The South Carolina Supreme Court recently decided a notable and somewhat salacious case involving an exotic dancer who was injured while plying her trade at – ahem – a “gentleman’s club” called the Studio 54 Boom Boom Room. Reversing the SC Workers’ Compensation Commission and the Court of Appeals, the Supreme Court held that the claimant was an employee of the Boom Boom Room, and not an independent contractor. The claimant was therefore entitled to medical benefits and disability compensation under the SC Workers’ Compensation Act. All employers should take note of this decision, as it applies to all types of businesses, and not just to those that involve high heels and G-strings. This case is a stark reminder that, as stated in the court’s opinion, compensation laws are to be construed “liberally in favor of coverage to further the beneficent purpose of the Compensation Act.” In short, employers cannot escape responsibility for workers’ compensation benefits merely by calling a worker an “independent contractor” instead of an employee.
The claimant in this case was struck in the abdomen by a stray bullet when a fight broke out at the Boom Boom Room. The South Carolina Workers’ Compensation Commission determined the Claimant was an independent contractor, and therefore not entitled to workers’ compensation benefits. The Court of Appeals affirmed the Commission’s denial of benefits. However, the Supreme Court disagreed and found that the details of the Claimant’s “professional relationship” with the Boom Boom Room supported the Claimant’s argument that she was an employee and not an independent contractor.
After some initial remarks rebuking the Court of Appeals for its perceived bias against the claimant due to the “nature of her profession,” the Supreme Court addressed the “right to control” test that is used to determine whether a claimant is an employee or an independent contractor. In analyzing the nature of a work relationship, the Court examines four factors: (1) direct evidence of the right or exercise of control; (2) furnishing of equipment; (3) method of payment; (4) right to fire.
The court determined that the first prong of the test weighed in favor of an employment relationship. It reasoned that, even though the club did not control the claimant’s specific movements as a dancer, it did exert control over her overall performance as an “entertainer.” For instance, the club required the claimant to pay a tip-out fee, undergo a search, and review the club’s rule sheet. The club chose the music for all the claimant’s performances, and dictated when in the rotation of dancers she was to appear on stage. The club required the claimant to perform “V.I.P.” dances if requested by a customer, set the minimum fee for such dances, and specified an area for those dances to take place. Finally, the court noted that the club exercised control over the claimant’s “degree of nudity” – stating that “she was required to be topless, but she would be fined for removing more.”
The second factor in the test, furnishing of equipment, also weighed in favor of an employment relationship, according to the court’s decision. The court noted that the rationale behind this rule is that the employer will necessarily exert more control over a worker when it provides valuable equipment, and has a financial interest in how that equipment is used. The court took exception with the Court of Appeals’ statement that “From the standpoint of both the [club] and its customers, Lewis brought her own ‘equipment’ for her work.” The court first stated that a claimant’s body cannot be considered equipment for the purpose of this analysis. It then determined that the club provided the “necessary performance space – including an area for V.I.P. dances, a stage with a pole, tables, and a sounds system.” As a result, the club had a vested interest in “ensuring the dancers effectively utilized the equipment provided to ensure the advertised experience was available to the patrons.”
With regard to the method of payment, the court conceded that this factor preponderates in favor of the independent contractor relationship, although the club did exert some control over payment by requiring the tip-out fee and setting the minimum for V.I.P. dances. Finally, with regard to the “right to fire,” the court concluded that this factor weighed in favor of an employment relationship. The claimant could be fined for failure to comply with the club’s rules, and failure to pay any fine would result in termination. The claimant could also be fired for continuously breaking the rules, fighting, “improper hygiene,” or simply not having the desired appearance.
The court therefore determined that, because three out of the four factors weighed in favor of an employment relationship, the Claimant was entitled to workers’ compensation benefits. Again, all employers with workers who are ostensibly “independent contractors” should take note of this opinion, and consider whether they are at increased risk of liability under the Workers’ Compensation Act. Click here to read the entire opinion. If you have specific questions or concerns, please contact the attorneys in the Workers’ Compensation Practice Group at Clement Rivers, LLP.