The Nevada Supreme Court has given a go-ahead for a class-action lawsuit by an Arizona lawyer who wants Las Vegas strippers classified as club employees and paid wages by the owners of clubs where they work.Without weighing in on who is right or wrong in this debate, let me quickly sketch the issues. The battle appears to be over money and risk. At the moment with the class action lawsuit, dancers are trying to shift some of the wage risk onto the club. Since the women provide the primary product this might make sense, however we should acknowledge what the clubs provide.
Many of the estimated 10,000 strippers in Las Vegas pay a fee to dance at clubs and sign agreements classifying themselves as independent contractors. They get no pay or benefits and earn only tips.
A panel of high court justices ruled 3-0 on Thursday that lawyer Mick Rusing of Tucson can bring a class-action lawsuit on behalf of strippers seeking to change that arrangement.
``This is going to force employers to stop living off the backs of these women,'' said Sean Brearcliffe, a lawyer at Rusing's firm. ``Some of the clubs don't pay them anything and force them to pay as much as $50 to $100 per hour out of their tips. Nevada law does not let employers take tips earned by their employees.''
Brearcliffe said that in coming months he plans to file a class-action lawsuit in Clark County District Court to force strip clubs to hire dancers as they do other employees.
If a class-action lawsuit succeeds, it will allow dancers to keep their tips and receive wages, Brearcliffe said. Clubs will have to raise revenue through higher entrance fees, drink prices and other means if his law firm persuades a judge to prohibit the independent contractor arrangement, he said.
Brearcliffe said strippers will be notified of the litigation and their right to participate if his law firm brings action against the clubs where they work. The law firm would represent the strippers on a contingency-fee basis.
Remember there is an alternative market for stripping services. Look in any phone book and you will find ads for entertainers who will come to you to preform. So what is it that clubs provide? A market, a coordinated place where dancers and customers can meet. True the phone book provides a market as well, but there are inefficiencies involved. Transaction costs are higher in the phonebook market. Asymmetric information is a larger problem. You can't verify dancer quality in the phonebook market. Whereas in the club environment, there are better opportunities to reduce those asymmetries and better match dancers with customers, while also increasing the number of matches (and thus income of the dancers). And don't forget the improved pleasure of the customers.
Think about a bachelor party with heterogeneous preferences in terms of hair color of the dancer. In a phonebook market, even if they can request a certain hair color dancer likely they will be unable to fulfill all the preferences of the bachelor party participants. Economies of scale allow the clubs to solve this problem, by providing many girls.
The other problem clubs solve is security for dancers. Here again, economies of scale serve to reduce the security costs per dancer, while simultaneously increasing their level of security.
I have always found the labor issues in strip clubs fascinating. The women are the ones who hold and sell the primary experience good, yet the clubs deserve some of the revenues for the coordination and services they provide. So the club figures out a way to extract their share from the customers and the dancers. And this leads (in my view) to some very different and bizarre approaches.
Let me be clear, I am not weighing in on the question of whether they should or should not be classified as employees, I'm merely trying to think about the value clubs provide the dancers.