New Rules for Contractors Have Unexpected Consequences for The City’s Strip Clubs (SF Examiner)

Read the full article by Laura Waxmann and Michael Toren at SFExaminer.com 

As some 30 dancers were handed the first employee paychecks ever issued to them by the Penthouse Club one evening in early November, a wave of panic swept the popular North Beach strip club.

“I opened mine in the locker room, and I was shocked,” said a former Penthouse dancer who asked to be identified as Jane. “All the other girls were also freaking out. Me and my friends decided right then that we were done. That was the final straw.”

Historically classified as independent contractors, the dancers were used to walking out of the club’s doors with cash each night — often hundreds of dollars — after their shifts ended. That changed suddenly when clubs across The City began enforcing a California Supreme Court ruling from April in an unrelated industry that set new standards for determining whether or not workers should be classified as employees.

The decision has shaken up the gig economy, but is also having an effect in unexpected places, such as in the hair salons and the adult entertainment industry, where workers have traditionally not been considered employees.

At local clubs, the move to convert dancers to employee status is causing an exodus, with many of them leaving San Francisco establishments.

“This whole business will be completely ruined. The whole point about being a stripper is you go in, get fast cash, no one knows how you’re getting it, it’s not documented and it’s not taken from you,” said a single mother who gave her name as Darla, who also recently cut ties with Penthouse Club. Like other dancers The San Francisco Examiner spoke with for this story, she asked to maintain anonymity for fear of retaliation.

Club owners say the changes are costing them as well.

A sign posted mid-October in the dancers’ dressing room at the Gold Club in the South of Market neighborhood said the club “felt that it was protecting your right and freedom to be an independent contractor.”

“However, as a result of the lawsuits and ongoing demands by the suing dancers and their attorneys, the club is now being compelled by Court order to eliminate the independent contractor option and require all dancers to become the club’s employees,” the sign read.

Axel Sang, marketing director of BSC, confirmed in an email to the Examiner that the dancers were formerly contractors but are now “club employees being paid an hourly wage and commission on dance sales.”

“The BSC-managed clubs now have matching payroll taxes, unemployment compensation, workman’s compensation, Healthy San Francisco costs, Affordable Care Insurance costs, and SF sick leave pay for several hundred new employee entertainers in addition to the hourly wage,” he wrote.

He estimated that 200 dancers have quit their jobs since the change came down at BSC clubs, including Penthouse and Gold Club and said that the change has “dramatically affected the business and the profitability,” costing the clubs “several million dollars” a year.

“A substantial reduction in the number of entertainers performing as well as the substantial increased payroll and other costs makes it very difficult to generate profits,” Sang said. 

Laura Waxmann covers education and community news for the San Francisco Examiner. Michael Toren is a reporter in San Francisco.