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NJ Club Owner Cannot Avoid Unemployment Taxes for Exotic Dancers

NJ Club Owner Cannot Avoid Unemployment Taxes for Exotic Dancers

On January 14, 2019, the Appellate Division of the New Jersey Superior Court decided a case brought by the New Jersey Department of Labor and Workforce Development (“NJDOL”) against Dance, Inc. Dance, Inc., operator of a go-go bar, was cited for failing to pay unemployment taxes on its dancers. 

 The club argued that under the “ABC test” (N.J.S.A. 43:21-19(i)(6)(A)(B)(C)) the dancers should be considered independent contractors because they took no direction from the club owner or the club manager, showed up whenever they pleased, and had no obligation to work any particular schedules.  Dance, Inc. contended that the dancers were paid exclusively in the form of tips they received from patrons and had contracts with the club, which identified them as independent contractors who leased space to perform.  (The agreement however, did not present a rental amount and was written in English while the dancers spoke exclusively Spanish or Portuguese and were undocumented.)

In applying the “ABC test,” the Court observed that Dance, Inc.’s website showed a list of “Our Girls” and featured schedules of the dancers who were to appear at the club each day.  The Court, in considering the content of Dance, Inc.’s website, Dance, Inc.’s corporate name, and Dance, Inc.’s description of the club’s operation, found that the dancers were “integral” to the club’s business.

The Court then reviewed the definitions of the unemployment compensation statute, including that of an “employee.”  Under the statute, services performed by an individual for remuneration or under any contract of hire are considered “employment.”   The Court found that receiving compensation exclusively in the form of tips from customers qualified as remuneration, and affirmed the NJDOL’s finding that the dancers were employees.  Dance, Inc. was therefore liable for unemployment tax.  Moreover, the Court also found that Dance, Inc. could also be liable for failure to pay minimum wage and overtime to the dancers.

The case is a good reminder to employers to ensure they are properly classifying their workers.  Not only can employers be liable to employees for failure to pay minimum wage and overtime, but employers can also be liable to the State for failure to pay employment withholdings.

If you find yourself challenged with questions regarding classification of your workers, please do not hesitation to contact Laddey, Clark & Ryan’s Employment and Labor Practice Group: Thomas N. Ryan Esq. (, Ursula H. Leo, Esq. (, Jessica A. Jansyn, Esq. (, or Nicole C. Tracy, Esq. ( Our attorneys can also be reached by phone at (973) 729-1880.