Tip Out

Adult entertainment in Detroit is suffering and a new model for the industry is required. The current model consists of women dancing on stage and then chatting up the guys in the audience. Typically, the guys buy the dancers a drink or two, have a meal, engage in a little conversation and leave. Many of the guys frequenting the clubs are executives, business owners, and salesmen, often there to conduct business. Due to a downturn in the economy, the clubs have lost many of its regulars, forcing them to lay off staff. jeddahvape

Adult entertainment clubs in Detroit are some of the finest clubs in Michigan, offering good food along with great sound, stage and lighting systems. When I attend these clubs, I imagine what the Cotton Club in Harlem must have been like this. Many of the clubs are quite elegant and classy. I often wonder why there are only sexy women in the clubs. Why aren’t there shows in the clubs? Every now and then there’s a porn star (don’t watch porn) but many guys do O well?

I know economics is primarily responsible for the state of adult entertainment clubs. In the past and still today, the clubs started using a system that charges women to dance in the clubs and called it “Tip Out”. It’s done in Michigan and all over the United States. It’s also used in Jamaica and England. sob-bau

The term Tip Out is not the same as Tip Pooling as defined by the Internal Revenue Service. Tip Out seems to be a kind of hybrid payment scheme, combining a rental fee and a tip pooling blend. The tip out shifts the costs of operating the club to the dancers without the benefits.

As I’ve come to know it, tipping out is the cost or the price that a topless dancer pays to dance in the club.

Let’s examine the tip out and see who gets paid:

Typical Club:

The House

(The Club/pay’s talent agents) 20.00

House Mom 10.00 (Help girls with problems usually make up, clothes, sells clothes, meals, etc.)

Bouncers 10.00

DJ’s 20.00

This adds up to about $60.00 a day, $300.00 a week, $1,200.00 a month in fees.

Could tipping be compared to tip pooling as defined by the Fair Labor Standards Act of 1938 or is it a rental fee?

If a tip out is used to describe a rental fee paid by the dancer, it’s confusing at best because there is typically no written agreement between the parties.

If it is a rental fee between the dancer and club why are so many people getting paid? With so many people being paid just who is the responsible party? What happens when the dancers gets no tips? Are they still required to tip out? Where are the written agreements, and rules posted? If it is a rental fee and the dancer is an independent contractor does the relationship between club and dancer satisfy the economic reality test to determine whether the individual is an independent contractor or an employee. odozapato

If tip out is another term for tip pooling then let’s defined tip pooling: According to Title 29, Subtitle B Chapter V Subchapter A Part 531 Subpart C 531.54 under the Fair Labor Standards Act of 1938:

Tip Pooling – Where employees practice tip splitting, as where waiters give a portion of their tips to the busboys, both the amounts retained by the waiters and those given the busboys are consider tips of the individuals who retain them, in applying the provisions of section 3(m) and 3(t).

Similarly, where an accounting is made to an employer for his information only or in furtherance of a pooling arrangement whereby the employer redistributes the tips to employees upon some basis to which they mutually agreed themselves, the amount received and retained by each individual as his own are counted as his tips for the purposes of the Act.

The U.S. Department of Labor Employee Standards Administration Wage and Hour Division print the Fact Sheet #15 Tipped Employee under the Fair Labor Standard Act(FLSA). This fact sheet provides general information concerning the application of the Act and who receives tips. rtp500

The most important thing about the Act is tipped employees that make more than $30.00 a month are usually paid not less than $2.13 an hour and tips actually received by tipped employees may be counted as wages by the employer.

Key Point: “Tipped employee cannot be required to contribute a greater percentage of their tips than customary and reasonable.”

Most dancers receive no hourly wage so again I ask what is the meaning of the tip out and is it required. If tip out is a fee charged to dance in the club then the fees must be paid to the club and the club should be responsible for paying the other employees. If we consider the tip out as a form of renting space for a specified time period then the dancers are not employees but independent contractors. The courts frequently examine the written agreement to determine the scope of the employment relationship between the parties. Even when the contract defines the relationship as that of an independent contractor it doesn’t necessarily mean the agreement is dispositive.

The courts can also rely on criteria used by the Internal Revenue Service to determine the existence of an employer-employee relationship. The IRS uses 20 factors for the determination. I will list only a few:

1) Business entity retains the right to require the worker to comply with instructions

2) Worker’s services are essential (indicate employee) or ancillary (contractor)

3) Worker can hire, supervise and pay assistants(contractor)

4) Business entity require the worker to work set hours (employee)

5) Worker is required to devote himself or herself full time to performing services to business entity (employee)

6) Required to work on premises (employee)

7) Business establishes the order or sequence of work (employee)

8) Business entity retains the right to discharge the worker (employee)

9) Can the worker has the right to terminate the relationship at anytime without incurring liability(employee)

So why is any of this important to the consumer? Because everyone must be treated with dignity and respect and business entities that operate in this fashion can’t have it both ways. The dancers can’t be both independent contractors and employees. Furthermore the business entity should not negate their responsibility for the paying its employees while forcing other employees or independent contractors to pay (tip out) those not directly involved in the services performed.

The women that work in these establishments are there to better themselves and provide for their families. If the establishment is not held responsible for providing fair wages to its dancers and employees then it’s impossible to keep the fraternizing between the dancers and the audience at a respectable level. It does not take long for the dancers to figure out if you offer extra services you will get more dances and the tip out is no longer a problem. If you don’t offer extra services and can’t make tip out, at the end of the evening you owe the.


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