Arbitrability of an Arbitration Agreement

Case involving employment claims by exotic dancers move toward Colorado Supreme Court

This post has been updated to reflect current comments from plaintiffs’ attorney Mari Newman. 

A lawsuit filed to challenge the employment classification of exotic dancers may be on its way to the Colorado Supreme Court.

Judge Raymond Moore in the U.S. District Court for the District of Colorado certified a question for submission to the state’s high court in an order filed Aug. 20 in Santich, et al v. VCG Holding Corp, et al, concerning what circumstances allow a non-signatory to an arbitration agreement to enforce arbitration in claims against them by a signatory.

The case is one of dozens that have been brought in varying jurisdictions across the U.S. challenging whether exotic dancers should be classified as employees or independent contractors. Dancers often are required to sign employment agreements with terms and conditions indicative of independent contractor status, such as not paying wages and charging them a house fee to perform.

Binding arbitration clauses are receiving increasing scrutiny in other industries as well. Their use notably received attention in October 2017 when the U.S. Senate voted against a rule banning financial companies from using mandatory arbitration clauses.

Mari Newman, a partner at Killmer Lane & Newman representing the plaintiffs, wrote in an email to Law Week that the the question of whether a non-signatory to an arbitration agreement can compel arbitration has implications beyond the case at hand.

“The notion that a corporation that was never a party to an arbitration agreement could use someone else’s contract to prevent workers from enforcing their legal rights in a court of law is legally unsupportable,” she wrote. “On the one hand, VCG seeks to avoid accountability for the illegal conduct of its clubs by cleverly creating separate companies for each and not signing the contracts, but when it thinks it can prevent its workers from effectively enforcing their legal rights, it claims that it should benefit from contracts it never signed.”

A spokesperson for Jackson Lewis, the firm representing named defendants in the case, could not be reached for comment. Similar cases date back to at least 1987, with Jeffcoat v. State, Department of Labor in Alaska. Dozens of state and federal district courts, as well as the 4th and 5th Circuits, have found that dancers at adult entertainment clubs are employees according to wage laws.

To read this story and other complete articles featured in the August 27, 2018 print edition of Law Week Colorado, copies are available for purchase online.