Redmond v. Chains, Inc.

• Decision Date: 20 January 2000
• Docket Number: No. 98CA2213.,98CA2213.
• Citation: 996 P.2d 759
• Parties: Christiana REDMOND, Plaintiff-Appellant and Cross-Appellee, v. CHAINS, INC., d/b/a Kitty's Pleasure Palace, and Colorado Alumni, Ltd., d/b/a Kitty's East, Defendants-Appellees and Cross-Appellants.
• Court: Colorado Court of Appeals

996 P.2d 759

Christiana REDMOND, Plaintiff-Appellant and Cross-Appellee, v. CHAINS, INC., d/b/a Kitty's Pleasure Palace, and Colorado Alumni, Ltd., d/b/a Kitty's East, Defendants-Appellees and Cross-Appellants.

No. 98CA2213.

Colorado Court of Appeals, Div. V.

January 20, 2000.

Michael R. Lawrence, LLC, Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee.

Law Office of Patricia S. Bellac, Patricia S. Bellac, Boulder, Colorado, for Defendants-Appellees and Cross-Appellants.

Opinion by Judge TAUBMAN.

In this action for wrongful withholding of wages and tips, plaintiff, Christiana Redmond, appeals the trial court's grant of summary judgment in favor of defendants, Chains, Inc., d/b/a Kitty's Pleasure Palace (Chains), and Colorado Alumni, Ltd., d/b/a Kitty's East (Colorado Alumni). Defendants cross-appeal the trial court's denial of their request for attorney fees. We affirm in part, reverse in part, and remand for further proceedings.

Redmond worked for 12 years as a private booth dancer at an adult entertainment facility owned by Colorado Alumni. A private booth dancer is a person who, upon request of a patron of an adult entertainment facility, performs a private erotic show inside an enclosed booth. See 303 West 42nd Street Enterprises, Inc. v. Internal Revenue Service, 916 F.Supp. 349 (S.D.N.Y.1996),

rev'd on other grounds,

181 F.3d 272 (2d. Cir.1999). Chains is a dissolved corporation formed to serve as a managing corporation for the dancers as employees. Chains served in this capacity from February 6, 1995, through June 28, 1995, when Colorado Alumni ceased operation of its live entertainment business. During most of Redmond's employment, Colorado Alumni believed its dancers were independent contractors. Based on this belief, Colorado Alumni did not pay its dancers, including Redmond, minimum wage and took a portion of their tips.

In February 1995, Colorado Alumni began treating the dancers as employees of Chains and subjected them to new rules regarding their performances and workplace behavior. In addition, Chains began paying the dancers $1.35 per hour as minimum wages for tipped employees. In June 1995, the United States Department of Labor informed Chains that since February 6, 1995, it had underpaid its employees by $.78 per hour, and was thus required either to pay the employees accordingly or to challenge the Department's determination in court. Chains agreed to pay the employees. With regard to Redmond, Chains owed her money for performances between February 6, 1995, and February 12, 1995, the date Chains terminated her employment.

Redmond brought this action on February 10, 1997, pursuant to the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. § 201 et seq. (1999), and the Colorado Wage Claim Act, § 8-4-101 et seq., C.R.S.1999, to recover unpaid minimum wages and tips that she paid to Colorado Alumni.

Defendants filed a motion in limine that the trial court later treated as a motion for summary judgment. The primary issue decided by the trial court on summary judgment was whether Redmond's claims were barred by the FLSA statute of limitations. If a party violates the FLSA, but such violation is not willful, the statute of limitations is two years. If, however, the violation is willful, the statute of limitations is three years. 29 U.S.C. § 255 (1999). Assuming that Redmond was an employee, the trial court determined that the two-year statute of limitations applied here because Redmond failed to prove that defendants knew or showed reckless disregard as to whether their treatment of her as an independent contractor was prohibited by FLSA. Because it found the two-year limitations period applied, the trial court further determined that all of Redmond's claims before February 10, 1995, were barred by the statute; thus, she only had claims for wages and tips for the time she worked between February 10, 1995, and February 12, 1995.

The court further determined that FLSA provided Redmond's exclusive remedy and precluded her from presenting evidence of violations of the Colorado Wage Claim Act. The court also disallowed any evidence regarding her claim for outrageous conduct.

Subsequent to entry of the summary judgment, Redmond filed a motion for reconsideration that was later denied. On October 2, 1998, the trial court granted defendants' motion to dismiss Redmond's remaining claims. Redmond consented to the dismissal.

I. Timeliness of Appeal

As a threshold matter, defendants contend that Redmond's appeal was untimely because it was filed more than 45 days after the trial court denied her motion for reconsideration. We disagree.

When summary judgment does not dispose of the entire action, the judgment is not final for purposes of appeal unless the trial court expressly determines that there is no just reason for delay, and orders entry of final judgment. C.R.C.P. 54(b); Manka v. Martin, 200 Colo. 260, 614 P.2d 875 (1980). Here, though summary judgment in favor of defendants dismissed most of Redmond's claims, the trial court acknowledged that Redmond still had de minimis claims for wages and tips on and after February 10, 1995. The trial court did not expressly enter final judgment until October 2, 1998, when it dismissed Redmond's remaining claims. Accordingly, Redmond timely filed her notice of appeal on November 9, 1999, 38 days later.

II. Employee Status of Plaintiff

Appellate review of summary judgment is de novo. Aspen Wilderness Workshop, Inc. v. Colorado Water Conservation Board, 901 P.2d 1251 (Colo.1995)

. In determining whether summary judgment was appropriate, a reviewing court must view the facts in the light most favorable to the nonmovant. Colorado Civil Rights Commission v. North Washington Fire Protection District, 772 P.2d 70 (Colo.1989). The initial burden is on the moving party to show there is no triable issue of fact. Once that burden has been met, the burden shifts to the nonmovant who then has the burden to set forth specific facts demonstrating the existence of a triable issue of fact. A showing of facts by the moving party, uncontradicted by counter-affidavits, leaves the trial court no alternative but to conclude that no genuine issue of material fact exists. C.R.C.P. 56(e); Civil Service Commission v. Pinder, 812 P.2d 645 (Colo.1991).

A. Statute of Limitations

Redmond contends that the trial court erred in allowing defendants to assert the FLSA two-year statute of limitations as a defense because they willfully violated their statutory duty to give notice to employees of their rights. We are not persuaded.

As noted, if a defendant's violation of the FLSA is willful, the applicable statute of limitations is three years. If, however, the violation is not willful, the statute of limitations is two years. 29 U.S.C. § 255 (1999). To prove a willful violation, a party must show that the employer "knew or showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA." Reich v. Monfort, Inc., 144 F.3d 1329, 1334 (10th Cir.1998).

If an employer acts reasonably in determining its legal obligation under the FLSA, its action cannot be deemed willful for purposes of the three-year limitations period. McLaughlin v. Richland Shoe Co., 486 U.S. 128, 108 S.Ct. 1677, 100 L.Ed.2d 115 (1988). Good faith and reasonableness, including a putative employer's consultation with an attorney, are defenses to allegations of willfulness. See Halferty v. Pulse Drug Co., 826 F.2d 2 (5th Cir.1987)

. Good faith dictates that an employer must have "an honest intention to ascertain and follow the dictates of the Act." Quirk v. Baltimore County, Maryland, 895 F.Supp. 773, 788 (D.Md.1995). This requires some investigation of potential liability under the FLSA.

The burden is on the party alleging willfulness to prove that the actions taken were knowing or in reckless disregard of the FLSA. See Gilligan v. City of Emporia, Kansas, 986 F.2d 410 (10th Cir.1993)

.

Although there was disputed evidence as to whether defendants displayed the wage posters required by the FLSA, such evidence did not raise a genuine issue of material fact because the threshold determination, assuming there had been a violation of the FLSA, was whether the violation was willful.

In support of her argument that defendants willfully violated the FLSA, Redmond asserts that all reported cases have held that dancers are employees rather than independent contractors. See, e.g., Reich v. Circle C Investments, Inc., 998 F.2d 324 (5th Cir.1993)

(determination made under FLSA); 303 West 42nd Street Enterprises Inc. v. Internal Revenue Service, supra (determination made under the Internal Revenue Code, which contains a similar test for determination of employee status); Jeffcoat v. Department of Labor, 732 P.2d 1073 (Alaska 1987) (determination made under FLSA). In all of these cases, the courts determined that, under the circumstances, strippers and private booth dancers were employees, and not independent contractors.

Here, the following facts are undisputed. In 1994, the accountant for Colorado Alumni became aware of the opinion in Reich v. Circle C Investments, Inc., supra,

and informed the attorney for Chains. Chains' attorney then reviewed Reich, as well as other cases, and determined that, unlike the establishments in those cases, Colorado Alumni exercised much less control over its dancers in that the dancers: (1) did not work in the open, subject to constant control and monitoring; (2) were not required to serve drinks or perform other tasks in addition to dancing; and (3) were not an integral part of the business.

The case law regarding employment status of dancers in adult entertainment establishments is unsettled, and at the time of defendants' investigation, no reported decision had held that private booth dancers were considered to be employees. In fact, more recently, some courts have held that adult entertainment facilities may have a reasonable basis for treating...