Mays v. Midnite Dreams, Inc.

300 Neb. 485

915 N.W.2d 71

Elizabeth MAYS, and all others similarly situated, appellee,

v.MIDNITE DREAMS, INC., doing business as Shaker’s, and Daniel Robinson, appellants.

No. S-17-674.

Supreme Court of Nebraska.

Filed July 13, 2018.

Robert B. Creager, of Anderson, Creager & Wittstruck, P.C., L.L.O., Lincoln, for appellants.

Kathleen M. Neary, of Powers Law, for appellee.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, and Papik, JJ., and Daugherty, District Judge.

Funke, J.

This appeal concerns an order from the Lancaster County District Court which found that Elizabeth Mays, an exotic dancer with Midnite Dreams, Inc., doing business as Shaker’s, was an employee entitled to compensation under the federal Fair Labor Standards Act¹ (FLSA) and the Wage and Hour Act² (WHA). The district court then awarded damages and attorney fees and costs under the FLSA and the Nebraska Wage Payment and Collection Act³ (NWPCA). While the court’s ruling that Mays was an employee under the WHA was not clearly erroneous, the court erred in granting Mays relief under the FLSA and the NWPCA. Therefore, we affirm in part, and in part reverse and remand with direction to award damages and attorney fees and costs, calculated consistently with the WHA.

I. BACKGROUND

Shaker’s, a juice bar featuring all-nude dancers, is owned by Midnite Dreams and located near Waverly, Nebraska. Shaker’s operates as a "leased" club, meaning it contracts with dancers to lease them the use of its facilities and the dancers receive compensation only from customer tips. Shaker’s also directly employs a doorman, wait staff, a bartender, and a disk jockey. Daniel Robinson, one of the appellants, manages Shaker’s and is the principal owner and sole corporate officer of Midnite Dreams.

From 2012 to 2014, Mays danced at Shaker’s, under two 1-year "Independent Artist Lease Agreements" with Midnite Dreams. Under the agreements, Mays paid a flat nightly fee for the use of Shaker’s stage and dressing room, with additional fees for each use of the "VIP" or private rooms. The agreements did not provide that Shaker’s would compensate Mays for any service and did not contain any schedule or minimum work requirements. The appellants never provided any compensation to Mays.

While dancing at Shaker’s, Mays was informed of over 50 additional "house rules," posted at the facility and orally communicated to the dancers, concerning the dancers’ conduct and the use of Shaker’s facility. Robinson provided inconsistent testimony as to whether these rules were mandatory or merely "suggestions." However, Mays testified that the house rules were enforced by Robinson and his employees and that failure to follow the house rules would result in discipline through belligerent reprimands, impositions of fines, and threats to terminate the agreements, which were terminable at will.

The "house rules" concerned the dancers’ shift arrival times; hair, makeup, lotion, and dress requirements for the dancers; the number and order of sets the dancers performed during a shift; the method of payment the dancers could accept from customers; cleaning duties; the price the dancers could charge for private and "VIP" room dances; off-stage dancer conduct; and conduct during onstage performances, specifying clothing items the dancers were expected to remove during certain sets.

Mays prepared a spreadsheet of the dates and hours she performed at Shaker’s from various documents and recollections. She also calculated her average compensation from customer tips, after lease fees, while working at Shaker’s as $44 per hour.

Mays filed a complaint and an amended complaint against the appellants seeking unpaid wages, liquidated damages, and attorney fees and costs under the FLSA and Nebraska law. Though Mays’ amended complaint alleged that the appellants violated the FLSA and Nebraska law, it contained no allegations concerning whether Mays had engaged in commerce or whether Midnite Dreams was an enterprise engaged in commerce.

The court determined Mays was an "employee" entitled to minimum wage compensation under the FLSA and Nebraska law, applying the "ABC test" under § 48-1229(1)(a) through (c) and the 10-factor test under § 48-1202(3). The court concluded that by instituting and enforcing the house rules, the appellants transformed Mays into an employee and themselves into employers. The court also ruled Mays was not estopped from claiming she was an employee.

The court determined Mays was entitled to a full minimum wage rate because, unlike Nebraska Law, the FLSA required specific notice requirements to count a "tip credit" against minimum wage requirements. Further, it ruled the FLSA entitled Mays to overtime compensation and liquidated damages. The court ruled the appellants were jointly and severally liable for $7,586.78 in damages for unpaid wages, $27,945 in attorney fees, and $504.70 in costs. The appellants filed a motion for new trial, which was denied.

The appellants perfected a timely appeal. We moved the case to our docket on our own motion pursuant to our authority to regulate the caseloads of the Nebraska Court of Appeals and this court.⁴

II. ASSIGNMENTS OF ERROR

The appellants assign, restated and reordered, error to the court for (1) concluding that a written lease agreement between the parties created an employment relationship, (2) applying the FLSA and the WHA policy statements to change the parties’ contractual relationship, (3) failing to find Mays was estopped from arguing she was an employee, (4) finding Mays was an employee of the appellants, (5) finding Mays was entitled to minimum wage compensation, (6) failing to conclude Mays was a tipped employee, and (7) awarding excessive and unreasonable attorney fees.

III. STANDARD OF REVIEW

The construction of a contract and the meaning of a statute are questions of law which an appellate court reviews de novo.⁵ The determination of whether a contract violates public policy presents a question of law.⁶ An appellate court independently reviews questions of law decided by a lower court.⁷

Ordinarily, a party’s status as an employee or an independent contractor is a question of fact. However, where the facts are not in dispute and where the inference is clear that there is, or is not, a master and servant relationship, the matter is a question of law.⁸

In a bench trial of a law action, the trial court’s factual findings have the effect of a jury verdict, and we will not disturb those findings unless they are clearly erroneous.⁹ In reviewing a judgment awarded in a bench trial of a law action, an appellate court does not reweigh evidence, but considers the evidence in the light most favorable to the successful party and resolves evidentiary conflicts in favor of the successful party, who is entitled to every reasonable inference deducible from the evidence.¹⁰

Plain error exists where there is an error, plainly evident from the record but not complained of at trial, which prejudicially affects a substantial right of a litigant and is of such a nature that to leave it uncorrected would cause a miscarriage of justice or result in damage to the integrity, reputation, and fairness of the judicial process.¹¹ An appellate court may, at its option, notice plain error.¹²

IV. ANALYSIS

The appellants’ arguments on appeal can be consolidated into the following four issues: (1) Did the court err as a matter of law in considering whether Mays was an "employee" when the agreements stated the parties had a lessee/lessor relationship? (2) Did the court err in ruling Mays was an "employee"? (3) Did the court err in ruling Mays was entitled to full minimum wage compensation? (4) Was the amount of attorney fees awarded to Mays excessive and unreasonable?

1. MAYS WAS EMPLOYEE ENTITLED TO COMPENSATION

(a) Agreements Neither Waived Protections Afforded to Mays by WHA nor Estopped Mays From Asserting Rights Under WHA

The appellants contend that because of the agreements entered into by the parties, as a matter of law, Mays cannot be considered an employee. They argue that the parties’ constitutional right to contract supersedes the policy statement in § 48-1201. This argument, however, relies on a presumption that the WHA permits an employee to forfeit the protections afforded to him or her by the WHA through contract. The appellants fail to cite any authority for their argument that the protections of the WHA may be waived, and we find no basis for such in the WHA.

Section 48-1201 provides:

It is declared to be the policy of this state (1) to establish a minimum wage for all workers at levels consistent with their health, efficiency and general well-being, and (2) to safeguard existing minimum wage compensation standards which are adequate to maintain the health, efficiency and general well-being of workers against the unfair competition of wage and hours standards which do not provide adequate standards of living.

The policy statement in § 48-1201 is precisely why parties may not contract away the protections afforded by the WHA. It is the function of the Legislature, through the enactment of statutes, to declare what is the law and public policy of this state.¹³ And a contract which is contrary to public policy is void.¹⁴ Accordingly, the agreements are void to the extent they defined the parties’ employment relationship, under § 48-1202(3).

To the extent the appellants challenge the constitutionality of the WHA, we do not reach this argument. Neb. Ct. R. App. P. § 2-109(E) (rev. 2014) requires that a party challenging a statute’s constitutionality file and serve notice with the Supreme Court clerk at the time of filing the party’s brief. Strict compliance with § 2-109(E) is required in order for an appellate court to consider a challenge to the constitutionality of a statute.¹⁵ A review of the record shows the appellants did not file a notice of a constitutional question with the clerk.

The appellants also contend that because Mays profited from the agreements, she is...