CARSON CITY, Nev. – The Nevada Supreme Court handed down a decision in Terry v. Sapphire Gentleman’s Club addressing the issue of adult entertainers as employees or independent contractors. The decision in the case, which pitted the dancers’ employee argument against the gentlemen’s club’s independent contractor stance, could have repercussions for other segments of the adult entertainment industry.

A district court had issued a summary judgment in favor of Sapphire, holding the dancers were independent contractors and not employees under relevant state law. The Nevada Supreme Court reversed the lower court’s ruling and returning the case to the trial court to be heard on its merits.

Given that production studios and independent producer-directors in the adult entertainment industry generally argue that actors and performers in adult films are independent contractors—an assertion that has been disputed by both state governments and private parties in the past—the Sapphire case presents a cautionary tale for all adult entertainment companies.

The lesson? Simply calling workers “independent contractors” doesn’t make it so.

“This has been an issue for years—adult companies prefer to have independent contractors,” Nevada-based attorney Marc Randazza told YNOT. “Some prefer it for rational reasons, others for mythological reasons. But, few of them really seem to get it right, using legal advice to make the decision.”

In Sapphire’s case, part of the club’s defense hinged on the notion the dancers had no “contract of hire” and thus were not “in the service of” Sapphire. The court flatly stated the argument “lack[ed] merit” given the facts at hand.

The court described the agreement between Sapphire and the dancers as “an express contract of hire” despite clauses designed to limit the scope to less than a contract of hire. The bottom line, the court held, is that Sapphire cannot unilaterally decide the employment status of its dancers.

“Particularly where, as here, remedial statutes are in play, a putative employer’s self-interested disclaimers of any intent to hire cannot control the realities of an employment relationship,” Justice Kristina Pickering wrote for the court.

The court also was not impressed by Sapphire’s argument that it lacked sufficient “control” over the dancers for them to qualify as employees; however, Pickering did concede, on that front, “at first look, the facts may appear mixed.”

While noting Sapphire “did not produce a set schedule for performers” and left many decisions regarding onstage performance and lap dances in the hands of the dancers, Pickering wrote the court was “mindful that Sapphire’s supposed lack of control may actually reflect ‘a framework of false autonomy’ that gives performers ‘a coercive choice’ between accruing debt to the club or redrawing personal boundaries of consent and bodily integrity.”

Curiously, Sapphire also argued that “exotic dancing is customarily performed by independent contractors, and therefore, is not an integral part of Sapphire’s business.” Perhaps not surprisingly, he court didn’t buy that argument.

“Given that Sapphire bills itself as the ‘World’s Largest Strip Club,’ and not, say, a sports bar or night club, we are confident that the women strip-dancing there are useful and indeed necessary to its operation,” Pickering wrote for the court.

Ultimately, the question of whether to treat performers, dancers and others who work in adult entertainment as independent contractors or employees is not one to be taken lightly. While the industry traditionally has shown a preference for the independent contractor relationship, Randazza said the Sapphire case “suggests that maybe adult companies should reconsider.”

“When these strip-club cases started percolating a few years ago, we proactively engaged our clients and did some audits of their practices,” Randazza said. “Many of them then decided to retool how they did things. Some went traditional and reclassified independent contractors as employees, but others asked us to get creative. Some of our clients decided to simply become ‘service providers’ for their erstwhile contractors. The companies that did that wound up being even more protected and more profitable.”

Ultimately, the correct answer to the independent contractor/employee question may vary from business to business, but the correct means for making the decision does not. Such decisions must be made carefully, with due consideration and the right kind of assistance, Randazza observed.

“The moral of the story here is to get good legal advice,” Randazza said, “from a firm that is willing to be proactive and creative.”