Two downtown Denver strip clubs are facing penalties after the city’s labor department announced last Wednesday that the clubs “violated nearly every applicable provision” of Denver’s minimum wage laws.
Rick’s Cabaret, located at Stout and 15th Street, and Diamond Cabaret, located off Colfax Avenue near Civic Center Park, were ordered to pay a total of $14 million for their violations. Both clubs are owned by the same company, RCI’s Hospitality Holdings.
Of the penalties, $11.3 million is allotted for restitution to the workers affected and $2.6 million is allotted for paying city penalties.
“It’s potentially just the tip of the iceberg because this company has withheld records for probably 99% of the entertainers,” said Matthew Fritz-Mauer, executive director of Denver Labor, in an interview with Denver7.
City of Denver Auditor Timothy O’Brien said the investigation found that the clubs misclassified entertainers (strippers and dancers) as exempt from certain city ordinances, failed to pay staff the city’s minimum wage and stole money from workers.
O’Brien said over 230 workers will receive restitution payments. Bartenders, servers, barbacks and entertainers were among the workers affected.
The audit found that the clubs required entertainers to pay a “house fee” of up to $85 per shift and a $8 “promotional” fee before their shift started.
The audit also found that workers at Rick’s Cabaret were required to put a portion of their earnings into what was called “The Rusty Envelope,” a moniker for the regional business manager.
Before every shift, tipped workers were required to sign forms acknowledging what was earned and how it was split between staff. According to the audit, Diamond Cabaret allegedly destroyed these documents.
“These violations are no accident, nor do they reflect a good faith misunderstanding of the law. They are the result of a system designed to depress staff income and divert money to managers and the club itself,” O’Brien wrote in Diamond Cabaret’s wage-determination letter, a vehicle used by labor departments to set out labor rules of certain industries.
The investigation into the clubs started in September after O’Brien subpoenaed three Denver strip clubs for alleged wage theft violations. PT’s Showclub, located close to campus off W Evans Avenue, was one of the three clubs subpoenaed but was not implicated in last Wednesday’s ruling.
Leah VanLandschoot, the attorney representing both clubs, said the Denver Labor Department is overstepping their oversight and “wielding subpoenas like weapons, demanding excessive documentation without a lawful basis and violating the privacy of individuals.”
According to 9News, if restitution is not paid by March 13, wage theft penalties will increase to 150% of unpaid wages. The clubs can appeal the order, and VanLandschoot said that her clients will challenge the order in court.
“Diamond Cabaret and Rick’s Cabaret will not stand idly by as Denver Labor exceeds its authority. We oppose these unlawful takings, and we are and will continue to challenge this overreach in the courts, where the law — not political agendas — must prevail,” VanLandschoot said in a statement.
