New rules for contractors have unexpected consequences for strip clubs

Law of unintended consequences, maybe? California did something pretty bold, and only time will tell if it was a good idea or not. Seems like there's a lot of fallout though, so far. Anecdotally, I know a few people whose small businesses were impacted by the change; neither knew it was even an issue until one was sued by a contractor they'd been working with for a few years. I wonder what kind of due diligence the State went through when making this broad-sweeping change.

The "traditional" standard here is for strippers to obviously be employees but get called contractors to evade paperwork, taxes, and required employee benefits, which is exactly the kind of situation these new standards are intended to prevent. I don't see anything "unexpected" about the result.

Reading the article, it seems like the primary complaint is that, since the business has to pay things like social security, payroll taxes, worker's comp, etc. that they then have to withhold this money before they pay the workers, rather than have the workers withhold this themselves?

It sounds a lot more like the complaints are "I was making $X before because I was underreporting my income, but now that the business is on the hook for all this, I'm being forced to comply and am finding that the work isn't profitable enough anymore". Which translates to me as everyone else, who was paying into all these public tax pools, was essentially subsidizing the dancers.

I guess you could argue that some of the stuff, like workman's comp, some people might want to just pocket the money that otherwise would've gone to insuring the risk of being injured on the job. Which I think is maybe irresponsible, since otherwise the burden just ends up getting shifted, again, to the general public (worker injured without worker's comp then ends up on food stamps, or ends up getting their medical debt written off, etc). So we should probably require people to directly pay into these things, like we require people to maintain liability auto insurance.

And I suppose you could also say that maybe the businesses are taking the opportunity to pocket some extra profit, but hopefully the invisible hand of the free market would compete that back down as employees and customers move around based on new pricing/comp.

Not disagreeing, but the article mentioned the element of being an employee and getting assigned work rather than getting to pick and choose.

The tax situation could be cleaned up without making them employees.

Essentially what's happening is that now the club owners have to pay a bunch of taxes they managed to avoid paying before. The dancers themselves were likely not paying as much in taxes as they were supposed to, but now, with paycheck withholding, they're probably paying more in taxes than they used to.

The clubs, in order to compensate for all the "new" taxes, are only paying minimum wage, and are taking larger cuts of private dance fees from the dancers than they were before, and are in some cases tacking on new fees dancers have to pay, like "private room rental".

Dancers might be getting better benefits under the new rules (health insurance, sick days), but might not, since some of these benefits require minimum weekly hours worked that the dancers mostly don't meet. Dancers are also feeling pressure to be less choosy about what things they're willing to do for different customers, since "it's their job".

Really what it boils down to is that these are not sustainable businesses at the prices they currently charge customers, unless they also avoid paying a bunch of taxes. If they want to keep their dancers from quitting, they'll likely have to raise prices enough to get a similar amount of cash into the hands of their dancers, while also meeting their tax obligations. Not sure if that increase in cost will decrease demand to the point where it just won't work.