Strip clubs Diamond Cabaret and Rick's Cabaret sue Denver Labor over wage theft investigation

Two Denver strip clubs accused of widespread wage theft are suing Denver Labor after they were ordered to pay back millions to their employees.

Diamond Cabaret Denver and Rick's Cabaret Denver have filed a lawsuit to stop Denver Labor from enforcing its order demanding the businesses pay back more than 200 employees of the strip clubs. They also requested a gag order against Denver Labor due to what they say is the "dissemination of falsehoods against the clubs."

"If left unchecked, Denver Labor's reckless abuse of power and disregard for the limits of statutory authority will set catastrophic precedents that jeopardize every business, worker, and entrepreneur in Denver," the clubs said in the filing.  

Denver Auditors' Labor Division said the clubs violated minimum wage laws by misclassifying entertainers as exempt from wage and hour laws. They also said the clubs required strippers to pay house fees and promo fees and claimed the clubs routinely took tips from employees.

Denver Labor Executive Director Matthew Fritz-Mauer said during the investigation they had difficulty obtaining records and that some of the records were destroyed by the clubs.

The clubs deny those claims, stating that they followed the law and all of their employees have been paid appropriately.

Leah P. VanLandschoot of Denver employment law firm The Litigation Boutique LLC is representing the clubs in the lawsuit. She claims Denver Labor is "forcing entertainers at Diamond and Rick's to become employees against their will" and the clubs' employees chose to be 1099 contractors to have more flexibility.

The lawsuit also claims that Denver Labor illegally accessed club records and disclosed the entertainers' information without consent. The clubs also said it's legal for managers to receive tips when they act as VIP hosts, introducing guests to entertainers, because it's a separate tipped job.

Diamond Cabaret and Rick's Cabaret said Denver Labor's claims didn't account for tips and overtime payments paid to employees and included multiple mistakes. They said the claims against them have harmed their businesses and accused one entertainer of making false public statements that have exacerbated the issue.

According to the Denver auditor, if restitution is not paid by mid-March, wage theft penalties will increase to 150% of unpaid wages.