It was in the end of the report that deals with things that happened after the quarter/year closed but prior to the 10K being published. I believe it is called "Subsequent Events" section. The club was sold on October, so technically it hasn't happened until the 10q for next quarter.
Rick's has little exposure to Houston......they probably generate more revenues from the Bombshell locations in Houston than the clubs. Probably a lot more.....
I would imagine in the next 6 months they will add a $10M liability to the balance sheet.......up until now they could claim the amount was unknown.....but that isn't the case going forward. Though with the RCII and RCI NYC liability still undecided.......that would be the only argument one could make to not include the liability on the balance sheet.
That is what she said back in April......she just wants them to start paying going forward. There was no mention of back taxes......and logic would dictate, if you can't get them to start paying it going forward, you definitely won't get the back tax, either. Don't be mad you can't do some simple logical deduction......I merely said she wouldn't start with back taxes, not that she would never go after them at some point.
Doubtful......she rather they just start paying it going forward! Once clubs actually start paying the tax......only then might she worry about back taxes from all the clubs. Though if the bill is so much that most clubs would just fold if required to pay back taxes, she may reduce future tax revenues and still not collect much of the back taxes. Not to mention what Texas might lose on liquor taxes if those same clubs folded. What Texas will do about back taxes is not their primary concern!
Oh it isn't the end of the industry......they just have to have the "correct" system in place from the beginning. Doing an IC model and then being forced to treat it like an employee model is near impossible, since you would treat all money collected completely differently. If they are employees, then all funds collected should be given back to the club and then the dancer gets a percentage of it back after making back her wage plus some premium. So if she makes $50 in wages a night, she might be required to bring in $100 before she would get 50% back on each additional dollar she raises that day as a commission. And the club would track how much under $100 she is and if it summed up to $1000, they might use that as a benchmark to determine to fire her. And all dollars raised by dancers are considered service fees.....even dollars collected on stage. Just means Rick's needs to track it.....which makes is more complicated. But they do operate two clubs in Minnesota under an employee model, so they know how to do it.
Rick's made a mistake by saying that there was a set charge per song.....they should have said it was a recommended amount. Anyone knows you can negotiate with a dancer. And at the same club, it seems dancers will ask for different amounts for a dance. There is really no way for Rick's to track what girls are charging per dance. At clubs that have designated dance areas, the club just tracks how many songs the girl is in that area and then charges her $5 a song or something.....and anything extra she keeps.
It all depends on state laws. The major issue with NY is that there labor laws, or the NYLL, allows for opt-out class action lawsuits. If they sued on the FLSA, or the federal law, it is an opt-in class......and therefore the rewards remain small and lawyers are uninterested. So in the event of NYC, one dancer can raise a lawsuit for all the dancers. Not sure if Texas state labor laws are the same, but even if they are......then you have to get class certified. And I think to date, that hasn't gained traction. But on the other hand, southern states tend to have more business friendly labor laws.
The argument for the IC model is that if you are good at it, you will make a lot of money. The problem is there are those who aren't good, don't make a lot of money, but never decide to leave and find something they are better at doing. If Rick's had paid them a wage, they would never had been "working" as long as they had if they couldn't generate at least minimum wage. The whole issue with Rick's tracking every service dollar is that unlike the Judge's claim, Rick's has very little financial control at the moment. Anything paid in cash to a dancer is pretty much untraceable to Rick's. If the dancers were employees and they used a commission system......then they would have to account for every dollar a dancer makes, collect it and payback a percentage. The issue will be figuring out how to guarantee that dancers don't pocket cash at the end of a shift. It is doable, but much more complex.....the current system is much easier.
It is all very confusing......blue is bullish on Rick's now? Makes me wonder what I am missing?
If the overall judgment came in at $18M that the plaintiffs are asking for, it would be above what I figured Rick's might loss. I did my calculations on a $5.15 minimum wage and not the $6 to $7 that is NY State minimum wage.
$12M is pretty spot on......being that the $10.9M isn't just minimum wage, but fees and fines, too. A huge chunk of what is left to be determined is actually the $60 tip outs. The judge has stated that he couldn't rule on this since it was testified that they were voluntary. Being I was probably responding to you stating they would owe $28M, I think I am far closer than you were!
I have been long for a decade......seriously, don't you read? I do agree, they could probably make more by doing some type of minimum wage plus commission pay system. But the counter argument is they would have to maintain a lot more control on dancers. No more tips, everything they make is a service revenue and then they get a percentage back in the form of a commission. The IC system is significantly less complex, which is why they do it. No risk of dancers pocketing revenue.
As usual, taking things out of context......there was an "IF" before the "the IC model is proper" statement. And a little deductive reasoning isn't hard to do......the judge has ruled already that the dancer's were employees. As long as that stands, it won't be pretty for Rick's.......but then again, the judge has made his last ruling on the case. The rest is up to a jury, which I never attempted to determine how they would rule. But left on what they have left to rule, the damages can only grow. Then there will be appeals and a new judge......hopefully some commonsense can return to the case at that point.
And talking about zero credibility......that is laughable coming from you. You have been crying the sky is falling on Rick's for a year plus now, and now you are taking a positive stance on Rick's????? A bit confusing. Granted, Rick's isn't bankrupt yet or worth pennies......so the sky has yet to fall, but I guess that just makes you wrong for over a year now.
You should learn how to read......I never said planes were a brilliant idea. The whole point of the article was to show that the planes were a wash compared to flying commercial. Is flying so much a good idea or not, that is left to the reader to determine. I don't claim to be a legal expert, but I can read, unlike some people, and it is quite clear that under the current judge the case isn't going to be taking any favorable bounces in Rick's direction. And why would Eric change the pay system if the IC model is proper? You have to wait until the conclusion of the court actions to make that determination. Changing the pay back in 2009 would have basically been admitting one was wrong. Why don't you stop crying and just short the company if it is so bad.
Eric definitely underestimated this lawsuit from the beginning, understandably so. They look at it and think, the best dancers make over $1,000 a night and they want minimum wage, too? Not to mention, the IC model makes the most sense from an operational standpoint. But I think they now clearly see that none of this actually matters when it comes to lawyers and courts. Just look at any press coverage on this lawsuit, and you probably walk away thinking dancers were completely duped into performing for free.
That being said, the last conference call was real telling when they said they walked away from Club O and has no plans in the future to acquire/open any additional adult clubs. The writing had been on the wall for a couple years now though......Bombshells to get a more stable growth stream, the REIT to gain ownership of adult clubs without taking on the operating risk (not to mention, split off the assets of Rick's clubs from the operation) and now even energy drinks. Today it is politicians trying putting excise taxes on clubs and lawyers tearing apart the IC model. In today's politically correct world, you can just see the day when lawyers attempt to hold the club liable for not protecting the dancer (club employee if IC model is busted) from sexual harassment from customers.
Arbitration agreement? What arbitration agreement stands in the way? Rick's has numerous clubs all over the country.....those aren't party to this lawsuit, so any agreement from this lawsuit wouldn't apply to those clubs. Sapphires in Vegas just got reversed in Nevada Supreme Court, which the plaintiffs cited Hart v Ricks in that case, though I haven't read the ruling yet.
On the paying the damages part, Rick's is a publicly traded company.....they have access to equity which they could easily sell if they didn't have the cash on hand to pay out the claims. But that is a last ditch effort. Rick's will be transferring real estate to a REIT which would raise cash, also.....but even beyond that, they generate millions every month in cash. They could easily raise enough cash while the appeals process plays out to pay off the claims if they needed. Not to mention they are probably sitting on $10M at the moment in cash.
This lawsuit won't sink them......the big threat is that if they can't get the IC model validated during appeals, they will be on the hook at other clubs when lawyers use this case has precedence later on in future cases.
They all settle long before trial, which is why their isn't much in the way of well defined case law on the subject. A handful of summary judgments at most, but then they settle since it is cheaper than going to trial.
The judge has ruled that it doesn't matter. The assumption is that it is on the club to properly classify if they are employees or ICs. Just read the last ruling and you can tell that more dancers prefer to be ICs than employees. Only 50 opted-in on the FLSA lawsuit but hundreds have opted-out of the NYLL lawsuit. Lawyers choose the state level labor laws to file class action suits against because it is an opt-out class and allows for a larger class. In a pass ruling. Rick's tried to get the class period narrowed to when they started requiring dancers to sign an agreement that they were ICs and not employees, but the judge ruled it doesn't matter. And other rulings have said it is very well ok to double dip and misclassify performance fees as tips when under IRS rules they would be service fees, since tips are voluntary by their nature and performance fees aren't.
I never said they were willful, I said that was left to be decided by a trial. I would agree with you that they followed a classification convention that is years old. But at the same time, there are cases where judges have ruled that ignorance on the judge's interpretation of labor law is willfulness, as was ruled in a NJ case. To me, willfulness would be if they actually classified the dancers as employees, and then refusing to pay, but I am not the judge. Clearly, this case as proven that the desires of the majority of dancers to be treated as ICs does not matter. Significantly far fewer dancers have opted-in to the FLSA case as those who have opted-out of the NYLL case. I probably make a bad fear monger because I wasn't fear mongering, "genius"!
This is why they are investing in energy drinks over adult clubs. If such a lawsuit holds, the lawyers will go after all other clubs using Hart v. Rick's has precedence. And when the court disagrees with how you classified your dancers, they then get to redefine every dollar that came into the club in the most disadvantageous possible way so they can take it away. Nevermind the fact the club charges $300 for 30 mins in VIP, hands $200 back to the dancer as compensation......yet, now it is considered $200 in tips and no wage was ever paid. When if the club had known they must pay a wage even though the dancer agreed with the previous classification, they would have changed the formula around completely.