Does Uncle Sam Support Single Moms? The Question of Federal Funds for Strip Clubs

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Should U.S. taxpayer dollars be loaned to strip clubs? What would have sounded like a joke just a few months ago is now a reality thanks to the federal government’s Paycheck Protection Program (PPP). And while that may sound like an outrageous misuse of federal funds, the unprecedented crisis caused by the COVID-19 outbreak means the situation may not be as clear cut as that. In fact, this time it is the strip clubs that might discover that they are the ones being teased once they start dealing the PPP’s regulations, particularly the requirement that 75 percent of the funds must go to employees if the loan is to be forgiven.

At least some federal relief funds being loaned to “gentlemen’s clubs” became a reality on Monday when District Court judge Matthew Leitman in Flint, Michigan, ruled that the U.S. Treasury Department could not deny a PPP loan to the Little Darlings strip club or similar establishments just because they provided entertainment of “prurient sexual nature.”

“Simply put, Congress did not pick winners and losers in the PPP,” Leitman wrote in his opinion.

The judge has a point. Whatever one might think of the entertainment that strip clubs provide, they do employ people who depend on those jobs to support themselves and their families. Like any other business, the clubs must also pay taxes, utilities, and rent. Strip clubs are also part of the hospitality industry, which is crucial to food and beverage suppliers. “I don’t personally like the kind of entertainment they provide” is a weak rationale for saying that strip clubs are less deserving of financial help than a less controversial ‘nonessential’ business like, say, a hair salon.

Yeah, it’s a cliché that a lot of strippers are single moms, but the cliché exists because it is often true. And right now the dancers for Little Darlings aren’t doing any better than anyone else because the club has been closed since March 24. It is not fair to punish them because some people look down at stripping.

That said, at most strip clubs the dancers are not employees, but independent contractors. Legally speaking, these strippers are independent businesses that just happen to perform on stage. Club owners like this arrangement because it means they don’t have to comply with state and federal employment regulations such as overtime and minimum wage. It is not unheard of for clubs to not pay their dancers at all, and instead let them only collect tips from customers. Dancers will put up with this because on a good night they can still make a lot more in tips than they could doing a week’s work at other jobs.

That creates an interesting wrinkle for strip clubs regarding the PPP loans. The Treasury Department will forgive the loans, making them effectively a gift from the government, provided employers meet that 75 percent to workers requirement. Since most strippers are not technically employees, it is hard to see how many strip clubs will be able to meet this requirement, even when counting their other non-contractor “traditional” employees like bartenders, cooks, and doormen. Most club owners who get PPP loans will probably have to pay them back. Depending on the interest rates for PPP loans, Uncle Sam might even make a modest profit off the clubs.

If some club owners find themselves in a difficult situation for these reasons, well, they’ll have brought it on themselves for being cheapskates and not treating their dancers as employees. We shouldn’t gloat over such situations, though. In the meantime, the dancers will still be struggling, as will the others who work at the clubs and the vendors.