Two Denver strip clubs engaged in widespread wage theft involving hundreds of workers and must pay nearly $14 million in restitution and penalties, the city’s auditor announced Wednesday.
Diamond Cabaret and Rick’s Cabaret “violated nearly every applicable provision” of Denver’s minimum-wage laws, including misclassifying entertainers as exempt from the ordinances; failing to pay staff the city’s minimum wage; and stealing money from entertainers by requiring them to pay fees for the privilege of working, Denver Auditor Timothy M. O’Brien said in a news release.
“This is an extraordinary case and unlike any other my office has conducted, due to the exorbitant amount of wages stolen, the strip clubs’ overbearing employee rules and their refusals to comply with our lawful investigations,” O’Brien said.
The strip clubs, in a statement, fired back at the city, accusing Denver Labor of disregarding legal boundaries, trampling on due process and “wielding subpoenas like weapons.”
“Diamond Cabaret and Rick’s Cabaret have fully complied with the law,” the clubs’ statement reads. “Yet Denver Labor, in a display of unchecked government overreach, continues to demand access to private business records beyond their legal authority, despite the complete absence of any substantiated claims of wage theft. These demands are not about justice — they are about control.”
The strip clubs exercised a “significant amount of control over” entertainers’ working conditions, the audit found. The clubs required strippers to pay a “house fee” of up to $85 per shift and an additional $8 “promo fee” before working. Diamond Cabaret also imposes fines against entertainers who violate certain rules.
Managers, meanwhile, routinely take tips for work performed by entertainers and tipped workers, the auditor determined.
“These violations are no accident, nor do they reflect a good faith misunderstanding of the law,” the auditor wrote in Diamond Cabaret’s wage-determination letter. “They are the result of a system designed to depress staff income and divert money to managers and the club itself.”
O’Brien’s audit said Diamond Cabaret also destroyed documents during the investigation.
Diamond Cabaret and Rick’s Cabaret pledged to fight the city in court, adding the case sets a “dangerous precedent” that could “erode the fundamental principles of due process and fair treatment under the law.”
The clubs must pay more than $11.3 million in restitution to more than 230 affected workers, money that includes unpaid wages and stolen tips. The businesses must also pay $2.6 million in city penalties.
The auditor in September issued subpoenas to three Denver strip clubs, including Diamond Cabaret, in an attempt to recover wages for dancers. The effort marked the first time O’Brien utilized subpoenas under a new city ordinance passed last year.
Wednesday’s action did not implicate the other two strip clubs — PT’s Showclub, and PT’s Centerfold — that also were issued subpoenas.
The strip clubs in October sued the city’s labor division, claiming the issuance of “overreaching and unjustified” subpoenas is “an alarming abuse of power” that threatens privacy rights. The businesses called the investigation a “fishing expedition.”
That lawsuit remains ongoing.
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