DENVER (KDVR) Two Denver strip clubs were told they owe nearly $14 million in restitution and penalties for wage theft after the clubs reportedly “violated nearly every applicable provision” of Denver’s minimum wage and civil wage theft ordinances.

The two strip clubs subject to the determinations and investigations were the Diamond Cabaret, located on Glenarm Place, and Rick’s Cabaret on Stout Street.

The Denver Auditor’s Office said it began investigating the Diamond Cabaret, which is operated by Glenarm Dining Services, in May 2023 because strip clubs are known to have a high risk of wage and hour violations. The office said the club’s wage theft was “part and parcel” of its business model, stealing millions from bartenders, servers, DJs and entertainers over the years.

“The Diamond depends on the hard work of its entertainers, servers, bartenders, and other workers who create the hospitality experience which attracts clients and the Club’s operations involve widespread wage theft against the very workers who make the business successful,” the auditor’s office wrote in its determination letter for the Diamond Cabaret.

Denver Labor said the clubs had many violations, including:

• Misclassifying dancers as exempt
• Failing to pay dancers and other staff Denver’s minimum wage
• Stealing money from entertainers by requiring they pay fees “for the privilege of working”
• Misclassifying workers as tipped food and beverage employees in order to pay them a sub-minimum wage, and then taking advantage of the tip credit by taking a share of tips while paying food and beverage employees a sub-minimum wage
• Misclassifying DJs and the house mom as food and beverage workers eligible for the tip credit

Cabaret management accused of ‘widespread wage theft’

The determination regarding the Diamond Cabaret discussed how a worker’s wages were stolen in 2024. The Denver Auditor’s Office noted that, at the time, minimum wage was $17.29, but the Diamond Cabaret was allegedly attempting to pay a worker only $14.27.

“The Diamond has underpaid every tipped employee by $3.02 per hour for every hour worked for more than two years,” the auditor’s office stated in its determination. “This tip theft pales in comparison to the Club’s treatment of its entertainers, however. The Diamond misclassifies these women, pays them nothing, takes gratuities they earned for their work, and claims they have no workplace rights.”

Those gratuities include an up to $85 “house fee” that dancers must pay to work at the Diamond Cabaret, the auditor’s office said. Additionally, the dancers would be assessed an $8 “promo fee” and then were fined if they violated certain rules.

Under Colorado law, the dancers are not classified as employees, the Denver Labor Division clarified. But under Denver ordinances, they are “workers.” Because of this, the auditor’s determination does not require changes in the working conditions except that the Diamond can no longer commit wage theft against them.

The determinations speak at length about situations where workers were tipped hundreds, if not thousands, of dollars, and then were forced to split their tips with management. The auditor’s office said the only record of these tip splits is through “Gratuity Received Declarations.”

“Since 2022, managers have reported significant gratuities,” the auditor’s office wrote. “In most pay periods, each manager at the Diamond reported hundreds, sometimes thousands, of dollars in tips … These examples reflect a pattern that persists in every pay period dating back more than two years. Even as managers were reporting significant tips, the Club was paying DJs, the house moms, bartenders, servers, and barracks on the sub-minimum wage.”

The auditor’s office noted that the club also claimed that it is not the workers sharing tips with management, but the opposite.

“The Club claims that managers share up to 75% of their tips with workers,” the auditor’s office noted. “This flawed reasoning is related to the Employer’s third argument: That nothing about its tip-sharing practice is unlawful because managers are ‘working directly with the guests,’ ‘providing a variety of customer services,’ and the law allows managers to keep tips that they receive ‘directly from customers based on the service that he or she directly and solely provides.'”

Rick’s Cabaret had similar situations and is facing almost the same accusations. Rick’s was assessed a fine of $1,566,199.95, owed to the city of Denver. Diamond was assessed a fine of $1,148,470.48.

Additionally, the Diamond is required to pay over $4.8 million in restitution, and Rick’s is required to pay nearly $6.6 million in restitution.

Third determination’s outcome pending against club

The auditor’s office also shared a determination stemming from a separate investigation in 2024 that delves into the situation that resulted in an auditor’s office’s investigation where a cocktail waitress received a $2,000 tip from one of her tables in “Diamond Dollars,” an internal currency at the strip club, and was told by a manager she needed to give 25% of her tip to management. According to the determination, the waitress ultimately gave in and handed over about $500. She was then pressured to give an additional $25.

After meeting with management to discuss her discomfort regarding the interaction, the worker was removed from the work schedule, and she was told she had been demoted back to TLC. A few weeks later, the club terminated the worker’s employment, the auditor’s office stated.

The outcome of this determination is still pending.