Analysis

Topic: Adult Entertainment
Sponsors:

Position: The Department of Consumer and Industry Services does not support the bills.

Background:

Adult entertainment is a mutli-billion dollar enterprise in the United States. Adult businesses may include movie theaters, bookstores, escort agencies, massage parlors, and topless/bottomless bars. Such enterprises are reportedly highly profitable. Adult entertainment is an $8-10 billion industry in the United States. One national distributor of pornography in the 1980's is reported to have earned almost $1 million per day. Although control of adult entertainment businesses has in recent years become more diversified, there is record in the past of organized crime involvement.

Local units of government throughout the United States have a long history of regulation in this area. These regulations include zoning and location requirements, licensing, limits on the hours of operation, restrictions on conduct and health regulation. Much of this regulation has focused on the secondary effects of adult entertainment establishments on neighborhoods and communities. These secondary effects have been identified in studies in many states and include high crime rates and property value deterioration. Over the years state courts and the United States Supreme Court have addressed the issue and have permitted local regulation of these businesses.

Description of the Bill:

The bills add a new article 17A to the Occupational Code to license and regulate adult entertainment establishments and massagists. Beginning 180 days after the effective date of the bills, a person may not engage in, carry on, or participate in the operation of an adult entertainment establishment without being licensed by the department.

The Department of Consumer and Industry Services would be required to maintain records of individuals and businesses licensed under the new article. These records would include the full name, a picture, any nicknames or aliases, residential and business address, social security and driver's license number and the name and address of all banks where accounts are maintained.

A license issued under the new article would not be transferrable. If a licensee changes the location of the business during the license period, the license is revoked and a new license application is required. A license must be conspicuously displayed.

Unlike the original bills, massagists would not be licensed. House Bill 5124 exempts businesses which use only massage therapists to provide services from licensure as a massage establishment. Massage therapists are defined as individuals who have at least 500 hours of formal training in massage therapy and bodywork. Individuals who have passed the national certification examination may also be exempted if that exam is adopted by the department. Businesses providing services by professionals licensed under Michigan law are also exempt from massage establishment licensing requirements.

House Bill 5130 establishes a list of prohibited activities for massage establishments. These prohibitions relate to activity that is sexual in nature. Current records of all massagists employed by the establishment are required. These records must be maintained by the establishment during the employment of the individual and for one year following the employment.

Licensing would be required by the bills for adult entertainment establishments. The license is valid only for the specific premises described in the license. The application for a license must document that the location or proposed location complies with all applicable laws and ordinances. Unless an applicable zoning ordinance provides otherwise, an adult entertainment establishment may not operate within 3,000 feet of a residential area, school, church or child care organization. An establishment which moves its location is required to reapply for a new license.

A license application is required to include a diagram of the premises showing the layout or floor plan of the premises. One or more manager's stations are required and must be shown on the layout or floor plan. The diagram requirement may be waived by the department if the applicant has previously submitted a diagram to the department and certifies that the configuration of the premises has not changed. The waiver is designed to reflect the fact that some adult entertainment establishments are licensed under the Liquor Control Code of 1998. A license must be approved or denied within 120 days after receipt of a completed application. A licensee is required to notify the department within 10 days if any information contained in its application is changed.

A House committee amendment to House Bill 5126 attempts to address concerns regarding the duplication of regulation related to Class C liquor licensees. The amendment would allow regulatory documents under the Liquor Control Code and the Occupational Code to be shared for the purpose of carrying out the respective missions of the agencies.

A license may not be issued under House Bill 5128 to a person convicted of a misdemeanor or felony for certain sexually related crimes within the time frames specified by the bill or to a person whose license to operate an adult entertainment establishment has been revoked.

House Bill 5129 extends the penalties of Section 602 of the Occupational Code for intentional misrepresentations or omissions, an improper transfer of a license or a change of location, violation of 1765 (massage establishment employee records) and 1766 (10 day notification of changes in application information), and a conviction for sexually related crimes. Penalties in Section 602 include limiting a license, suspension, denial, revocation, probation, payment of a civil fine, censure and probation. In addition to the penalties under Section 602 the bills impose monetary penalties for specific violations. For instance, failure to properly display a license can result in a fine of up to $1,000.

Periodic inspections by the Department of Community Health to prevent the spread of communicable diseases would be authorized by House Bill 5131. Reasonable notice of such inspections would be required. Inspection by law enforcement officials would also be authorized.

The hours of business of an adult entertainment establishment are regulated under House Bill 5132. Such businesses may not be open on holidays or Sundays. Business hours on Monday through Saturday would be from 10 a.m. until 2 a.m. Operation on Sunday (except 12 a.m. to 2 a.m.) or legal holidays would be prohibited.

House Bill 5132 also prohibits an adult entertainment establishment from hiring independent contractors to provide live adult entertainment or massage to customers. All persons providing such services must be employees.

Contract employment would be prohibited. All persons engaged by an adult entertainment establishment to provide entertainment, massage, or other services must be employees of the establishment. Contract employment for dancers is standard practice in the adult entertainment business. Although the practice offers flexibility for both the dancers and owners, the House believed that it permitted exploitation of employees and promoted tax evasion.

House Bill 5133 amends the Public Health Code by prohibiting a person from constructing, using, designing, or operating a facility for the purpose of engaging in or permitting a person to engage in sexual activity which includes high-risk sexual conduct. The bill contains requirements relating to manager's stations, configuration, lighting, floor covering, wall and ceiling surfaces and use of porous building materials. The Department of Community Health is permitted to inspect a facility suspected to be the site of high-risk sexual conduct. The bill establishes an administrative procedure for handling such allegations and resolving them.

House Bill 5134 amends the Revised Judicature Act of 1961 by allowing a private citizen of the county which brings an action to abate a public nuisance existing at an adult entertainment establishment required to be licensed under Article 17A of the Occupational Code to be awarded reasonable attorney's fees as part of a favorable court ruling or judgement.

House Bills 5124-32 are tie-barred to each other. House Bill 5134 is tie-barred to House Bill 5124. House Bill 5133 is not tie-barred to any of the other bills in the package.

House Bill 5469 was introduced in response to a recent federal court decision. The bill establishes an expedited appeals process under the Occupational Code. The bill establishes various timelines for the appeal of decisions under Article 17A. These include:

The circuit court's hearing is to be conducted without a jury and is confined to the record. The court is required to hear oral arguments and receive written briefs upon request. The time limits may be jointly waived by the parties to the case.

Arguments For:

Local zoning has been insufficient in regulating this industry. In some communities adult entertainment establishments have been placed across the street from schools, adjacent to residential neighborhoods and in other places where the zoning ordinance would otherwise restrict them. State regulation is needed to supplement local requirements. The bills are based on a successful program in Delaware.

There are serious problems in certain areas, often older commercial areas, with the proliferation of adult entertainment establishments and massage parlors. These providers of sexual services contribute to the deterioration of older urban areas and are even spreading into rural areas. They bring with them crime and communicable diseases that local ordinances and enforcement are ill-equipped to handle. State licensure and enforcement is the only effective means of regulating such businesses.

Adult entertainment establishments are not limited to older commercial areas. One Lansing area township official described in committee how an establishment opened across from a school. Although such a business was not permitted by the zoning ordinance, the name of the establishment did not suggest that this was an adult business. There are zones in the township where such establishments are permitted, but this business chose to use subterfuge to establish itself.

Local regulation of adult entertainment establishments has had mixed success. What successes have occurred have usually come at great cost to local budgets and the quality of life in adjoining residential and commercial areas. State licensure would provide local communities with an additional tool to prevent the spread of adult businesses.

Arguments Against:

There is no need for these bills. The bills deal with issues which are more appropriately a local police matter. Many local police agencies are dealing quite adequately with the criminal justice problems associated with adult entertainment establishments and massage parlors. According to the Detroit Free Press a multi-county task force made coordinated raids on adult businesses in seven Michigan counties on March 22, 2000. The raids were the result of an 8-month investigation. At least two of the 10 stores were closed for health and safety violations.

State regulation will contribute little to local prosecution of such businesses and could conceivably reduce local enforcement efforts by giving communities a false sense of security. State regulation is no substitute for aggressive local enforcement in this area.

Some of the businesses which would be licensed under the proposed bills are already licensed by the Liquor Control Commission. The bills would impose an unnecessarily duplicative and costly burden on these establishments. Amendments to exempt Liquor Control Commission Class C licensees from the bills were unsuccessful in the House. In some respects, the proposed regulation of adult entertainment establishments conflict with requirements for liquor licenses. Under these bills a person with a prior conviction for a criminal sexual violation would not be able to obtain a license. This provision may make several adult business owners who have Class C licenses ineligible for a license. Currently, the Liquor Control Code makes a prior conviction a consideration rather than a contingent factor in granting a license.

The bills may unintentionally open the door to licensure of massage therapists. Massage therapy is a legitimate health service and is currently offered in wellness centers and medical centers as part of physical therapy, stress relief programs or other health services. Certification is obtained through the American Association of Bodywork and Massage Professionals. There is training for these health professionals available in programs approved by a national accreditation organization. There is also a national examination. Permitting the state to recognize national organizations and to adopt the national examination may be a giant step toward licensure of this profession. The profession is currently licensed in 29 states.

The bills are designed to drive a legal business out of the state. This is precisely what has happened in Delaware, which provides the model for Michigan's legislation. Before Delaware enacted their law there were an estimated 20 adult businesses in the state. Their numbers have been reduced to 3 as a result of the bill. Two of the remaining licenses are reportedly the subject of regulatory action by Delaware authorities. The proposed Sunday and holiday closing is an onerous requirement. Hiring of independent contractors is prevailing practice in the industry because it works for both the establishment and the dancer. There is no reasonable basis for this requirement. The argument that the owners and dancers are dodging tax liability has not been documented.

The level of the license fees which will be paid by adult businesses under these bills cannot be justified. The annual license fee required under the bills has been estimated to be as high as $13,000 for each establishment. This amount is significantly higher than the license fee paid by any other licensed Michigan business or profession. Fees of this magnitude will have the effect of putting many operators out of business.

Supporters:

Opponents: