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I suspect that's why they are usually contractors, not employees.

No, that's probably so that they can pay below minimum wage (or, indeed, have the strippers pay the club).

Then, what DOES prevent age and sex discrimination lawsuits?

Self-interest?

Why would fire a good employee for something as stupid as sex or age?

Yes, there are people who would do that, but if they're that brainless I don't think their business is going to be long-lived.