LATE LAST MONTH, state regulators at the Department of Labor & Industries, the agency that enforces occupational health and safety standards, got a complaint the likes of which they'd never heard before. Workers at porn website Clublove -- which is run by Seattle-based Internet Entertainment Group (IEG) -- are being forced to use a dildo camera.

At a Friday staff meeting about three weeks ago, Clublove's Director of Talent Mara Mehren told employees at IEG that on the following Monday, the strippers would have to use a bottom-of-the-line Slim Line vibrator. The device has a tiny camera lens inserted into the tip of its hollow body. The women were instructed to shove the dildo cam up their vaginas for the "Bedroom" shift in the Clublove studios, which broadcasts porn over the Internet. They would each take turns using the same plastic penis.

The workers, who put in eight hour shifts and are required to masturbate eight to 13 times per shift, didn't exactly take their new assignment lying down. Two women quit, and two were fired. The complaint was filed soon afterward.

IEG is Seattle's biggest Internet porn business. The company, whose top competitor is Playboy, took in an estimated $50 million in 1998. Seth Warshavsky, IEG president and CEO, smut peddler and multimillionaire, founded the company in 1997, and has garnered recognition from the mainstream media for selling video images of celebrities Pamela Anderson and hubby Tommy Lee doing the nasty. Warshavsky also got attention for his nude photos of Dr. Laura Schlessinger.

Access to the site costs $25 a month, with add-ons later. Horny customers can choose broadcasts in the Bedroom, the Health Club, the Buddy Room, the Couples Room, the Dungeon, or the Two-Girl Shower. Warshavsky has boasted of pulling in 100,000 members. Customers can call a 1-800 number that connects to a speaker phone in one of the rooms, and talk to masturbators. Some clients communicate through chat rooms, where they can type in requests to personalize a performer's show.

The customers may think it's live, but it's mostly Memorex. About 50 percent of the Arcade shows are taped, despite the "live, live, live, live, live, live" announcement on the website, which invites you to "Watch the sluts spank that pussy in the Bedroom!" and "Give that snatch a good workout in the Health Club!"

Most of the workers who spend their days in Clublove's Capitol Hill studios masturbating for Warshavsky's broadcasts are women in their early 20s. There are a few male employees who work four-hour shifts rather than the grueling eight. The pay is $20 an hour. Employees compete for shifts to get a fat paycheck, but they don't have to hustle for tips like at a strip joint.

Despite the taboo and quasi-criminal nature of the sex industry -- an obvious barrier to filing labor complaints with the state -- Clublove's rank and file are starting to revolt.

Their case may help shed some light on the secretive industry. Two days after the complaint was filed, Labor & Industries conducted a surprise inspection of Clublove. What they found merited an investigation, they say, which could take up to six months.

The Washington Industrial Safety and Health Act (WISHA) guidelines don't mention dildos. But obviously a shared dildo can raise some common-sense health questions. The dildo cam comes with a sheath that's not medically tested, and has a hole cut in the top for the glued-on lens to peek through.

People who have worked for IEG say there are several serious problems at Warshavsky's smut shop. They asked to keep their identities secret, because they're scared of Warshavsky's threats to sue (employment at IEG is contingent on never talking to the press) or blacklist them in the sex industry. But they also want to call bullshit on IEG.

The dildo cam is made of plastic, and unlike steel and silicone, can't be safely disinfected. The women also worry about handling the same cord -- which cannot be sterilized -- when juices could drip onto it.

The dildo cam isn't the only problem. Sources say Clublove's performing rooms are unsanitary. There is "lube and pube" all over the floor in the dungeon, and gunk is clogging the showers. It's likely that Labor & Industries saw this during the inspection.

Finally, sex industry sources say Clublove employs an illegal break policy, where performers get half of the hour the state requires, and managers get nothing. There's no safety committee, sometimes paychecks bounce, and no one gets a copy of their own contract.

Heidi Stern, a friend of Clublove employees who also works in the Seattle sex industry, says sharing toys is "absolutely out of bounds" at every strip club and porn website she's worked. "I know a couple of the girls [at Clublove] have herpes," she adds. She points out that many workers in the sex industry are hyper-aware of the risks of contracting sexually transmitted diseases, and wouldn't willingly have unprotected sex under any conditions.

Stern, who gave her stage name to protect her identity, thought about applying to work at Clublove, but says she opted against it because Warshavsky runs a seedy joint. "It's a pussy sweatshop," she says.

According to Labor & Industries spokesperson Bill Ripple, there are four possible outcomes of the investigation. The state could find general, serious, willful, or no violations. The maximum penalty for an employer willfully violating health and safety standards is $70,000, although that is rarely imposed.

IEG's Warshavsky was unwilling to comment on the dildo cam, and finally had underlings in his New York City publicist's office deliver the following statement: "All of our activities have been and are carried out within the law, and we will always abide completely with every legal requirement."

Warshavsky wouldn't say, however, if he would use the dildo cam himself.