Consignment store Rhea Lana said Tuesday it would appeal a federal court ruling that sided with the Labor Department and ruled that the company is run by employees who must be paid, and are not volunteers as the company insists.
Rhea Lana will appeal a D.C. District Court ruling from last month that the company says would undermine its entire business model if it were upheld.
“Individuals should be free to volunteer their time for their own benefit. The Labor Department’s crusade to classify volunteers as employees has put my business and livelihood in jeopardy. If everyone is satisfied, why would the federal government need to intervene?” said Rhea Lana Riner, owner of the franchise.
The case is a legacy of the activist direction the department took during former President Barack Obama’s administration, which sought to crack down on what it argued were abusive or otherwise unfair business practices. Rhea Lana is a for-profit company that relies on volunteers for its labor pool, which the administration argued violated the Fair Labor Standards Act.
It is not clear if the department under the Trump administration, which has reversed several Obama-era efforts, would continue to pursue the case. A Labor Department spokesman could not be reached for comment.
Rhea Lana holds what are essentially big semiannual yard sales. People who provide clothing or other items for the sales get 70 percent of the profits from the items they donate as well as first crack at the other merchandise. The donors often assist at the events, which last only a couple of days, by maintaining the displays or making sales transactions. This helps them to ensure that their own items get sold. That’s also what got Rhea Lana in trouble with the feds.
The Labor Department’s Wage and Hour Division told the company in a 2013 letter that it was violating the FLSA because only nonprofits can have volunteers. While it didn’t penalize the company at the time it did say that any “repeated or willful violations” would result in fines “not to exceed $1,100 for each such violation.”
In effect, the department told Rhea Lana that if it continued running its business this way, the government would bleed them to death financially.
The department was apparently never able to identify any worker who said they were exploited. Nevertheless, officials have said the practice could not go unchallenged, and argued that only religious, charitable, civic, humanitarian or similar non-profit organizations can legally have volunteers. Department officials even cited a 1945 Supreme Court ruling that found that the FLSA must “be applied even to those who would decline its protections.”
The District Court agreed with the government. “Rhea Lana’s consignor/volunteers performed tasks integral to Rhea Lana’s commercial success and expected to receive a personal benefit for those tasks and that Rhea Lana exercised some control over the consignor/volunteers analogous to an employer,” it said.
The Cause of Action Institute, the nonprofit legal group representing Rhea Lana, said this was an “outdated” view of the law. “The court freely conceded that Rhea Lana’s labor practices are not designed to exploit anybody. We continue to believe that the Department of Labor has overstepped its authority. The federal government should not attack a business model that provides hardworking families with affordable children’s clothing,” COA Vice President Julie Smith said.
This post originally appeared on Washington Examiner