Washington, DC – The U.S. Court of Appeals for the District of Columbia today ruled in favor of Rhea Lana Riner and her children’s clothing consignment business in her lawsuit against the U.S. Department of Labor. Cause of Action Institute (CoA Institute) represents Rhea Lana, Inc. The ruling overturns the district court’s dismissal of her complaint and allows the case to proceed.
Rhea Lana: “I am grateful that the Court of Appeals is allowing my case to go forward. The Labor Department’s crusade to classify volunteers as employees has put my business and livelihood in jeopardy. I look forward to presenting my case before the district court in the hopes of being able to run my business without the constant threat of civil penalties from the federal government.”
Rhea Lana founded her clothing consignment company in her living room more than a decade ago. Since the company’s humble beginnings, Rhea Lana, Inc. has expanded as a franchise with 80 locations across 24 states. However, in 2013, the U.S. Department of Labor conducted an audit and sent Rhea Lana a letter claiming that her company was in violation of the Fair Labor Standards Act regarding minimum wages and overtime pay. The government claimed that volunteers who help at the consignment events where their goods are on sale must be classified as “employees.”
Rhea Lana took the Department of Labor to court, but the complaint was dismissed for lack of a reviewable agency action. On appeal, however, the Court of Appeals held that the government’s letter to Rhea Lana is subject to immediate judicial review. The ruling states:
“We conclude that the Department’s letter to Rhea Lana is final agency action because it is more than mere agency advice. By notifying Rhea Lana that the company was in violation of its wage-and-hour obligations, the letter rendered knowing any infraction in the face of such notice, and made Rhea Lana susceptible to willfulness penalties that would not otherwise apply. The letter thus transmitted legally operative information with a ‘legal consequence’ sufficient to render the letter final. We therefore reverse the district court’s dismissal.”
CoA Institute President & CEO, and former federal judge, Alfred J. Lechner, Jr.: “We are gratified by the decision of the Court of Appeals. People who receive agency letters like the one the Department of Labor sent Rhea Lana should be able to go to court to protect their rights. The outcome of this case will set an important precedent about the right to judicial review, the scope of the government’s control over U.S. commerce, and whether individuals are free to volunteer their time for their own benefit. We believe that the Department of Labor overstepped its authority in this case and look forward to Rhea Lana’s day in court.”
The case now returns to the district court, where Rhea Lana will show why volunteers should be free to use their time to ensure the success of consignment events.
The Court of Appeals decision relied on the United States Supreme Court’s decision this week in U.S. Army Corps of Engineers v. Hawkes Co., which involved a similar question of judicial review. CoA Institute filed an amicus brief in that case in support of the parties seeking review, who prevailed in the Court.