How the Department of Labor’s erroneous action discourages entrepreneurship and threatens small businesses. Rhea Lana’s president Rhea Lana Riner explains how the 1938 Fair Labor Standards Act has her in a dispute with the Department of Labor.
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Read the full story here: Bloomberg BusinessWeek
The DOL’s actions could cripple Riner’s business and the “entire consignment industry,” the lawsuit alleges. It was filed in federal court for the District of Columbia by Cause of Action, a legal group founded in 2011 to support limited government. It challenges the Labor Department’s policy of banning for-profit enterprises from using volunteer labor, and it asks the court to block the DOL from further investigating or collecting penalties from Rhea Lana’s. It also asks for attorney’s fees but does not request a specific monetary award.
As I wrote last summer, the U.S. Labor Department opened an investigation into Rhea Lana’s volunteer policy in January 2013, after the Arkansas Department of Labor took a similar action. In August 2013, the feds informed the company that it was in violation of minimum wage laws for not fairly compensating its volunteers—mostly stay-at-home mothers and retired grandmothers who help staff Rhea Lana’s mammoth consignment sales in Riner’s hometown of Conway, Ark., and around the country through her franchisees. In exchange for their work, volunteers are given an opportunity to shop early at the sales, snagging the best used toys, clothes, and baby gear for themselves.
FOR IMMEDIATE RELEASE CONTACT:
Adam Temple, 202-630-3532
Mary Beth Hutchins, 202-499-4232
The Department of Labor’s attempt to redefine employees is met with a lawsuit from Cause of Action on behalf of consignment company Rhea Lana’s
WASHINGTON – Cause of Action (CoA), a government accountability organization, filed a lawsuit today against the Department of Labor (DOL) on behalf of Rhea Lana, Inc. and Rhea Lana’s Franchise Systems, Inc. (jointly, “Rhea Lana’s”), a national children’s consignment event company, over the DOL’s attempt to ban volunteers at for-profit enterprises. Should the DOL’s actions stand it could cripple not only Rhea Lana’s but also the entire consignment industry on which millions of Americans rely.
Cause of Action’s Executive Director, Dan Epstein stated, “This illogical move by the Department of Labor demonstrates just how out-of-date their regulations are and how far they are willing to go to shut down free enterprise. We are facing a government that is essentially telling Americans: we want to meddle in the minute details of how and where you volunteer. Thousands of entities operate with willing volunteers and to single out Rhea Lana’s is arbitrary, outside the law and damaging to families and entrepreneurs across the country.”
Rhea Lana’s hosts consignment sales in numerous cities that allow parents and other family members to sell children’s clothing and items to other families. Consignors keep approximately 70 percent of the profits generated from their items, and Rhea Lana’s keeps 30 percent. The small family business has grown to include sales in 23 states across the country. Consignors assist at sales events in exchange for the option to shop early. Given the tough economic reality facing many parents with young children, shopping for affordable, quality children’s items at Rhea Lana’s events has led to overwhelmingly positive experiences for many families.
In January of 2013, DOL commenced an investigation and concluded, despite the fact there were no apparent complaints from parents and other participants, that consignment event co-venturers were “employees” under the Fair Labor Standards Act.
The suit, filed in the U.S. District Court for the District of Columbia, argues that the DOL acted arbitrarily and outside the law when it classified Rhea Lana’s co-venturers as employees under the Fair Labor Standards Act (FLSA). Cause of Action seeks a declaration that Rhea Lana’s volunteers are not employees under the FLSA and an injunction prohibiting the DOL from bringing action against the company.
“For years we have received overwhelming support from the families who are trying to save money and provide for their children through our sales,” said Rhea Lana Riner, the entrepreneur and founder of Rhea Lana, Inc. “Yet now we find ourselves having to defend how moms choose to use their personal time to benefit their families. For the government to step in and overregulate our business and our industry just makes no sense. We’re fighting back to protect our business and the families we serve.”
“DOL erred in applying a categorical ban against volunteerism in this context,” stated Reed Rubinstein, senior vice president of litigation at Cause of Action. “It should have applied the Supreme Court’s ‘economic realities’ test, which requires the agency to consider all relevant facts and circumstances when determining the applicability of the FLSA. The economic realities of Rhea Lana’s consignment events do not create an employee-employer relationship between Rhea Lana’s and its volunteers.”
The Complaint for Declaratory and Injunctive Relief can be read in its entirety here. The government has 60 days to file a response.
About Cause of Action:
Cause of Action is a nonprofit, nonpartisan organization that uses investigative, legal, and communications tools to educate the public on how government accountability and transparency protects taxpayer interests and economic opportunity. For more information, visit www.causeofaction.org.
About Rhea Lana’s:
Founded by Rhea Lana Riner in her living room 16 years ago and headquartered in Conway, Arkansas, Rhea Lana’s Children’s Consignment hosts semi-annual sales. With Arkansas roots, Rhea Lana’s Franchise Systems, Inc. is rapidly growing with 69 locations in 23 states. The company is the first consignment sale business in the country to offer on-line management and real time tracking of merchandise through a computerized inventory system and a convenient mobile application. For more information, visit www.rhealana.com.
To schedule an interview concerning the litigation, contact Adam Temple, temple@jdafrontline.com, 202-630-3532.
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Notice of Appeal to DC Circuit (January 20, 2015)
Memorandum Opinion (November 21, 2014)
Plaintffs’ Memorandum of Points and Authorities in opposition to Defendant’s MTD the Complaint Pursuant to Rules 12(b)(1) and 12(b)(6) (June 3, 2014)
Department of Labor’s Motion to Dismiss (April 29, 2014)
Proof of Service DOL (January 14, 2014)
Proof of Service US Attorney General (January 14, 2014)
Proof of Service Civil Process Clerk US Attorney (January 14, 2014)
Complaint (January 6, 2014)
Read the full story: Washington Post
After Zucker shut down his company, the commission responded by naming him in its lawsuit. The commission supported that move with a legal precedent known as the Park doctrine, which allows the government to criminally prosecute corporate officers for failing to prevent violations of the Food, Drug and Cosmetic Act.
Critics say it is a misuse of the doctrine. “At a minimum, this action is an obvious overreach of the CPSC’s authority,” said Dan Epstein, executive director of Cause of Action, a conservative legal group backing Zucker. “At a maximum, it is an illegal abuse of power by persons within the commission who seek to punish Mr. Zucker.”
Read the full story: The Hill
In recent weeks, LabMD and the watchdog organization Cause of Action, which is representing the testing lab, had unearthed speeches in which Brill referenced the ongoing case as an example of ways the FTC was cracking down on lax cybersecurity. They had requested Brill be disqualified from the case.
“Commissioner Brill has told the world that LabMD failed to secure consumer information and violated the law … No neutral judge with any regard for the due process requirement of avoiding the appearance of bias and prejudgment would ever say such things about a pending case,” the company said in a motion filed earlier this month.
Cause of Action, a government accountability group which has investigated Department of Homeland Security (DHS) Deputy Inspector General (IG) Charles Edwards, issued the following response to his resignation.
Executive Director Dan Epstein:
“Cause of Action has investigated Charles Edwards for two years, working with information from credible insiders, and filing a FOIA request for records related to Edwards’ misconduct on March 27, 2013, which DHS OIG ignored, prompting us to sue. Our lawsuit ultimately led to the receipt of documents revealing nepotism, mismanagement and the existence of several internal complaints against Edwards, compelling us to ask the President to remove him from office. Cause of Action sees the failure of the Administration to hold Edwards accountable and Edwards’ resignation, less than three days before a Senate hearing, as a cowardly excuse to avoid answering difficult questions about allegations of his abuse and misconduct, some of which may rise to violations of the law, in the Inspector General office.”