This week, Cause of Action filed an opening brief on behalf of Rhea Lana, Inc. and Rhea Lana’s Franchise Systems, Inc. in Rhea Lana v. U.S. Department of Labor (No. 15-5014). The case is now pending in the United States Court of Appeals for the D.C. Circuit.
In a nutshell, Rhea Lana’s is appealing from the district court’s dismissal of its case on procedural grounds. The brief we’re filing explains why the district court erred, and why Rhea Lana’s complaints against the Department of Labor are ready for the district court to consider on the merits. Here is some key background on the case.
Rhea Lana’s is a family-owned business that organizes consignment sales of children’s clothing in 24 states. Rhea Lana’s, like other consignment industry participants, gives its consignors the opportunity to volunteer at consignment events to set up, write price tags, check inventory, and help with sales.
Consignors are typically young stay-at-home mothers, working mothers, and retired grandmothers, and many of them are also interested in shopping at the sales where they contribute clothing. Volunteering gives them the opportunity to shop early and a higher likelihood of selling their own items — not to mention the chance to build friendships with other moms. In short, volunteering is a “win-win” for all concerned.
The Department of Labor, though, wants to put a stop to it. In 2013, the Department notified Rhea Lana’s that its volunteers are actually employees under the Fair Labor Standards Act (FLSA), and are therefore entitled to back wages. The Department also informed Rhea Lana’s that if it doesn’t start treating its volunteers like employees, which would put Rhea Lana’s at a major competitive disadvantage in the industry, Rhea Lana’s would be liable for statutory penalties. Even worse, the Department sent a letter to Rhea Lana’s volunteers telling them that they have a right to sue Rhea Lana’s themselves. Tellingly, none have taken up that offer.
Rhea Lana’s sued the Department, arguing that due process and basic principles of federal administrative law ought to prevent the government from punishing entrepreneurship, undermining the culture of volunteerism, and depriving mothers of the opportunities that volunteering affords.
The United States District Court for the District of Columbia dismissed Rhea Lana’s complaint on November 21, 2014. Even though the Department has told Rhea Lana’s that it is in violation of the FLSA and liable for penalties if it doesn’t change its business model, the district court held that there hasn’t been any “final agency action” by the Department that’s ready for judicial review.
As Cause of Action’s opening brief shows, though, that’s completely mistaken: The Department’s letters determine Rhea Lana’s rights, effectively order Rhea Lana’s to conduct its business differently, and change Rhea Lana’s legal position for the worse. That’s all that Rhea Lana’s needed to show, and all that’s required for the district court to reach the merits and decide whether the Department’s bullying can stand.
Looking ahead, the Department’s response brief is due on July 6, 2015. Rhea Lana’s has requested oral argument.