United States Court of Appeals, District of Columbia Circuit
Rhea Lana, Inc. and Rhea Lana's Franchise Systems, Inc., Appellants
United States Department of Labor, Appellee
September 21, 2018
from the United States District Court for the District of
Columbia (No. 1:14-cv-00017)
A. Smith argued the cause for appellants. With her on the
briefs were Joshua N. Schopf and John E. McGlothlin.
Foster, Attorney, U.S. Department of Justice, argued the
cause for appellee. With her on the brief were Jessie K. Liu,
U.S. Attorney, Mark B. Stern, Attorney, and Dean A. Romhilt,
Senior Attorney, U.S. Department of Labor.
Before: Srinivasan and Katsas, Circuit Judges, and Ginsburg,
SRINIVASAN, CIRCUIT JUDGE.
Lana is a for-profit business that organizes consignment
sales of children's merchandise. The consignors who
supply the merchandise for sale can also work at the sales.
They are not paid for that work but instead are given the
opportunity to shop at the sales earlier than the general
Department of Labor determined that Rhea Lana's workers
qualified as "employees" under the Fair Labor
Standards Act. The company brought a challenge to that
decision, contending that the workers should be considered
volunteers rather than employees. The district court rejected
the challenge and sustained the Department's
determination. Rhea Lana now appeals, and we affirm the
Fair Labor Standards Act guarantees all "employees"
a federal minimum wage. 29 U.S.C. § 206(a); see
id. § 203(e)(1). The Act does not extend its
protections to workers who are volunteers rather than
employees. See Tony & Susan Alamo Found. v. Sec'y
of Labor, 471 U.S. 290, 299-303 (1985). Nor does it
protect independent contractors. See Morrison v.
Int'l Programs Consortium, Inc., 253 F.3d 5, 10- 11
(D.C. Cir. 2001).
Rhea Lana, Inc. and Rhea Lana's Franchise Systems, Inc.
(collectively, Rhea Lana) run semiannual consignment sales
for children's clothing, toys, and other merchandise. A
consignment sale is an arrangement whereby a seller (or
consignor) entrusts goods to a reseller (or consignee) for
resale. A consignor receives compensation for the goods only
if the consignee successfully resells them. Otherwise, the
goods go back to the consignor.
Lana's events are staffed by the company's managers,
who work for compensation. But Rhea Lana's sales also
require additional workers to perform everyday tasks like
organizing merchandise, removing tags from clothing, and
processing customers' purchases at the point of sale. For
those tasks, Rhea Lana solicits consignors to work five-hour
incentive to work at the sales, Rhea Lana offers consignors
the opportunity to shop before the general public. A
consignor's priority in the shopping order depends on how
many five-hour shifts she works. The consignors fall into
four groups-called Primo Moms, Super Moms, Early Workers, and
Workers-with the first of those groups working four shifts
and getting to shop first, the second group working three
shifts and getting to shop second, and so on.
2013, the Department of Labor's Wage and Hour Division
began investigating Rhea Lana's labor practices. In
August 2013, Robert A. Darling, a District Director in the
Division, sent a letter to Rhea Lana stating that "[the
Department's] investigation [has] disclosed that your
employees are subject to the requirements of the FLSA."
Letter from Robert A. Darling to Rhea Lana ...