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Rhea Lana, Inc. v. United States Department of Labor

United States Court of Appeals, District of Columbia Circuit

June 7, 2019

Rhea Lana, Inc. and Rhea Lana's Franchise Systems, Inc., Appellants
v.
United States Department of Labor, Appellee

          Argued September 21, 2018

          Appeal from the United States District Court for the District of Columbia (No. 1:14-cv-00017)

          Julie A. Smith argued the cause for appellants. With her on the briefs were Joshua N. Schopf and John E. McGlothlin.

          Sydney 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, [*] Senior Circuit Judge.

          OPINION

          SRINIVASAN, CIRCUIT JUDGE.

         Rhea 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 public.

         The 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 district court.

         I.

         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).

         Plaintiffs 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.

         Rhea 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 shifts.

         As an 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.

         In 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 ...


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