On Sept. 26, 2017, A District of Columbia federal judge upheld a determination by the U.S. Department of Labor (DOL) that an Arkansas-based company and its franchisees that operate children’s consignment sales around the country must pay its consignor/volunteers as employees (Rhea Lana, Inc., et al. v. U.S. Department of Labor, No. 14-17, D. D.C., 2017 U.S. Dist. LEXIS 156905).

Rhea Lana, Inc. organizes consignment sales.  Families pay a flat $9.50 fee to consign their used items and receive 70 percent of the profits from the sale of their items, with the remaining 30 percent going to Rhea Lana.

The day-to-day operations of the sale are carried out by managers paid by Rhea Lana and by consignors who volunteer for five-hour shifts to assist with tasks such as working the cash register, setting up display racks, restocking the merchandise, assisting customers during the sale and cleaning up after the sale has ended.

In 2012, the U.S. Department of Labor (DOL) investigated whether the volunteers qualified as employees under the Fair Labor Standards Act (FLSA) and were thus entitled to back wages for their past labor. The DOL ultimately determined that the company’s volunteers were employees under the FLSA and that Rhea Lana was in violation of the act for failing to pay the minimum wage.

The department explained in an Aug. 30 letter to Rep. Tim Griffin, that It only allows volunteerism for “religious, charitable, civic, humanitarian or similar non-profit organizations.” A for-profit business simply does not qualify.

The letter to Griffin bluntly stated that it didn’t matter what the volunteers themselves thought. It cited a 1945 Supreme Court ruling that found that the FLSA must “be applied even to those who would decline its protections.” The court argued in that case that if exceptions were allowed for volunteers then “employers might be able to use superior bargaining power to coerce employees to make such assertions.”

To see the decision, Click Here.