DOL Regulating An Entreprenuer Out of Business

Not much of a surprise, but the Department of Labor is inappropriately enforcing arcane regulations that threaten an entrepreneur. In a recent USA Today op-ed, Rhea Lana Riner tells her story of how regulations deriving from the WWI era Fair Labor Standards Act (FLSA) would stifle her innovative business model.

Mrs. Riner, as a mother struggling to keep a budget and provide kids with nice clothes, started a clothing consignment business–Rhea Lana’s—in 1997. Today her business, which was started in her garage, has flourished and currently operates in 22 states.

Rhea Lana’s provides families with brand name clothes at affordable prices. In her article she describes how her business works:

“We rent a large space for a few days, say an unused department store. Parents with clothes and children’s items to sell sign up online, enter their items into a computerized tracking system and choose their sale price. Then they bring the clothes and other items to the sale location, label them with preprinted price tags and display the clothes. Parents keep 70%; we keep 30%. It is easier than a garage sale, makes more money for parents, and shoppers efficiently find good deals.”

In addition, Rhea Lana’s success is largely contingent on volunteer work. Both from consignors (the people who bring in the clothes) and shoppers who volunteer to help set up the event before the sale begins. For their effort, these helpers get first pickings.

However, the DOL Wage and Hour Division has initiated an audit of Riner’s company because the agency suspects that her “volunteers” are really “employees” covered under the FLSA.

Therefore, the DOL is asking for the names and contact information of Rhea Lana’s consignors and volunteers to interview them and determine if violations were made. If the DOL investigation finds that these volunteers are employees, then Riner would be forced to pay them the federal minimum wage of $7.25 per hour, fill out IRS paperwork and fulfill other regulatory requirements.

The absurdity of the DOL’s regulatory enforcement is not lost on Riner, “With this logic, Build-a-Bear Workshop employs child labor by letting young customers assemble their own teddy bears.” Likewise, Riner points out she gives her customers the same opportunity as eBay does with its resellers.

Luckily, Congressman Tim Griffin (AK-R) wrote a letter in support of Rhea Lana’s business practices to the DOL on February 15, 2013. In the letter, Rep. Griffin communicates his concern that the investigation into Rhea Lana’s is “unnecessarily requesting to interview consignors who assist with the sale of items (including their own) at Rhea Lana’s events, and inaccurately identifying these individuals as employees.” Further, Rep. Griffin states that Rhea Lana’s relies on volunteers to put on the events that provide low cost products for individuals and families.

Unfortunately, this is par for the course of the Obama administration’s DOL, which throughout its reign continues to formulate regulations to expand the FLSA to cover more and more workers instead relaxing inane and outdated laws.

One of Obama’s predecessors in the Oval Office, JFK, was famous for urging Americans into the satisfying life of volunteer work. How ironic that the latest Democrat to sit in JFK’s chair would punish volunteers and the organizations that need them.