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District Court Agrees Rhea Lane Should Pay Overtime

In order to save some money, companies frequently hire interns, who are either unpaid or not paid very much. Recently, several companies have had to face legal action from unpaid interns alleging they should qualify as paid employees under the federal Fair Labor Standards Act (FLSA), but most for-profit companies don’t try to save money by using volunteers.

Only not-for-profit companies, such as charities and community organizations, can legally use volunteers. According to the federal Department of Labor (DOL), Rhea Lana Inc. was had volunteers selling items at the company’s semi-annual sales of children’s clothing, toys, etc. The company leases the space and handles the logistics for these events.

The volunteers/consignors who help sell the clothing at these events are not paid for their time, although they are allowed to purchase items before the general public and prominently display their own items for sale in order to improve their own profits. Consignors take home about 70% of the proceeds from the sales of their items.

The DOL sent two letters, both of which explained that Rhea Lana’s use of volunteers at their sales was illegal. One letter went to the company, while another went to the volunteers.

Judges understand that it can be confusing to try to keep track of all the federal and local laws regulating businesses today, including labor laws. That’s why they tend to go a little bit easier on companies that violate the law if they’re convinced that the companies honestly did not know they were doing anything illegal.

The letter sent by the DOL to Rhea Lana puts the company in a predicament because it proves they were informed that their employment practices were allegedly in direct violation of federal labor law. If Rhea Lana is charged in a court of law with violating the FLSA, the DOL letter could subject it to additional penalties for willfully violating the law.

The DOL began investigating Rhea Lana’s employment practices back in the beginning of 2013, and it was the result of those investigations that led the DOL to conclude that the company’s consignors are allegedly entitled, not just to wages, but to back pay for the time they’ve already spent working for the company.

Rhea Lana responded by filing a lawsuit against the DOL in pursuit of a declaration that their consignors do not qualify as employees and asking the court to file an injunction against the DOL from further investigating Rhea Lana or enforcing any decisions the company made as a result of the investigations.

The district court agreed with Rhea Lana’s assertion that the two letters sent by the DOL do not qualify as a final agency action, and as a result, cannot be challenged under the Administrative Procedure Act.

The DOL appealed the ruling and the D.C. Circuit court sided with the DOL, saying that, by providing Rhea Lana with an explanation as to how their employment practices violate the FLSA, the DOL had provided the company with legally operative information that contained enough “legal consequence” to qualify the letter as a final agency action by the DOL.

The Chicago class action and employment law attorneys at the Chicago Overtime Law Center have three decades of experience fighting to help employees who are victims of wage, overtime and tip theft by their employers. We have a team of Chicago unpaid overtime lawyers who concentrate on prosecuting state and nationwide class action lawsuits. Our attorneys work out of Chicago and Oak Brook offices and pursue claims for workers all over the Chicago area including Berwyn and Bollingbrook. We protect unpaid workers who haven’t received overtime throughout the Chicago area including in DuPage, Kendall, Lake, McHenry, Kane and Cook Counties.

Our Skokie and Berwyn overtime and employment lawyers are intimately familiar with the issues that arise during wage claim litigation, and we know the laws that govern overtime cases well. Many employers mis-classify employees as being exempt from overtime laws and pay workers salaries instead of hourly wages in order to avoid paying them overtime. Some employers mistakenly classify employees as exempt and others intentionally do so in order to circumvent the law. In either case, workers do not receive the wages they should, and a lawsuit may be the only way to recover their earned wages.

The Chicago Overtime Law Center is based in Chicago and Oak Brook, and represents clients throughout the country who have unpaid overtime and other employment right claims.