Provided by: Judge Ruth B. Kraft


I have blogged about unpaid interns and the standards applicable to students interning in a for-profit organization. Recently, a case involving non-student volunteers has gotten press; it could have fascinating implications for businesses.

An Arkansas franchisor, Rhea Lana Riner, runs a children’s consignment business using volunteer workers. She has taken the initiative and sued the U.S. Department of Labor in January, 2014 alleging that the department harmed her business and acted arbitrarily when it classified her volunteers as employees under the Fair Labor Standards Act. The suit alleges that this could destroy the entire consignment industry. The Arkansas Department of Labor was first to investigate Rhea Lana and this was followed by a U.S. Department of Labor audit. Last August, the company was informed that it was in violation of minimum wage laws for not fairly compensating its volunteers—stay at home moms and grandmas-who help staff her consignment sales at 63 franchises nationwide. In exchange for their work, the volunteers are given the opportunity to shop early at the sales, getting the best used toys and clothes for themselves. The government did not penalize the company but notified volunteers that they could sue for back wages. None have done so but the threat of litigation is certainly out there.

Rhea Lana’s counsel argues that the concept of a “shared economy” requires updated regulations to accommodate these business models, including homeowners renting out rooms in their homes or car sharing. He argues that a blanket prohibition is inappropriate and that by applying tests already articulated in the case law, a more rational approach should prevail. The case law tests typically emphasize economic realities, such as the permanence of employment. Basically, if you volunteer because you want to, whether with a charitable organization or in a for-profit business, why is this illegal? I could make some public policy arguments to the contrary involving workers’ compensation coverage but the idea is not so far-fetched.

I do not recommend that businesses embrace volunteer workers without the evaluation and recommendation of legal counsel because the exposure is simply too great.
Have a question or comment?
Contact Jennifer at Jennifer@Kirschenbaumesq.com or at (516) 747-6700 x. 302.