Rhea Lana, Inc. v. Department of Labor
423 U.S. App. D.C. 12
| D.C. Cir. | 2016Background
- Rhea Lana operates and franchises semi-annual consignment sales for children’s items; consignors who staff sales ("consignor-volunteers") are unpaid but may receive benefits like early purchasing and better sales placement.
- In 2013 DOL’s Wage and Hour Division investigated and concluded consignor-volunteers are employees under the FLSA and entitled to back wages; DOL informed Rhea Lana in an August 26, 2013 letter that it had disclosed violations.
- The August 26 letter warned that while no penalty was assessed in that investigation, under 29 U.S.C. § 216(e)(2) and 29 C.F.R. § 578.3 future violations could be deemed "willful" if the employer ignored advice from a responsible Wage and Hour official, exposing the employer to civil penalties.
- Rhea Lana sued under the APA seeking declaratory and injunctive relief, challenging DOL’s determination and asserting the letter was final agency action subject to review.
- The district court dismissed the suit as involving non-final, advisory agency action; Rhea Lana appealed.
- The D.C. Circuit reversed, holding the DOL letter was final agency action because it produced legal consequences—specifically, it rendered Rhea Lana susceptible to willfulness penalties under DOL’s regulation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether DOL’s August 26 letter is final agency action under Bennett v. Spear | The letter is final because it determines obligations and creates legal consequences (triggers willfulness penalties) | The letter is non-final advisory guidance akin to routine agency letters; any penalty exposure is contingent | Letter is final as to legal-consequences prong: it makes Rhea Lana susceptible to willfulness penalties under § 578.3(c) |
| Whether the letter imposed new obligations akin to EPA order in Sackett | Letter functions like an order to comply and thus determines rights/obligations | Letter merely restates existing FLSA obligations and does not impose new mandatory duties | Letter did not create new obligations; unlike Sackett order, it did not command specific restorative acts |
| Whether § 578.3(c)(2) is mandatory (advice makes violation "willful") or merely evidentiary | Advice from a responsible official, if ignored, is dispositive and "shall be deemed" willful | The regulation requires a totality-of-circumstances inquiry; advice is one factor, not dispositive; agency urges deference to this reading | The regulation can reasonably be read to make unheeded advice a stand-alone trigger for willfulness; DOL’s contrary litigation position gets no Auer deference here |
| Whether contingent future enforcement cancels finality (penalties too speculative) | Exposure to civil penalties—though contingent on future enforcement—is a direct legal consequence sufficient for finality | Penalties are too speculative because they depend on future enforcement and adjudication | Contingency does not defeat finality: like Sackett, the possibility of future penalties counts as a legal consequence here |
Key Cases Cited
- Bennett v. Spear, 520 U.S. 154 (1997) (two-part test for APA finality: consummation and legal consequences)
- Sackett v. EPA, 132 S. Ct. 1367 (2012) (EPA compliance order produced legal consequences and was final)
- Auer v. Robbins, 519 U.S. 452 (1997) (agency interpretation of its own regulation entitled to deference absent certain exceptions)
- McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988) (definition of "willful" for statute-of-limitations context requires knowledge or reckless disregard)
- Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156 (2012) (limits Auer deference when the interpretation is a litigating position or post hoc rationalization)
- HCSC-Laundry v. United States, 450 U.S. 1 (1981) (principle that a specific regulatory provision controls over a more general one)