This Mom Started Her Own Successful Business, but the Feds Want to Shut it Down

Rhea Lana Riner was having trouble sticking to a family budget when it came to buying clothing for her kids. But the Arkansas stay-at-home mother of three saw an opportunity in her dilemma. In 1997, Riner started a kids’ clothing consignment business from her home.

When Rhea Lana’s began, most of Riner’s customers were her neighbors. But word spread about her consignment sales and before long, her small get-togethers spread to franchises in 24 states. Riner knows just how simple, yet effective, her model truly is.

“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,” Riner explained. “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 percent; we keep 30 percent. It is easier than a garage sale, makes more money for parents, and shoppers efficiently find good deals.”

Riner’s business is fueled and made possible thanks to hundreds of people who volunteer for her events.

“A big part of our success are the hundreds of parents — both consignors and shoppers — who voluntarily work brief shifts to help set up before the sale starts,” she continued. “In exchange, these parents get to shop first with more choices and better merchandise.”

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Riner will rent a space for a few days to sell the clothes, and relies on an army of volunteers to set up and work the table. | Photo: Gannett

Apparently he federal government didn’t see the virtue of Riner’s model. The U.S. Department of Labor in January 2013 audited her business. Five months later, the government informed her she was out of compliance with the Fair Labor Standards Act and that the mothers who volunteered for Riner’s events should be classified as employees.

“This means paying the federal minimum wage of $7.25 per hour, filling out IRS paperwork and complying with who-knows-what other rules. And all for a pop-up business that lasts days,” said Riner.

Cause of Action, a nonpartisan government accountability organization, has stepped in to defend Riner against the government.

Daniel Epstein, president of Cause of Action, said Riner’s ordeal goes beyond government overreach and hits on American ideals.

“This is a case not only of the government overreaching and trying to destroy an innovative company, but fundamentally also punishing those who do something that is so American: volunteering,” Epstein said.

Cause of Action’s attorneys in November presented oral arguments before the U.S. Court of Appeals for the D.C. Circuit in the case of Rhea Lana, Inc. v. Department of Labor. They contend that the government has put Rhea Lana in an impossible position. Because Labor officials did not initiate an enforcement action but rather threatened the business with fines and encouraged its consigners to sue for back wages (none did), a federal district court dismissed Rhea Lana’s lawsuit because the Labor Department had taken no “final agency action.”

Riner’s lawyers argue that the Labor Department did, in fact, take “final action” by changing the status of her business and threatening her with fines for noncompliance. The U.S. Supreme Court has ruled that targets of government regulation don’t have to wait for an agency to enforce a rule before asking a court for relief.

Riner said that if she were to be hit, not only would it have drastic implications on herself, but also all of the people who take part in her business that helps thousands of people.

“If this did go through there would be enormous financial implications and it would cripple our business.” Riner said. “If I lose this case I will be hurt, but mostly, it’s these good people behind me that will be hurt.”

One thing is clear: Rhea Lana has experienced so much success that even the federal government took note. Growing a business from the couch in your living room to 24 separate states is truly an amazing feat that fits the very definition of achieving the American Dream.

Joe Schoffstall is a contributor for Opportunity Lives. You can follow him on Twitter @JoeSchoffstall.