Amway IBO sues company seeking unpaid wages
An Amway distributor in California is suing the company for unpaid wages.
Plaintiff William Orage alleges
although Amway has classified Plaintiff and other Amway IBOs as “independent contractors” … IBOs are Amway employees for the purposes of the Industrial Welfare Commission’s Minimum Wage Order and IWC Wage Order No. 4, and related Labor Code sections.
In the opening paragraph of his complaint, Orage claims his lawsuit is filed “on behalf of the California Labor Workforce Development Agency, pursuant to the Private Attorney General Act.
At first I thought this meant the government was involved, but upon closer examination that’s not the case.
California’s Labor Workforce Development Agency (LWDA) is a government agency, but they aren’t a party to the lawsuit.
According to Orage, he contacted LWDA last October regarding violations detailed in his lawsuit.
As of January 10th, the date he filed his lawsuit, Orage had received no response from LWDA.
The Private Attorney General Act (PAGA)
authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations.
A prerequisite of PAGA is filing a claim notice with LWDA.
As an alleged Amway employee, Orage asserts he wasn’t paid “minimum wage for all hours worked, as required by California law”.
Amway failed to keep the necessary employment records for Plaintiff and other IBOs in California, including documentation of hours worked and meal periods taken and/or missed, and to make those records available to IBOs for review.
Orage also alleges the IBO Product Starter Kit he felt “compelled” to purchase is a work-related tool.
As per Californian law, employers are required “to provide such work-related tools”.
Orage joined Amway in 2015. His description of his time in the company fits that of a product-based pyramid scheme.
At his sponsor’s urging, Mr. Orage joined an IBO organization called World Wide Group LLC, in order to access trainings, meetings, and conferences dedicated to recruiting, training and coaching Amway IBOs.
World Wide Group LLC is an Amway-accredited “Approved Provider”, authorized by Amway “to provide IBOs with support such as conferences, literature, webinars, mentoring, and more”
World Wide Group LLC is managed by Amway IBOs who have built their downlines to achieve “Diamond” level or above inside Amway’s IBO hierarchy.
Once in “active” IBO status, Mr. Orage spent between 10 and 20 hours per week prospecting for new recruits, attending meetings and conferences, and listening to audio recordings, all at the direction of his uplines.
While Orage’s upline and World Wide Group profited from his continued purchases, his own Amway business failed to gain any traction.
Mr. Orage estimates that he paid Amway approximately $450 in annual renewal fees.
During his time as an IBO, Mr. Orage personally purchased approximately $50,000 in Amway products.
He made only two product sales – both to his mother – during his four-year tenure with Amway.
Against the $50,000 he spent, Amway paid Orage $12,671.
Orage states “all but a few dollars” of that amount were rebates against his own purchases.
Orage does not disclose whether at any point Amway contacted him to confirm he was making retail sales.
Mr. Orage focused his efforts as an IBO on recruiting prospective OBOs but was unable to convince anyone to sign up to be an Amway IBO.
The trap to fall into here is analyzing Orage’s marketing skills. The real takeaway is that, presumably, Orage was a product of World Wide LLC’s training.
According to Orage;
Much of the material presented are devoted to instructing IBOs on how to recruit new IBOs and emphasize that such recruitment is key to an IBO’s success.
Under Amway’s compensation plan, upline IBOs earn commission payments on products bought and sold by their “downline” IBOs.
The compensation formulas used by Amway offer IBOs far more potential earnings from “downline” activity than through their own direct sale of product.
If an “Amway-accredited” company, owned by Amway distributors, is pitching recruitment over retail – that’s indicative of a much wider problem.
Although it’s not the focus on Orage’s complaints, he does address this in his lawsuit.
Amway’s business model focuses on the recruitment of IBOs and the fees that flow from that recruitment.
Amway generates a substantial portion of its revenue from the recruitment of IBOs like Plaintiff.
Amway performs this recruitment through the work of IBOs whose principal task is the recruitment of more IBOs.
Upline IBOs earn compensation on products purchase and/or sold by their “downline” IBOs.
The bigger the downline, the more compensation an IBO makes.
Getting back to unpaid wages; a key factor in Orage’s lawsuit will be convincing a court he is indeed an Amway employee.
In support of this, Orage cites numerous controlling rules Amway imposes on IBOs.
These include prohibiting Amway IBOs from
- not being able to sell or transfer their Amway business without written permission from the company;
- selling products to retail customers online outside of their replicated Amway website;
- selling products to retail customers at a retail establishment, even if the IBO works or owns the establishment;
- displaying Amway products are event without prior authorization; and
- using Amway products for fundraising purposes; and
- working for or selling products of other MLM companies.
Amway also threatens to hold IBOs accountable for the actions of their spouses, even if said spouse is not an Amway IBO.
Across three causes of action, Orage is seeking civil penalties, pre-judgment and post judgment interest and legal costs.
Unfortunately being filed in Superior Court, I can’t track the case on Pacer. That said if I do come across any updates I’ll provide them below.
A similar lawsuit alleging Nerium distributors were employees was filed in mid 2018.
The suit was dismissed in January 2019 over jurisdictional issues.