A proposed class-action filed in California on May 3rd alleges Rodan + Fields has misclassified its Consultants as independent contractors.

Plaintiff Lauren Dann, a Rodan + Fields Consultant (distributor), claims the MLM company

is a massively successful company that, for years, has exploited its California salesforce by misclassifying them as independent contractors rather than as employees.

Named defendants in Dann’s class-action are:

  • Rodan + Fields
  • Dr. Katie Rodan, co-founder
  • Dr. Kathy Fields, co-founder
  • Dimitri Haloulos, CEO
  • Tim Eng, interim CFO
  • Laura Beitler, Chief Global Sales Officer
  • Dalia Stoddard, Chief Brand and Innovation Officer
  • Jessica Raefield, Chief Human Resources Officer and
  • Janine Weber, Senior Vice President of North American Sales

Dann complains that in exchange for promoting Rodan + Fields,

acquiring new customers, engaging existing customers, recruiting and training new Consultants, and driving traffic to R+F owned websites, R+F pays Consultants at most a paltry commission when customers purchase products.

Dann asserts that services provided by its Consultants saves Rodan + Fields “millions of dollars annually”.

R+F’s success—and ability to avoid accountability for its employees thus far—turns on the fact that it operates as multi-level marketing business (“MLM”).

R+F’s recruitment tactics purportedly promise its prospective Consultants the opportunity to build a business.

The reality of working for R+F is starkly different, though. Consultants supply free brand awareness and perform uncompensated marketing of R+F Products, sales support for existing and new customers, and onboarding support and periodic trainings for other Consultants that would otherwise cost R+F millions of dollars annually.

The willful, intentional nature of R+F’s decision to misclassify its California Consultants is apparent from its decision to operate as an MLM, a business model that virtually guarantees the company will secure hundreds of thousands of hours of free or below-market labor each year to execute a centralized marketing and growth strategy.

As opposed to being “independent contractors”, Dann claims

despite their title as a Consultant,” they function as R+F’s salesforce and are not engaged in an independently established trade, occupation, or business as salespeople.

With respect to MLM companies and California employment law, Dann claims the “California exemption” is limited to “in person sales”.

It does not cover R+F’s modern, online business model, where Consultants drive social media engagement under its guidance and direction, directing consumers to R+F-controlled websites, where R+F accepts and processes the sales and fulfills the orders, while also collecting and benefiting from the consumer data it acquires from these leads.

Dann supports her claim by providing evidence of the ways in which Rodan + Fields controls its Consultants.

To protect its intellectual property, brand image, and legal interests, R+F requires Consultants to comply with a byzantine series of rules and regulations.

The central document is the “Policies and Procedures,” a massive document spanning more than 100 pages when taking into account its many appendices.

These documents detail the ways in which R+F exerts significant control over Consultants in their limited, but critical role as social media marketers.

Such to the extent Rodan + Fields Consultants do make “in person sales”, Dann alleges these are external to its MLM opportunity.

R+F does not require or even suggest that sales be made “in person.”

R+F places cumbersome restrictions on when and how Consultants may order products and limits the locations in which the products may be sold, effectively preventing any meaningful sales that are “in person.”

R+F treats “in person” sales as outside of its elaborate “Compensation Plan,” in other words, Consultants cannot build out their business through in person sales because they are not calculated for the purposes of Achievement Rewards or advancing commissions brackets.

R+F explicitly “discourages Consultants from engaging in door-to-door solicitation for sales.”

The result is that virtually all sales occur via R+F-controlled websites, where R+F supplies the content, sets the prices, and fulfills the order.

R+F leadership touts that they “don’t use the regular marketing and advertising” and that “everything in Rodan + Fields is run on [Consultants’] smartphone[s].”

Rodan + Fields Consultant income is also cited as supporting evidence;

The lack of discretion R+F gives to its Consultants is evidenced by the fact that few can or do actually earn money under its compensation structure.

For instance, in 2022, 33% of Consultants, did not receive a single commission check during the entire year.

Many more saw their meager commissions erased by R+F’s monthly fee of $24.95—required for anyone wanting access to their own Consultant Websites and the various online tools and platforms needed to perform their work.

R+F only tracks the percentage that received commission, not whether Consultants earned net income from their hard work after deducting for purchases necessary to perform the work.

As a Rodan + Fields Consultant, Dann states she’s filed her class action

to recover unpaid wages, overtime compensation, penalties, interest, injunctive relief, other equitable remedies, damages, and reasonable attorneys’ fees and costs/

Alleged violations of several statutes of the California Labor Code, City of LA Code and County of LA Code are cited.

Upon information and belief, R+F has not addressed and/or changed its unlawful practices and has continued to deprive employees of millions of dollars in straight and overtime compensation.

By bringing this action, Plaintiff intends to stop this ongoing and unlawful practice and recover back wages and overtime to which she is rightfully entitled.

Note the above is a summary of a two hundred and ninety-three page filing. The full class action complaint might be worth a read, courtesy of reporting from the Northern California Record.

It’s also worth noting that last year, similar alleged labor violation class-actions were filed against Beachbody and Premier Financial Alliance.

As of March 2024, the PFA action was recently sent to arbitration. A decision on the Beachbody case also being sent to arbitration is pending.

I suspect at some point Rodan + Fields will file a motion requesting Dann’s case also be sent to arbitration.

If any of the California class actions result in MLM distributors being classified as employees, how MLM companies operate in California will change significantly.

Stay tuned for updates as we track Lauren Dann’s Rodan + Fields class-action.

 

Update 6th June 2024 – Pending the outcome of agreed arbitration proceedings, the parties filed to have the case stayed on May 22nd.

 

Update 3rd October 2024 – This case has been settled. As per Case Management statements filed by the parties on September 17th and 18th;

This case has settled. After the Parties execute the MOU, the Parties will submit a request to designate this matter as “complex”.

Once granted and after the case is re-assigned, the Parties will submit a stipulation to allow Plaintiff to amend the complaint to add additional plaintiffs/class representatives, Kathryn Cude and Mary Yoon.

I haven’t published a separate article as I’m not sure if the above means settlement details will be made public. Will continue to monitor the case docket for updates.