Rodan + Fields class-action alleges Consultants are employees
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.
If an MLMer, aka an endless-chain recruiter, is to be classified as an employee, then the MLMer would effectively be doing the hiring of new employees for R&F with every new person they recruit. Lolol. Imagine the budget needed to pay all those “sales consultants”.
Perhaps Dann should’ve researched the MLM scam before deciding to participate? It’s not like MLM is a new system. If she wanted to be a legit paid sales rep, she should’ve avoided MLM. I mean really, what normal sales rep is willing to recruit their own customers as competitors, in the same territory, to infinity?
Did Ms. Dann recruit anyone? R&F attorneys should be asking that question. I.e., was she acting as a traditional sales rep or as an MLMer?
R&F might consider changing their wording a smidge in CA. Simply replace “consultant” with “direct customer”…..”who can receive kickbacks for finding R&F other direct customers”…and all will be settled. Nothing else needs to change, just that one word in the contract. It would be the honest thing to do.
I am not defending R&F or any company using the MLM scam system, but Dann can’t have it both ways. It is either an MLM company, or it isn’t. And she signed up with an MLM company.
I’ve said it before, but willing-victims, emphasis on “willing”, need to also be held accountable for their decision to participate. And, if they recruited, they are party to the crime.
In the age of the internet, it’s not rocket science to research a scam. And this particular scam, multi-level marketing, has plenty of years of information available. No excuses.
MLMers are not business owners, nor are they employees. They are glorified direct customers getting kickbacks for finding the company other direct customers.
I am shocked that Rodan + Fields are claiming their consultants are employees. If they are employees, then they must be paid at least minimum wage. The company must provide them with a W-2, they must withhold state and federal taxes, and social security taxes.
All Dann has to do to win, since the company claims they are employees, is to demand they provide the court with her W-2 statements and payroll checks issued to her for her employment, and they were cashed.
The State of California is tough on employers for failing to provide detailed records and is non-compliant with California labor laws. The fines Rodan + Fields would receive could possibly put them out of business; depending on how long they failed to provide the required records and violated California labor laws.
I might be misunderstanding but Rodan + Fields, like all MLM companies, maintain their distributors are independent contractors.
My bad, I misread the title. I was thinking Rodan + Fields was claiming their consultants were employees, not the consultants claimed they are employees. A senior moment.