Australian Fed Court to decide if MLM affiliates are employees
Bit of interesting news from down under, with a case involving an eCosWay affiliate being passed up to the Australian Federal Court for an “authoritative decision”.
A decision that could have widespread implications for any MLM company currently doing business in Australia.
The case was brought about by the Fair Work Ombudsman, on behalf of an eCosWay affiliate who claims
she was, in substance, an employee of Ecosway and therefore entitled to minimum wage, annual leave and other employee entitlements.
This follows on from a Federal Circuit Court ruling that stipulated that
sales people include store operators who sell from specific locations, in addition to other sales people who sell via their personal and customer networks without reference to a specific location.
This stipulation contradicts the MLM business model, which holds that affiliates are “independent business owners”.
As part of the suit, which was filed on the grounds of “sham contracting” between eCosway and its affiliates, the Federal Court has to make a decision on whether the company’s affiliates are classified sales people employees.
If so, eCosway could face
substantial financial penalties for failure to provide minimum terms and conditions of employment, and for engaging in sham contracting in breach of the Fair Work Act 2009.
Aware that their decision could have widespread ramifications for the Australian MLM industry at large, the Federal Circuit Court punted the case up to the Federal Court.
Should the Federal Court rule that MLM affiliates are indeed employees, it goes without saying the industry landscape in Australia will be changed forever.
In effect, MLM as we know it will cease to exist (minimum wage, annual leave and other employee entitlements run counter to the independent business owner MLM model).
When a decision on the matter is expected to be made I can’t say, but it’s worth noting that the original lawsuit was filed back in 2013. As such, it’ll probably be some time before the Federal Court makes a ruling on the matter.
Stay tuned…
Hello again Oz
One observation and one question if I may; however, the question is not directly connected to the above post.
(Ozedit: Send it via the contact form then.)
in this particular case, the plaintiff was a ‘store owner’ of ecosway. a ‘store owner’ entails a specific location, set working hours, managerial work for running the store etc. this is very similar to a regular brick and mortar sales setup. an ’employee status’ for affiliates running a ‘store’ for an MLM, is therefore, not a leap of imagination.
but, regular affiliates of MLM, who are comparable to free lancers, or insurance salesmen, or real estate agents, who sell independently for commissions, can hardly be defined as employees. that would be a stretch of the imagination.
so, i expect the court to find for the plaintiff, in this particular case, but not so much ‘declaring’ MLM reps as employees.
But working as an independent MLM affiliate. I’ve seen Amway and Nu Skin storefronts that are the same.
Basically the company permits affiliates to open up a storefront but they’re still MLM affiliates. No formal employment contract exists between the company and the affiliate.
Same as me converting my house into a (insert company name here) storefront.
That’s where the interest in this case lies.
Yeah if they were defacto employees just selling product then sure, that’s pretty straight forward. Here we have an MLM affiliate with a storefront, arguing that because of a very specific ruling in Australian law that they, as an MLM affiliate, are owed employee considerations.
And it’s certainly not an individual or unique-case ruling, hence the deferral to the higher court. They openly acknowledge this decision will affect the greater MLM industry at large.
Basically the company permits affiliates to open up a storefront but they’re still MLM affiliates–oz
well, the storefront MLM business model, may come to a grinding halt in australia. the plaintiff has a strong argument, to be found as an ’employee’.
but, such a ruling, may not affect the status of non-storefront reps, as ‘independent contractors’.
The court has already ruled that sales people who operate from a storefront or free-roam are classified one and the same.
There is no “storefront model”, the MLM affiliate contract is the same.
The issue is under an MLM business model are they “sales person” employees or “independent business owner” affiliates?
eCosway is a weird hybrid. I’ve seen one of those stores in Northern California.
The problem is it’s not specifically operated as a franchise, and there are many attempts all over to force the big corporations that franchise out (i.e. McDonalds, Burger King, KFC, etc.) to take responsibility of the local employees.
Turns out that store I spotted has already closed. Too bad!
yelp.com/biz/ecosway-daly-city-2
you bet. it’s not the normal MLM model. it’s comparable to herbalife allowing some distributors to set up ‘nutrition clubs’, but the difference is, that in herbalife the distributor invests the money, and in ecosway, the company funds the store front.
the above^^ is so case specific, i don’t think its about ‘normal’ MLM reps, but pertaining to the store front model, used by ‘some’ MLM’s.
MLM companies, will probably have to give ’employee status’ to store front MLM affiliates, or different ‘contracts’to them, separate from ordinary affiliate contracts.
i don’t think that reps, who ACTUALLY work independently in MLM, will be affected by this case. that wouldn’t make any sense at all.
If the court rules sales people such as this woman are owed employee benefits, the above is who it will apply to.
That second definition is MLM affiliates as we know them today.
I have been in the industry 18 years. ECosway IS not a pure MLM company and as others have said, is a “hybird” MUCH MORE than an MLM.
The Store Model renders those who are “working” in the store “volunteers” according to eCosway, but knowing people who have had stores, they are by every stretch of the imagination “free labor” and could be construed as employees of the STORE OWNER.
It will be interesting to see how the Australian Court rules. Me thinks they will rule in favor of the lady plaintiff but NOT against other Pure MLMs that do NOT have people working in stores.
THere’s a parallel but not MLM case in California a while back. Airport shuttle van drivers were ruled to be employees instead of “contractors”.
Shuttle van drivers don’t have a fixed location but uses company equipment. Company since have forced the drivers to buy their own vans and get their own transit license.
washingtonpost.com/business/supershuttle-drivers-say-they-face-tough-times-under-firms-franchise-system/2012/04/19/gIQAFbp9VT_story.html
I’m not at all familiar with eCosway. But, if the regular type MLMs were to be affected, and if I were their attorney, I would argue this:
Just sayin….
damn that’s funny Char
here’s something else that’ll affect what’s employee and what’s not…
Uber and Lyft drivers wanted to be classified employees. 🙂
finance.yahoo.com/news/uber-lyft-drivers-want-full-130000984.html
so, this didn’t end well for the ‘freelance’ drivers. now they have to ‘invest’ their money to continue working, and will get trapped by the loans they raise to finance their vans etc. instead of getting health/insurance etc, they are instead, in deeper shit.
a very small fraction of the world is made of those people, who can set up and run businesses. a very large part of the world is people who are employed by these businesses.
another part of the world, works on a flexible freelance system. businesses cannot carry the financial weight of both the latter type of people, and survive. it’s not practical.
if a freelancer, wants to be a full employee, he should go for that. but, running a semi independent business under the umbrella of big business, utilizing their brand, equipment, management for a fee, does not entail full employee benefits, in my view.