Amway Sued For Wage Theft
With the recent changes to California labor laws, Amway has now been sued for wage theft.
Here are the details of the complaint:
Amway describes itself as “the world’s largest direct selling company ($8.8B reported sales, 2018).” Amway “manufacture[s] and distribute[s] nutrition, beauty, personal care and home products—which are exclusively sold in 100 countries through Amway Independent Business Owners”(“IBOs”).”
As a direct selling company, Amway sells its products to consumers in a non-retail environment through a “multi-level marketing” system in which purported IBOs recruit others to join the Amway “opportunity.”
Amway is in the business of recruiting IBOs, and IBOs are the core of Amway’s workforce and its principal source of revenue. IBOs pay fees to join and remain part of Amway, purchase Amway products for their own use, and recruit new IBOs who also pay fees and purchase products. The more IBOs Amway recruits, the more money Amway makes.
To work for Amway, IBOs must pay Amway sign-up and annual renewal fees. Amway encourages and incentivizes IBOs to recruit others to sign on with Amway and pay these IBO fees.
Although Amway has classified Plaintiff and other Amway IBOs as “independent contractors” under the terms of its form contracts, IBOs are Amway employees for purposes of the Industrial Welfare Commission’s (“IWC”) Minimum Wage Order (“Minimum Wage Order”) and IWC Wage Order No. 4 (“Wage Order’), and related Labor Code sections that underlie the claims here.
Amway failed to pay Plaintiff and other IBOs in California minimum wage for all hours worked, as required by California law.
In exchange for the required IBO fees, Amway gives the IBOs access to the tools necessary to work as an Amway IBO.
Those tools include access to Amway’s web portal, which allow IBOs to sign up recruits as IBOs and to sell and purchase Amway products, and brochures used to recruit IBOs and sell products.
In addition, Amway also strongly encourages new IBOs to purchase its “IBO Product Starter Kit,” a collection of Amway products to share with IBO recruit prospects and customers. Amway promotes this purchase as a “smart choice” and asserts that “IBOs who purchase the Product Starter Kit when they register are more productive and have a stronger start than those who do not buy the kit.”
These compelled purchases by Plaintiff and other IBOs violate California law, which requires the employer to provide such work-related tools.
Lastly, 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.
On October 17, 2019, Plaintiff duly filed a letter online with the California Labor Workforce & Development Agency (“LWDA”). He provided a copy of the letter to Amway via certified mail. The letter notified the LWDA and Amway of the violations of the Minimum Wage Order, Wage Order, and Labor Code violations alleged herein.
Plaintiff has received no response from the LWDA to date. Accordingly, Plaintiff now brings this representative action under PAGA, Labor Code §§ 2698 et seq., solely to seek civil penalties on behalf of himself and others who have worked as Amway IBOs in California during the period of October 17, 2018 through the present (“PAGA Period”).
Amway Engages IBOs to Recruit Other IBOs and to Promote its Business and Products.
To work as an Amway IBO, individuals must enter into and “comply with the IBO Contract including the Rules of Conduct.”
The IBO Contract labels Amway IBOs as “independent contractor[s].”
New IBOs must pay a sign-up fee.
In exchange for that fee, Amway provides IBOs with tools necessary to perform their job, including Amway product brochures to share with recruits and customers and access to a website portal — referred to by Amway as a “Personal Retail Website” —to register new IBO recruits, register and create profiles for customers, and order Amway products and allow customers to order products using the IBO’s number.
In addition, Amway also strongly encourages new IBOs to purchase its “IBO Product Starter Kit, a collection of popular Amway products to display to recruits and customers. Amway promotes this purchase as a “smart choice” and asserts that “IBOs who purchase the Product Starter Kit when they register are more productive and have a stronger start than those who do not buy the kit.”’ To continue serving as IBOs and using the tools provided by Amway, individuals must pay an annual business renewal fee and renew the IBO contract.
William Orage’s Experience
Plaintiff William Orage became an IBO in 2015. He paid Amway a sign-up fee of approximately $175.00.
Mr. Orage was recruited by his “sponsors,” a married couple that were active IBOs with Amway.
Mr. Orage’s sponsors and other IBOs who joined Amway before him as part of the same sponsorship chain formed Orage’s “upline.” Upline IBOs earn compensation on products purchased and/or sold by their “downline” IBOs, as more fully described below. The bigger the downline, the more compensation an IBO makes.
At his sponsors’ 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. (Welcome to the Amway tools scam Mr. Orage)
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.
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.
Mr. Orage focused his efforts as an IBO on recruiting prospective IBOs but was unable to convince anyone to sign up to be an Amway IBO.
Between 2015 and 2018 Amway paid Mr. Orage a total of $12,671. Of this, all but a few dollars were rebates for products he purchased for himself.
Amway paid nothing to Mr. Orage for the many hours he spent trying to recruit new IBOs, including many hours of meetings and trainings.
PRAYER FOR RELIEF
WHEREFORE, pursuant to PAGA, the Minimum Wage Order, the Wage Order, and other Labor Code provisions listed herein, Plaintiff, in his representative capacity, requests relief as follows:
- An award of civil penalties for failure to pay minimum wage;
- An award of civil penalties for failure to provide tools and equipment that are required and/or necessary for IBOs to do their jobs;
- An award of civil penalties for failure to provide accurate and itemized wage statements and for failure to keep accurate payroll records;
- An award to Plaintiff and aggrieved employees of reasonable attorneys’ fees and costs, pursuant to Labor Code § 2699(g) and/or other applicable law;
- Pre-judgment and post-judgment interest as provided by law; and
- Such other. and further relief as this Court deems just and proper.
– Source William Orage vs. Amway Corp.
If you were or are an Amway IBO in California, the legal team for this case would like to hear from you. Please click here and fill out the form and a member of their legal team will be in touch.
My prayer for relief is to some day be free of the Amway scam.