William Orage says that Amawy’s over-emphasis on recruitment means he was never really a salesperson.
A California man is suing Amway, claiming the company’s emphasis on recruitment entitles him to additional pay.
MLlive.com reports that the lawsuit demands compensation for time spent recruiting, rather than hawking products. Amway, in turn, maintains that most of its representatives are independent contractors and not entitled to ordinary wages.
Amway, adds MLive.com, is a “direct sales” company. Holding hundreds of patents, it encourages contractors—called “Independent Business Owners”—to purchase its nutrition, beauty and home care products. IBOs then attempt to turn a profit by selling the same merchandise directly to customers.
However, sales aren’t necessarily the best way for IBOs to make money. As a multi-level marketing company, or MLM, Amway rewards workers for recruiting other independent business owners.
“Many increase their income potential by sponsoring and mentoring others to join their team and do the same,” Amway’s website says.
The people an IBO recruits then became part of their “downline.” Contractors can earn a commission on whichever products are bought—or sold—by their sales lineage.
MLM ventures have often been likened to pyramid schemes, with a disproportionate share of revenue sourced from employees’ own purchases. The lawsuit emphasizes the outsized role of recruitment in Amway culture.
“The compensation formulas used by Amway offer IBOs far more potential earnings from “downline” activity than through their own direct sale of the product,” the lawsuit alleges.
MLIve.com names the plaintiff as William Orage, who worked as an IBO in 2015. Orage says he was “recruited” by Amway “sponsors” in 2015. He paid a sign-up fee of $175, then purchased $50,000 in Amway products.
Orage, though, only made two sales in total—both to his mother.
“During his time as an IBO, Mr. Orage personally purchased approximately $50,000 in Amway products,” the lawsuit states. “He made only two product sales—both to his mother—during his four-year tenure with Amway.”
Towards Justice attorney Juno Turney, who’s working on the lawsuit, told Michigan Radio that sales are simply an aside to Amway’s business plan.
“We allege that they spend their time trying to recruit others into the Amway scheme,” Turnet said. “So, in our view, these are not actually salespeople. They’re essentially recruiters.”
Of the four years he spent with Amway, Orage says a disproportionate share was dedicated to recruitment. Despite his lackluster sales history, Orage’s issue is with the “many hours he spent trying to recruit new IBOs, including many hours of meetings and trainings.”
Now, Orage is hoping California state law can provide some recompense.
According to MLive.com, the lawsuit stresses that, even if Amway claims its IBOs are salespeople, its business model encourages contractors towards recruitment. And if that’s true, Amway IBOs may not truly be independent contractors under California law. If Orage is successful in court, Amway would be obliged to pay its IBOs minimum wage and reimburse them for start-up expenses.
“Amway has been using the ‘gig economy’ business model of using massive numbers of revenue-producing workers that are classified as independent contractors,” Orage attorney Brian Shearer told The Los Angeles Times. “And they’ve been doing it for 60 years.”
Amway, however, maintains that IBOs aren’t actually employees.
“When Mr. Orage signed a contract with Amway and became an independent business owner, he agreed he was an independent contractor with the discretion to spend as much or as little time as he chose building his business,” Amway said in a statement. “His lawsuit is without merit, and Amway will vigorously defend itself against his false claims.”
Amway suggests that California legislation may exempt “direct sellers” from the legislation Orage is hoping to weaponize.
“The State of California, where Mr. Orage filed suit, specifically exempted direct sellers from Assembly Bill 5 in 2019, recognizing that direct selling representatives such as IBOs have a long history of working as independent contractors,” Amway said.