Will AB 5 Kill Amway in California—Harm Thousands of Women?

The victims of AB 5 is growing.  About 80,000 independent truckers, journalists, ride share drivers—and recently we found the San Jose Jazz Festival is in trouble due to this Democrat measure.  Add another group of workers to the potential victims:  AMWAY sales people.

“California’s definition of who qualifies as an employee was broadened in a 2018 ruling by the state’s highest court. A law codifying that decision which took effect Jan. 1 is aimed at securing protections for gig workers.

“Amway has been using the ‘gig economy’ business model of using massive numbers of revenue-producing workers that are classified as independent contractors,” Brian Shearer, an attorney for Orage, said in an interview. “And they’ve been doing it for sixty years.”

Since the founders and leaders of Amway are major GOP donors—Betsy DeVos is U.S. Secretary of Education—she promotes charter schools while Guv Newsom promotes union controlled schools, only.  I expect his $20 million fund to kill jobs will look at Amway.  That is if the publicity hound AG, Becerra does not sue them on behalf of AB 5 first.  Either way, the middle class, making a few bucks in the gig economy are being harmed by the Democrats.

Amway, Welcome to the Gig Economy: You’re Being Sued Over Pay

By Josh Eidelson, Bloomberg,   1/10/20 

  • Man says main role wasn’t sales but recruiting distributors
  • Lawsuits seeking employee rights at gig companies are booming

Amway Corp. has long faced controversy over its multi-level marketing business model. Now, the family-owned direct sales giant is accused in a lawsuit of ripping off the people who peddle its products by failing to pay them minimum wage.

It’s part of a wave of cases in California over who counts as an employee, a battle that’s heated up with a new state law that makes it harder for companies to classify workers as independent contractors to avoid giving them better pay and benefits.

Amway relies on what it calls “independent business owners,” who pay fees and buy its merchandise to sell to others, historically friends and neighbors. “Outside salespersons” are not typically treated as employees under California law, but William Orage claims in a suit filed Friday in state court in Oakland that his “principal task” at Amway was not sales, but the recruitment of new IBOs to pay Amway more fees and buy more products.

“Amway told me that being a so-called Independent Business Owner would give me a chance to be an entrepreneur and grow my own business –- but instead I spent hours every month trying to grow theirs,” Orage said in an emailed statement.

Amway didn’t immediately respond to a request for comment. It has touted itself as the “world’s largest direct selling company,” with $8.8 billion in sales and more than a million “Amway Business Owners” in its network. It was co-founded by the late Richard DeVos, the billionaire conservative activist and father-in-law of U.S. Education Secretary Betsy DeVos. Its current co-chairman is his son Doug DeVos.

According to Orage’s lawsuit, Amway is heavily focused on recruiting new distributors because of the sign-up and annual renewal fees they pay. IBOs are incentivized to bring in new ones because they receive a premium on Amway products purchased by their recruits. Orage claims the company closely controls the sponsorship process, encouraging IBOs to attend numerous trainings and coaching sessions, and its heavy involvement means IBOs should be treated as employees under California law.

Orage, who left Amway in 2019, says he made only two product sales during his four years with the company and alleges that he received no pay for the time he spent in trainings and trying, ultimately without success, to recruit new IBOs.

He filed his complaint under California’s Private Attorneys General Act, which also allows him to seek government penalties for thousands of Californians who’ve worked for the company. If successful, Orage and other affected workers will receive a share of the recoveries. He’s backed in the case by the legal non-profits Towards Justice and Justice Catalyst Law.

Orage’s lawsuit is far from the first legal challenge to Amway’s business model. In 1979, the U.S. Federal Trade Commission found the company had fixed prices and overstated profitability, but decided it wasn’t an illegal pyramid scheme. In 2010, a former Amway subsidiary agreed to settle a suit alleging it ran a fraudulent pyramid scheme for an estimated $155 million.

California’s definition of who qualifies as an employee was broadened in a 2018 ruling by the state’s highest court. A law codifying that decision which took effect Jan. 1 is aimed at securing protections for gig workers.

“Amway has been using the ‘gig economy’ business model of using massive numbers of revenue-producing workers that are classified as independent contractors,” Brian Shearer, an attorney for Orage, said in an interview. “And they’ve been doing it for sixty years.”

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.

Comments

  1. Democrats and unions are the type of people that hate seeing other people doing better than them.The only thing they care about is power and how they can rip off the system.

  2. Cycleman, Amen to that.

  3. I think AB5 also includes the casual laborers you find at regular congregation sites throughout CA .and their middle class cash contractors….. maybe the illegal alien lobby can finally get this AB5 abomination repealed?

  4. I am still waiting to find out where Hollywood stands on AB5 with almost everyone being contract labor.

  5. Totallyfedup says

    Every person in San Diego that voted for Lorena Gonzalez needs to apologize to all Californians for putting that destructive “person” in office.
    Now, will people learn and vote her out next time?

  6. Isaac aragon says

    What a loser , he couldn’t sign up a single new ibo, and only sold 2 products!!

    This is why you need to inform yourself. You have to report the sales to Amway to get paid and you have to make wayyyy more than 2 products to qualify for pay!!! What a loser.

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