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California lawsuit claims Amway sellers should be classified and paid as employees

Dustin Dwyer
Michigan Radio
Amway's world headquarters in Ada.

A former Amway salesperson is suing the company in California, saying he and other sellers should be paid as employees.

Amway says its sellers are “Independent Business Owners” who agree to be treated as independent contractors under the law.

But a new law in California sets strict standards on who can be considered a contractor.  

William Orage says he was an IBO with Amway from 2015 to 2019. In his lawsuit, he says he was recruited by a married couple. Amway sellers who recruit new sellers are part of an “upline.” Those they recruit are part of their “downline.”

Upline sellers can earn commissions and bonuses for having more people in their “downline.”

"[Orage] made only two product sales - both to his mother - during his four-year tenure with Amway," says the lawsuit.

The lawsuit claims that recruitment and fees are the focus of Amway’s business model, not sales.

“During his time as an IBO, Mr. Orage personally purchased approximately $50,000 in Amway products,” the suit alleges. “He made only two product sales – both to his mother – during his four-year tenure with Amway.”

One of the lawyers who helped Orage file his lawsuit says this is a key point. She says sales are not the focus for Amway Independent Business Owners.

“We instead allege that they spend their time trying to recruit others into the Amway scheme,” says Juno Turner, an attorney with Towards Justice, who is working on the lawsuit. “So, in our view, these are not actually salespeople. They’re essentially recruiters.”

This matters because California’s law on employee classification exempts direct sellers from its strict standards.

Turner says that law should apply to Amway Independent Business Owners.

She says Amway IBOs perform a core part of the company’s business, they have to follow Amway guidelines, and they’re prohibited from working for other direct sales companies.

“And so all of those things taken together, in our view, establish that folks are employees and not independent contractors,” she says. “At least under California law, and potentially the laws of other states that follow a similar test.”

The lawsuit says Amway owes Orage and all other IBOs in California payment for the hours they worked for the company, and extra compensation for the products and equipment they buy from the company. 

Other firms representing Orage in the suit include Leonard Carder, LLP of Oakland, California and Justice Catalyst Law, based in Brooklyn.

The full complaint is available here.

In a statement, Amway said Orage’s lawsuit is “without merit.” The company says it will “vigorously defend itself” in the lawsuit.

“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,” the company said.

Dustin Dwyer reports enterprise and long-form stories from Michigan Radio’s West Michigan bureau. He was a fellow in the class of 2018 at the Nieman Foundation for Journalism at Harvard. He’s been with Michigan Radio since 2004, when he started as an intern in the newsroom.
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