Nerium class-action pyramid lawsuit claims affiliates are unpaid employees

On May 16th John Harris filed a lawsuit against Nerium International, Jeff and Renee Olson and several John Does.

In the proposed class-action suit, Harris argues that as Nerium affiliates (Brand Partners), he was in fact employed by the company.

Throughout the course of the alleged employment, Harris claims he and his fellow Nerium affiliates are ‘denied proper classification as to employee status, as required by California law‘.

Nerium International is described as an “ever-growing pyramid” in Harris’ complaint.

It is alleged that Defendants sell their products to the Nerium “brand partners,” such as Plaintiff, who are supposed to recruit multiple, new Nerium brand partners.

Any new recruits, in turn, purchase additional Nerium products, and recruit yet more Nerium brand partners, in an ever-growing pyramid.

BehindMLM reviewed Nerium in 2014 and found the company had a decidedly grey focus on prioritizing affiliate autoship recruitment over retail sales.

Harris alleges Nerium improperly classifies affiliates as

purported “independent contractors,” failing to pay required wages, including failing to pay waiting time penalties, failing to provide accurate itemized wage statements, failing to maintain accurate records of hours worked, and failing to reimburse necessary business expenses.

This allegation is based on the California Unfair Practices Act, Business and Professions Code § 17200, which pertains to

unfair competition, mean(ing) and includ(ing) any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.

The claims of wages owed are based on alleged violations of the California Labor Code.

By misclassifying Plaintiff and the Class as purported “independent contractors,” as alleged above, Defendants have failed to pay all wages owed to Plaintiff and those similarly situated by virtue of their true status as employees.

This includes, but is not limited to, employer side payments to federal and state taxing authorities, wages received by the employer in violation of Labor Code §§ 221 and/or 212, and any other charge, discount, deduction or amount which has caused Plaintiff or Class Members to receive less than the full benefit they would have received as employees.

Defendants are aware that it owes the wages claimed, yet it has willfully failed to make such payment.

Further, and in direct violation of California Labor Code § 221, Defendants did unlawfully require its employees to purchase products from them.

Plaintiff seeks return of these wages unlawfully collected.

All in all Harris’ lawsuit brings forward five causes of action.

Some 500+ Nerium affiliates are potential class plaintiffs and estimated damages are pegged at over $5 million dollars.

In a nutshell, the lawsuit will come down to whether or not Nerium affiliates are employees or independent contractors.

I’m not sure what the case-law on this issue is but seeing as “independent contractor” is the norm across the industry, figure at some point it would have been challenged?

Otherwise Harris’ lawsuit could be an interesting one to watch.

If he and the proposed class wins, it’d pretty much spell the end of the MLM industry as we know it.

Affiliates in MLM companies would cease being affiliates and instead would be reclassified as employees.

This brings with it employee benefits and obligations, at cost to the MLM company.

On the plus side we might see MLM companies being far more stringent about who they “employ”, as opposed to the relative open-door approach we have now.

Then again, that open-door “anyone can make it” policy is a cornerstone industry principle.

I suspect Nerium International will be quick to file a motion to dismiss on this one. We’ll keep you posted.

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