Beachbody Lawsuit 2023 | Class-action lawsuit alleges Beachbody Misclassify coaches as independent contractors
FTC Affiliate Disclosure: Support this blog by purchasing the quality products advertised on this site. All of the products have been purchased and/or verified. When you make a purchase using one of the affiliate links, a reasonable commission gets paid at no additional cost to you. Your support is appreciated. Thanks.
Summary of Beachbody Lawsuit 2023
A class-action lawsuit has been filed against Beachbody by the Tycko & Zavareei law firm and the Clarkson law firm, claiming that the company has classified its coaches as independent contractors, rather than employees, resulting in wage and benefits violations under California law.
The lawsuit argues that Beachbody coaches are integral to the company's operations and should be treated as employees, meaning they are entitled to benefits and minimum wage guarantees.
The plaintiff in the case argues that coaches were required to work fixed hours, use Beachbody's equipment, adhere to strict dress codes, and follow specific procedures for conducting workouts.
Beachbody, however, argues that their coaches are independent contractors and that they do not have the same rights as employees.
At present, coaches receive payment based on commission and are required to cover their own business expenses. The lawsuit seeks to recover unpaid wages, benefits, and penalties on behalf of the coaches.
This lawsuit is similar to those recently filed against other gig economy companies, such as Uber and Lyft, which have also faced claims that they misclassified their workers.
Although the outcome of the Beachbody lawsuit remains to be seen, it serves as a reminder that companies need to carefully consider how they classify their workers to avoid potential legal issues.
If the plaintiffs in the case win, it could have significant implications for the gig economy and the way that companies classify their workers to avoid providing benefits and protections.
Frivolous Lawsuit?
If you look at the actual law, this is a frivolous lawsuit. Let's look at the background on the California law being used as the basis of the lawsuit.
We will be looking at the lawsuit in great detail. Sections of the lawsuit will be quoted and the paragraph number will be included.
Below is the link to the lawsuit.
https://acrobat.adobe.com/link/
Background on the California Independent Contractor Law
In August 2020, the state of California filed a lawsuit against both Lyft and Uber, alleging that they had misclassified their drivers as independent contractors instead of employees. The lawsuit claimed that Uber and Lyft have violated California's labor law, which requires companies to provide their employees with proper benefits such as overtime pay, sick leave, workers' compensation, and other benefits.
The lawsuit against Lyft and Uber followed a new law that went into effect in California in January 2020, called Assembly Bill 5 (AB5). AB5 was designed to combat the misclassification of workers as independent contractors, which has become increasingly common in the gig economy. Under AB5, companies must treat their workers as employees if they are performing work that is central to the company's business.
Both Lyft and Uber argued that they are technology companies, not transportation companies and that their drivers are independent contractors. They claimed that drivers have more freedom and flexibility as contractors and that reclassifying them as employees would significantly increase costs.
In August 2020, a California judge ordered Lyft and Uber to reclassify their drivers as employees within 10 days. However, in response, both companies warned that they might be forced to shut down their operations in California if they were required to reclassify their drivers as employees, citing the potential for dramatically increased operational costs.
In November 2020, a ballot measure called Proposition 22 was approved in California, creating an exemption for companies like Lyft and Uber to classify their drivers as independent contractors. Prop 22 overturned AB5 and allowed for the gig economy companies to continue to classify their drivers as independent contractors while providing limited benefits such as minimum wage guarantees and health insurance subsidies to their drivers.
Overall, the case against Lyft and Uber highlights the ongoing debate surrounding the classification of gig workers and whether they should be considered employees or independent contractors.
The Legal Difference Between an Employee and an Independent Contractor
An employee is hired by an employer to perform work and is subject to the employer's control and direction. The employer provides the employee with the tools and equipment necessary to perform the work, and the employer is responsible for paying the employee's wages, withholding taxes, and providing benefits. In addition, an employer can be held legally liable for the actions of their employees while on the job.
An independent contractor, on the other hand, is hired to perform a specific task or project, but the contractor controls the means and methods of completing the project. The contractor usually provides their own tools and equipment and is responsible for their own taxes and benefits. Additionally, a contractor is responsible for their own work and is not subject to the control or direction of the person or company that hired them.
The legal distinction between an employee and an independent contractor is incredibly important due to the differing legal obligations and responsibilities of both parties. Some of the key differences between employees and independent contractors include:
- Labor laws: Employers are required to follow certain labor laws such as minimum wage, overtime, and anti-discrimination laws. Independent contractors are not subject to these laws and are responsible for negotiating their own fees and project specifications.
- Tax obligations: Employers are responsible for withholding payroll taxes and providing social security and Medicare contributions. Independent contractors are responsible for their own taxes and must pay self-employment taxes.
- Benefits: Employers are required to provide certain benefits such as health insurance and retirement benefits to their employees. Independent contractors are responsible for their own benefits and do not receive any employer-provided benefits.
Misclassifying employees as independent contractors can result in significant legal consequences, including fines and penalties for failing to follow labor laws. It's important for employers to properly classify workers to avoid legal issues and to ensure their employees receive the proper benefits and protections afforded under federal and state law.
Lawsuit between Jessica Lyons vs Beachbody
Most of the allegations by Jessica Lyons, a schoolteacher who joined Beachbody, will be debunked here. The reason why it is a frivolous lawsuit is because of the claim of unpaid wages overtime.
Difference Between Uber/Lyft and Beachbody.
There are 3 fundamental differences between an Uber/Lyft driver compared to a Beachbody coach.
First, is that the actions of an Uber/Lyft driver generates revenue. You must have revenue from which unemployment and workers' compensation are paid.
Second, the California law was intended to protect workers from employers who did try to avoid paying unemployment and workers' compensation taxes. These tend to be places where a worker has a higher risk of getting injured. An example of this are the agricultural workers in the case of S. G. Borello & Sons, Inc. v. Department of Industrial Relations
Third, once an Uber/Lyft driver accepts a job they are required to be at a specific place at a specific time. Beachbody coaches do not have any requirements as to when, what, or how to do any activity.
At a job, an employee is required to be at a specific location, at a specific time, and they are required to do the activities their employer mandates them to do.
Commissions
(p.1) "In exchange for their promoting the brand on social media, referring new customers, providing customer service, and driving traffic to Beachbody's website, Beachbody pays them at most a paltry commission."
Facts are that Beachbody pays 25% commission on most of its products and 40% on Beachbody on Demand memberships.
http://img1.beachbodyimages.com/
Teambeachbody/shared_assets/Coach/
Coach-Documents/Comp-Plan-Highlights/
TBB-Coach-Comp-Plan-Highlights-en-ca-091417.pdf
This is significantly more than most affiliate offers. Amzon for instance will pay upto 5% for most products and you do not get any residual income from any future purchases your customers make.
One criticism is that their flagship product Shakeology may seem overpriced at $130 for a one-month supply. While that may have been a fair criticism in the past, the price of Shakeology has not increased in at least 9 years and the price of other products has doubled or tripled, especially during the inflation of 2022/2023.
Beachbody on Demand is competitively priced compared to similar products.
Beachbody Growth Based on Independent Contractors
(p.1) "Since Beachbody began relying on independent contractors to do its sales work, Beachbody grew from a small video streaming service to a $3 billion publicly traded health and fitness empire."
Beachbody uses multi-level marketing(MLM)/network marketing to grow its business, but that is not what exploded its business to make them a household name. Beachbody became a brand name with their infomercials for exercise Programs like P90X, Insanity, and TurboFire.
Without this branding, they would not be the "$3 billion publicly traded health and fitness empire" they are today.
Beachbody Operates as an MLM to Avoid Accountability
(p.2) "Beachbody's success - and ability to avoid accountability for its employees thus far - turns on the fact that it operates as a multi-level marketing business (MLM). 'Coaches' are purportedly promised the opportunity to build a business; in reality, however, they supply free marketing and sales support that would otherwise cost Beachbody millions"
With the explosion of cable networks, it was no cost-effective to advertise on infomercials. Instead of paying for advertisements, Beachbody utilized a network marketing style of advertising where they pay commissions to their users for sharing their products.
Just as any sales type job Beachbody pays commission on ACTUAL SALES. As an independent contractor, a person has the freedom of the methods they want to use to generate sales.
Beachbody is Not Direct Sales
(p.4) "While the MLM industry has long relied on 'direct sales' exemptions to justify its exploitation of sales personal, the California exemption was written 40 years ago, and among other things, is expressly limited only to those salespersons making 'in person' sales, such as door-to-door salespeople and home 'Tupperware party' hosts. It does not reach Beachbody’s modern, online business model, where Coaches drive social media engagement under its guidance and direction, directing consumers to Beachbody-controlled websites, where Beachbody accepts and processes the sales and fulfills the orders, while also collecting and benefiting from the consumer data it acquires from these leads."
The complaint states Tupperware is legitimate direct sales but they have used the same business model as Beachbody for years.
It also highlights why Beachbody is an attractive business to be associated with because as the complaint says "Beachbody accepts and processes the sales and fulfills the orders". Basically, you share your link and you get a commission for any sales. Unlike Amazon, you get commissions on all future sales from customers who made a purchase using your affiliate link.
Beachbody Exerts Control
(p.5) "Beachbody also exerts significant control over Coaches in their limited, but important role as social media marketers. To protect its intellectual property, brand image, and legal interests, Beachbody requires Coaches to comply with a byzantine series of rules and regulations, many of which are laid out in a 48-page policy and procedure document, which in turn includes directives to understand and market products consistent with other documents, notices, manuals, and guidance provided by Beachbody. Nowhere in those rules, however, does Beachbody require or even suggest that sales be made 'in person.'”
Just because Beachbody does not REQUIRE or suggest that sales be made in person doesn't mean they are prohibited from doing so. As independent contractors, people can decide how they want to generate sales. They could do face to face, postcards, door-to-door, etc. Those methods work, other businesses use those strategies today such as solar panel salespeople.
It is obvious that most people have a better chance to be successful using social media.
Beachbody Business Service Fee
(p.5) "The lack of discretion given to its Coaches is evidenced by the fact that few can or do actually earn money under its compensation system. For instance, in 2021, 25% of Coaches did not receive a single commission check, and many more saw their meager commissions erased by the $15.95 monthly 'Business Services Fee' Beachbody requires Coaches to pay to obtain access to the various online tools and platforms needed to perform their work."
Later in the class action lawsuit documents it is said "Beachbody charges its Coaches for access to the instrumentalities needed to sell products, further increasing its profits and decreasing Coaches’ pay, in violation of California law."
While the $15.95 fee is not one of Beachbody's best features, but you get the information and tools to conduct business online.
Anybody wanting to make money online will need a website. A basic website with Wix will cost you $16 per month just for a basic website.
To create an eCommerce website similar to the replicated site Beachbody gives you would cost $27 - $59 per month with Wix. With Shopify, it can cost you $39 - $399 per month.
If you try to make your website on WordPress, then good luck with that because there is a huge learning curve, and your website can easily crash if you install the wrong plug-in.
Beachbody's Willful Decision to Misclassify its Salesforce
(p.6)"...its decision to operate as an MLM, a business model that virtually guarantees the company will secure thousands of hours of free or below-market labor to execute a centralized marketing and growth strategy."
The MLM model does has its flaws. The main one is that companies using this business model focus too much on business opportunity.
Beachbody Low-cost Compensation Scheme
(p.6) "In communications with shareholders, Beachbody executives have heralded the work of the Coach network, while touting the low-cost compensation scheme. "
As shown above, Beachbody pays a fair compensation of 25% on most products and 40% for Beachbody on Demand.
Ideally, Beachbody would want all of its coaches to be successful because if everybody is making sales, then the company makes more money.
Control Over Wages, Hours, and/or Working Conditions
(p.16) "Plaintiff is further informed and believes and based thereon alleges that CARL DAIKELER, in his capacity as the Chief Executive Officer, exercised control over the wages, hours and/or working conditions of Plaintiff and other aggrieved employees, including by informing employees when to report to work and what work hours should actually be recorded, violated, or caused to be violated, the above-referenced and below-referenced Labor Code provisions in violation of Labor Code section 558.1. "
There is a big difference between an employee and an independent contractor. There is a difference between what someone should or could do vs what a person is REQUIRED to do.
Employees can be told when they are REQUIRED to report to work and which hours to report.
In addition, the employer can REQUIRE employees to perform certain activities.
For example, at a retail establishment, one employee may be REQUIRED to operate the cash register and take orders while another employee can be REQUIRED to assist customers on the sales floor and replenish merchandise.
Employees can be fired if they don't do these REQUIRED activities.
Beachbody Requires You To Create A Challenge Group
(p.26) "Beachbody has more recently been using as the term 'BODGroups,' and at times has also referred to them as 'Accountability Groups.' Coaches now organize these Challenge Groups of Beachbody customers using the Beachbody platform. Prior to the unveiling of the BODgroup platform, Coaches were required to organize Challenge Groups on third party social media platforms."
The complaint also says:
(p.26) "These groups are a central component of the Coaches’ work; as Beachbody’s website states: Accountability Groups are an essential part of a successful Coaching business, and provide a simple structure for you to support your customers through their program. And, we know that when your customers combine nutrition, fitness, and support, they can dramatically improve their results."
Outside of any evidence, this is a lie.
Beachbody coaches are not REQUIRED to create their own challenge groups.
Beachbody policies and procedures state:
As part of Your opportunity to help other people try BODi products and achieve their fitness goals, You may organize, host and manage Your own BODi Challenge Group or BOD Group..."
It says you MAY organize a challenge group but does not REQUIRE you to do so.
coach-office/policies/Team_Beachbody_
Policies_Procedures_US_Eng.pdf
Further evidence that Beachbody coaches are independent contractors, not employees.
Beachbody URGES Purchase of New Products
(p.27) "The Coaches also drive social media engagement, posting on Instagram and other outlets. For example, in advance of the launch of a new Product, Beachbody urges its Coaches to purchase and promote the product on social media using Beachbody’s talking points and graphics. Coaches do so, and also pass this information on through their downlines, who in turn promote the product to consumers on social media as well. The result is a coordinated marketing campaign that increases exposure and awareness of the release, and is a critical part of Beachbody’s marketing strategy."
In a transcript from Q1 2022 earnings call, CEO Carl Daikeler said:
(p.27) "And coach network, which is the variable side of it really delivers significant value, taking advantage of these new launches. And in fact, the coaches will create within 72 hours of launching a new program or announcing a new program, it will become a trending term on social media and a searchable term and come up in the top 10 searches for a particular word. So -- but that expense doesn’t cost us anything until sales actually happen."
https://seekingalpha.com/article/
body-ceo-carl-daikeler-on-q1-2022-
The quote by the CEO doesn't show Beachbody in a good light, however, this does not prove that Beachbody coaches are employees under the law.
In this part of the complaint, coaches are URGED not REQUIRED to purchase the new products and participate in new product launches.
Beachbody URGES Coaches to be a Product of the Product
(p.28) "In between product launches, Beachbody urges Coaches to host Challenge Groups, as well as maintain a consistent presence on social media. Beachbody sees Coaches as a “product-of-a-product,” in that the Coach’s own personal results are the “product” of using Beachbody’s products, and it directs them to market Beachbody products accordingly. For example, Beachbody urges Coaches to regularly post updates about their daily progress, workout results, and details about things like pounds lost or muscle gained. "
Why would anybody trust you if you are not using a product that you are recommending?
It is the most common sense thing about marketing.
Beachbody coaches are not REQUIRED to post regular updates and workout results. There are other ways to make sales, but for most people, this is one of the few FREE ways to promote the products you are recommending.
Market Saturation
(p.29) "Because Beachbody has tens of thousands of active Coaches at any given time, their marketing efforts ensure that social media is saturated with posts about Beachbody, its Products, and testimonials as to its successful and effective programs."
Beachbody is a company that sells nutritional supplements and fitness programs.
The market for the products Beachbody offers is definitely not saturated. Wikipedia states that Over 70 million adults in the United States are obese.
According to Healthline, all 50 states have an obesity rate of over 20%. States in the South and Midwest have an obesity rate of at least 35%.
https://www.healthline.com/health/
In Beachbody's business model of network marketing, not everyone has the same circle of influence.
For instance, a brother and sister may work for different companies or have different hobbies which gives them a different network of people to promote to.
Because there are so many people who could benefit from Beachbody's wellness-related goods and services, coaches can decide to promote to people outside of their network.
Beachbody Coaches Are Losing Money
(p.36) "Today, Beachbody preys upon many of the most vulnerable members of our society. Despite being a $40 billion industry, 'the vast majority of people involved in them don’t make money off of MLMs, and many people lose money.'"
The plaintiffs are deceiving the court by trying to hold Beachbody accountable for losses based on the results of inventory-based companies.
The reference was regarding Paparazzi an inventory-based multilevel marketing company under an article called "$5 jewelry and an MLM conference gone wrong."
https://www.vox.com/the-goods/
22688317/mlm-covid-19-pandemic-
That article had nothing to do with Beachbody. With inventory-based MLMs you lose money when you cannot sell off your inventory.
With Beachbody, you usually get started with a Challenge pack where you get access to exercise programs and supplements.
After the initial purchase, many people continue with their flagship product Shakeology and/or other supplements that they consume on a monthly bases.
Shakeology is sometimes used to replace a meal. If you are replacing an unhealthy meal at a fast food restaurant, especially after the inflation of 2022/2023, then you actually save money.
Beachbody Income Disclosure Shows People Lose Money
(p.36) "...according to Beachbody’s own income disclosure, 25.8 percent of Coaches received no commission payment in 2021."
The way people use the income disclosure statement to show network marketing in a negative light is very deceiving.
If 25.8% of coaches received no payment, then that means they did not sell anything.
Jessica Lyons said she made 50 a month in commission. Keep that in mind when looking at the income disclosure statement.
https://d238rk0zygcl6s.cloudfront.net/
uploads/2021/04/US-Statement-of-
Independent-Coach-Earnings.pdf
** The following example is not intended to be a full explanation of the Beachbody compensation plan
In Beachbody's lowest rank of Emerald, you are required to have 2 personally sponsored coaches or preferred customers to unlock the other parts of the compensation plan. This is separate from the commission from retail sales as described in the sections above.
The main product purchased (promoted) is Shakeology. The average commission is $32. So if you have 2 coaches/customers, that means you have $64 per month in commissions.
Beachbody has a binary compensation plan, meaning you get extra commissions based on sales volume which can include sales generated by a coach's upline.
Assuming that Jessica Lyons had the bare minimum as an Emerald coach with no assistance from her upline, an Emerald coach would achieve 6 team cycle bonus which is $14 each.
So in one full year, an Emerald coach would get $768 retail commissions and $84 in team cycle bonuses for a total of $852 ($71 per month)
One more example of how the income disclosure statement and be manipulated.
The 2022 Beachbody income disclosure statement states the low earnings for a Diamond rank is $347. To achieve diamond rank you must have 8 personally sponsored coaches/preferred customers. So if all those customers purchase Shakeology, then the MINIMUM monthly commissions would be $256 per month ($3072 per year) from just the retail sales, not counting the team cycle bonus.
Below is a video on some statistics, including the statistic that 70% of the people in network marketing recruit ZERO people, and another 20% recruit only TWO people.
Most Workers Should be "Employees"
(p.37) "In recent years, state legislatures have taken action to send a clear message that most workers should be 'employees.'"
The consumer protection class-action law firm puts this statement in the complaint but does not cite any sources.
No Special Skills Required to be a Beachbody Coach
(p.39) "To engage in online marketing work for Beachbody, the company does not require Coaches to hold any special experience, skills, license, or education level."
This is why people are attracted to Beachbody and similar companies. Network marketing is a business that the average person without any special skills can do to earn a reasonable income.
Network marketing is sales. You make a commission based on sales.
You are not going to become an instant millionaire if you don't have skills.
Unfortunately, people join network marketing companies, including Beachbody, and join the company after discovering a high-earning coach on YouTube living a glamorous lifestyle.
FACTS: it takes professional salespeople (employees) an average of 3 months of training (full-time) before they are ready to interact with buyers, 9 months to be competent to perform, and 15 months of full-time experience to be a top performer.
https://www.rainsalestraining.com/
blog/sales-rep-onboarding-how-
When you start a new job, you must get trained, right? If you were recruited to your network marketing company for the business opportunity, how do you expect to be successful in a short period of time without any experience?
Beachbody cannot force its coaches into 3 months of intensive training, tell them how many hours to work. This only proves that Beachbody does not have significant control over its coaches.
This is one of the reasons why the lawsuit from the Zavareei LLP and the Clarkson law firms is incorrect when they vigorously defend the idea that Beachbody is misclassifying them as independent contractors rather than as employees.
Business Service Fee is Non-waivable
(p.43) "Under the Compensation Plan, Coaches are responsible for all expenses. The Business Service Fee is non-waivable, and Coaches must be current with it to receive commission payments."
This is a lie.
The Business Service Fee can be waived for United States military service members.
Yes, most people have to pay the fee, but to put this 'white lie' in a lawsuit is unethical.
Business Expenses Not Reimbursed
(p.43) "Coaches must purchase the Products needed to run Challenge Groups and make promotional posts and testimonials on social media. Beachbody does not reimburse Coaches for the purchases. Coaches also cover the cost of a cell phone, internet, and other routine business expenses."
Why does the complaint list these as 'business expenses' if they allege that coaches are employees?
Why should Beachbody or any company reimburse coaches for products they personally consume?
And as debunked earlier, coaches are NOT REQUIRED to purchase products needed to run Challenge Groups other than the products they consume to show the positive results they can get by following the Beachbody program.
To take it one step further, you are not even required to purchase any products to be an affiliate for Beachbody as long as you pay for the Business Service Fee you can still qualify for retail commissions.
https://faq.beachbody.com/app/answers/
detail/a_id/8890/catid/0/TLP/0
Also, why should any company pay for the cost of cell phone and internet expenses?
No extra cost is incurred when you use these services for business.
Just like any employee, part of these expenses can be written off on a person's federal tax return. For an employee this is done on the I.R.S. form 2106 and for independent contractors it is done on the Schedule C and Form 8829 for expenses for Business Use of Your Home.
If a person was an employee as the plaintiffs allege, then this sales force would report to the office, work specified hours, and use phone, internet, and office supplies that the company pays for.
There might be "other routine business expenses" but those are NOT REQUIRED. Most social media accounts and graphic design tools such as Canva can be accessed for FREE.
Beachbody Control of Coaches
(p.44) "In the Agreement, Beachbody gives itself broad rights to control Coaches and mandate conformance with its directives. It states that Beachbody created the Agreement 'to explicitly set a standard for acceptable business conduct,' and 'Coaches are required to read and comply with all the terms and conditions set forth in the Agreement.'"
Most partnership agreements have policies that people need to abide by to avoid termination.
Amazon has an "Associates Program Operating Agreement", does this level of control make their affiliates employees?
https://affiliate-program.amazon.com/
Termination Events
(p.44) Below are the termination events that the plantiffs state Beachbody uses to "control" their coaches.
They are listed but not elaborated on because these are basic policies.
The plaintiffs don't even list policies as titled in the policies and procedures to create their narrative.
coach-office/policies/Team_Beachbody_
Policies_Procedures_US_Eng.pdf
3.2.9 (termination for failure to comply with social media directives)
The actual title of the section "Social Media & Online Conduct"
Identification as an Independent BODi Distributor
You must "identify Yourself as an Independent BODi Distributor" and " Whenever you provide your personal
opinion, you must clarify what is your opinion rather than a BODi position"
Most companies that you are an affiliate for have this policy to prevent confusion from a customer between the identity of the affiliate and the company.
Social Media as a Sales and Promotion Forum
You must abide by the terms of use policies of the social media platform you are promoting on. Policy limits how much original BODi workout content you can post.
Sales and Enrollments from Social Media Sites are Prohibited
Enrollments can only be done using the BODi replicated website.
This does not mean you cannot do 'direct sales' or in person sales. The Beachbody software has the ability to set up the order and send link to the customer to make the purchase.
This type of policy is established to prevent fraud such as taking cash payments or taking a person's personally identifiable information that can be exploited later.
Use of Third-Party Intellectual Property in Postings
Basically stay make sure you have the legal rights to use "trademarks, trade names, service marks, copyrights, or intellectual property of any third party in any posting".
Respecting Privacy
"Always respect the privacy of others in your postings. As a member of the BODi community, You should not engage in gossip or advance rumors about any individual, company, or competitive product or service."
Professionalism
This section is basically about being truthful.
Prohibited Postings
This policy prohibits you from making certain types of posts or linking to posts that are not directly related to promoting the product or service which is standard for promoting any affiliate offer.
Responding to Negative Posts
"Responding to negative posts simply fuels a discussion with someone carrying a grudge who does not hold themselves to the same high standards as BODi, and therefore damages the reputation and goodwill of BODi"
Promotion of Other Direct Selling Businesses Through Social Media
"If You create a business profile page on any social media site that promotes or relates to BODi, its products, or opportunity, the business profile page must relate exclusively to
Your BODi business and BODi products. If Your BODi business is canceled for any reason, You must immediately deactivate the business profile page and any other links to it or your BODi business."
This could be seen as a level of control by the plaintiffs for the purposes of being an employee, but it isn't. This is only for business pages, not your personal page or profile.
3.4 (termination for improper purchases)
The actual title of the section "Bonus Buying Prohibited"
This covers enrollments without a person's knowledge or permission, fraudulently enrolling individuals and enrollment of non-existing entities (Phantom accounts).
These policies prevent people from manipulating the compensation plan. People should only purchase products they personally consume.
3.7.3 (termination for failure to comply with recruiting directives)
The actual title of the section "Income Claims"
"You may not make unsubstantiated income claims about the BODi Distributor Opportunity. Distributors may only make income claims that they can document as accurate (such as about their own income or that of other Distributors that they have actual proof to support)."
This is one of the main complaints about the “with the MLM business model". Sometimes people are convinced to join the company with exaggerated income claims that is not realistic for most people.
3.10.1 (termination for recruiting other Coaches to participate in other MLMs and competing work)
The actual title of the section "Non-Solicitation"
This labeling by the plaintiff's lawyers is extremely deceiving and has nothing to do with an employer/employee relationship.
When a person joins Beachbody, they have access to a network of Beachbody coaches and customers.
What is conveniently left out by the plaintiffs is the following section "3.10.2 Participation in Other Network Marketing Business Opportunities" which states that distributors "have the freedom to participate in other Network Marketing Business opportunities, provided their participation in another Network Marketing Business never includes any attempts to solicit any BODi Distributor or customer as previously explained in Section 3.10.1 above."
This is further explained in FAQ:2679 "Multi-level Marketing: Participation in Multiple Earning Programs"
https://faq.beachbody.com/app/answers/
detail/a_id/2679/~/multi-level-marketing:
-participation-in-multiple-earning-programs
This policy prohibits coaches with a lifetime rank of Star Diamond or higher to participate in other network marketing businesses. These people get customers provided by the company placed under them.
People with higher ranks sometimes have a celebrity status and people would follow them to a competing company if they ever left. This includes people they did not personally sponsor.
The non-solicitation policy is to prevent people from joining Beachbody for the main purpose of stealing their customers.
3.10.3( termination for marketing Beachbody products alongside non-Beachbody products)
The actual title of the section "Participation in Other Business Opportunities"
"If a Distributor engages in another business opportunity which includes products or services related to fitness, nutrition, supplements or any other product or service which competes with a current BODi offering, they may not promote, advertise, sell, or attempt to sell any of those competing products using any BODi or Distributor branded website or platform, or any other website or social media platform they primarily use to promote their BODi business".
This policy is to prevent people from leveraging Beachbody which the lawsuit admits is a health and fitness empire to sell other products.
"In addition to the restrictions above, Distributors may not display BODi promotional material, products, or services with any other promotional material, products, or services in a fashion that might in any way confuse or mislead a prospective Customer, Distributor, or member of the public into believing there is a relationship between the BODi and non-BODi products or services."
If a person makes a purchase of a product that was marketed alongside Beachbody products, then the customer will have a bad impression of Beachbody because they would associate those inferior products with Beachbody.
This is not a form of control because Beachbody does not prohibit you from selling other products, you just can't market Beachbody products alongside non-Beachbody products.
3.10.4 (termination for policy violations by members of Coach’s household)
The actual title of the section "Policy Violations by Members of Distributor Household"
Out of all the subcategories taken from the policies and procedures, the title is the most accurate, but it is misinterpreted on purpose to deceive the court to fit their narrative.
The policy states "BODi Distributors who have family members or other individuals living in their immediate household who are engaged in other Network Marketing Business will be held responsible for the activities of these individuals should those individuals violate the BODi Distributor Policies & Procedures, including the restrictions provided in this Section 3.10. The resulting disciplinary action may include the suspension and/or termination of the Distributor’s business center."
The reason why coaches can be held accountable for the actions of a member of their household is that the coach's account can be used as a funnel to customers away from Beachbody to the other persons competing network marketing company.
The entire 3.10 Section deals with "Conflicts of Interest" mainly to prevent people from stealing customers from Beachbody.
8.1 (termination for illegal, deceptive, or unfair business conduct, the determination of which Beachbody retains the “sole discretion” to make)
This section simply talks about the remedies if a coach violates the agreement or "engage in any illegal, fraudulent, deceptive, or unethical business conduct" that "may damage BODi’s reputation or goodwill".
Almost every affiliate program has the same policy.
Amazon's policy for its affiliates are as follows:
"we may terminate this Agreement or suspend your account immediately upon written notice to you for any of the following: (a) you are in material breach of this Agreement, (b) you otherwise fail to cure within 7 days of our notice to you regarding any other breach of this Agreement (including any Program Policy); (c) we believe that we may face potential claims or liability in connection with your participation in the Associates Program; (d) we believe that our brand or reputation may be tarnished by you or in connection with your participation in the Associates Program; (e) your participation in the Associates Program has been used for deceptive, fraudulent or illegal activity"
Having this policy does not prove that Beachbody coaches are employees under the law.
In-Person Sales Impossible
(p.48) "While Beachbody does not expressly prohibit all forms of in-person sales, as described in Paragraphs 63–79, Beachbody has created many incentives for Coaches to sell on its online platforms, made it difficult, if not impossible, for Coaches to engage in most forms of inperson sales, and the Agreement does not require that any sales be performed in person."
It is a false statement to say that Beachbody has "made it difficult, if not impossible" to conduct in-person sales.
Beachbody has actually made it easier to conduct in-person sales with their "Share-a-cart" feature.
https://faq.beachbody.com/app/answers/
With the "Share-a-cart" feature you can set up the order for your customer and email the link making it easier for the customer to set up their first purchase.
Beachbody Coach's Office
(p.50-59) Paragraphs 50-59 of the complaint are mainly about the resources a coach has to promote Beachbody products.
Having access to promotional material is not proof that a person is an employee under the law.
Daily Business Activity Tracker
(p.60) "As another example, for years, Beachbody has published a “daily business activity tracker” worksheet for its coaches to use. See Ex. B.22 These worksheets give a list of tasks for the Coach to perform each day, including things like:
- Be Proof the Products Work. Work out and drink Shakeology
- Do a social media post that showcases the benefits of your healthy lifestyle or has a call-to-action
- Update your IG Story throughout the day” to show “workout clips,” “meal prep,” or “Invitation/promote group/poll or call-to-action
- Contribute to your Challenge Group"
These are tasks that a coach can do, but these are NOT REQUIRED, including, the purchase of Shakeology as discussed earlier.
An important thing to consider is that many people hoping to make some extra money to help raise their families don't have very much disposable income. Beachbody provides ideas and resources to use FREE online marketing strategies.
Beachbody Weekly Podcast
(p.61) "Beachbody also produces a weekly podcast. Coaches are encouraged to join to learn sales and marketing tips, hear from other Beachbody veterans, learn about new Products, and stay motivated."
Attendance at these meetings is NOT REQUIRED.
However, by attending these meetings, coaches can learn strategies for FREE that other coaches have been using to generate sales.
Company and Upline Suggestions
(p.62) "Beachbody Coaches are incentivized to follow Beachbody’s directives and prompts in marketing the Products. Because they are only paid if they make sales, they are incentivized to follow the suggestions of Beachbody, and their upline Coaches, on what kinds of marketing efforts are likely to result in successful sales."
Being "incentivized" to do something is different from being REQUIRED to take any particular action.
Tools Exert Control to Ensure Conformity
(p.63) "Beachbody has developed numerous online tools, including the Coach Sites, Challenge Groups, and a special 'Share-a-Cart' system, which reflects a decision to exert control over the Coaches and ensure they conform to the directives contemplated under the Agreement."
Almost every affiliate program gives you online tools. Does that mean that EVERY affiliate is an employee for the companies they promote the products for?
If you promote 15 different affiliate offers, does that mean you are an employee for all 15 companies?
Of course not, that is one of the major reasons why this lawsuit is completely ridiculous.
Coach Sites Ensure Compliance
(p.64) "First, the Coach Sites are designed in a way that ensures that Coaches operate in compliance the Beachbody’s marketing directives that are laid out in its Agreement."
and "the Product pages and descriptions are generated entirely and solely by Beachbody, with no option for the Coach to revise or supplement either the language or photos of the Products."
There isn't an affiliate program out there that will let you as the affiliate "revise or supplement either the language or photos of the Products." This includes Amazon. You get your link (replicated site), you share that link, and you get a commission when a sale is made. This is basic affiliate marketing.
This is obviously done for legal reasons so companies don't get sued if people made changes that were not legally compliant to avoid problems with government agencies such as the FDA and the FTC, not to control the affiliate.
Sites Control Pricing and Promotions
(p.65) "Second, the Sites ensure Coaches adhere to Beachbody’s rules on pricing and promotions. See, e.g., Agreement, §§ 5.2 (prohibiting sales of Products below Beachbody’s list price and the offering of incentives not otherwise offered by Beachbody); 5.6 (prohibiting Coaches from using charitable causes to promote sales). On the Sites, Beachbody sets the prices and does not permit adjustments, nor is there a way for a Coach to allow a customer to get a discount, receive a free gift, make a donation, or use any other offer that is not available on Beachbody’s main platforms and to all Beachbody customers. This significantly limits Coaches’ marketing discretion."
Let's look at the sections of the policies and procedures
5.2 Product Pricing and Promotion Guidelines
This section prevents unfair business practices specifically selling "BODi products below the list price on the BODi price list" and offering incentives not offered by BODi".
This policy makes gives everyone a fair chance without giving anyone any special advantages.
For instance, if someone is able to sell Shakeology on Amazon at a lower price, then why would anyone want to buy Shakeology with an average distributor?
The lawsuit complains that coaches lose money, but yet endorse policies that make it impossible for the average person to be successful.
5.6 Charitable Donations
"Although Distributors may contribute a portion of their BODi earnings to a charitable cause, due to the charitable permit and registration requirements of multiple states and additional federal requirements, You may not use any contribution as a means of promoting Your BODi business, or run any sales or incentive promotions where a charitable group or cause is identified as the benefitting organization."
Again, as you can clearly see, coaches may not use charitable contributions to promote their BODi business due to legal reasons, not as a way or a form of control.
The law firm should be ashamed of themselves for even suggesting that there is a link between linking the policy of charitable donations and control to establish an employee/employer relationship. They should know the law, right?
Control of Refund Policy
(p.66) "Relatedly, even when consumers purchase through the Coach Site, Beachbody controls whether and how orders can be cancelled or refunded. Thus, the Coach may not deviate from Beachbody’s rules, further limiting Coaches’ exercise of business discretion. Agreement, §§ 1.7 (requiring adherence to refund policy); 6.2.1 (requiring Coach to forgo commission if refund is given); 7.1 (setting forth money back guarantee)."
Which program out there lets the affiliate control the refund policy? The answer is none.
1.7 BODi Distributor Code of Ethics
Upholding high standards makes a brand stronger.
What is wrong with a company that wants to have a "Code of Ethics" such as treating people with respect, and promoting your business "with honesty and integrity"?
Beachbody nor any other business is not going to want anybody engaging in "deceptive, unlawful, or unethical" business practices.
The only thing this section says about refunds is "I will offer my customers the highest level of service, offering assistance with any necessary product exchanges and/or refunds."
6.2.1 Adjustments for Returned Products and Services
"Distributors receive bonuses and commissions based on the actual sales of products and services to end consumers. When a product is returned to BODi for a refund or is repurchased by the Company, the bonuses and commissions attributable to the returned or repurchased product(s) will be deducted, in the month during which the refund is given, and continuing every pay period thereafter until the commission is recovered,"
In the sales business, you make a commission on actual sales. The sale has not been fully completed if the product is returned for a refund, therefore, why should the agent keep the commission?
This is basic common sense.
If a law firm does not capable of basic common sense, they are not deserving of reasonable attorneys' fees and costs, they should also be required to pay the cost to pay for Beachbody's attorneys fees.
7.1 Product Guarantee
"BODi offers a 100% money-back satisfaction guarantee (less shipping and handling charges) to all Customers, retail customers, Preferred Customers and Distributors on all of our products."
There has never been an affiliate offer where the affiliate controls the refund policy.
The issue presented around the product guarantee is contradictory. The product guarantee is meant to protect the consumer.
Is the law firm suggesting that consumers not be protected?
Limitations on How The Product Can Be Sold
(p.67) "Third, the Sites and Challenge Groups create incentives for Coaches to steer people to Beachbody-controlled platforms, and promote compliance with Beachbody’s many limitations on where and how Coaches may sell the Products. See, e.g., Agreement, §§ 3.8 (prohibiting sales of Products at kiosks or other general public retail outlets); 3.2.13 (prohibiting Coaches who work at gyms from promoting Beachbody during classes); 3.9 (prohibiting sales of Products at “swap meets, garage sales, online auctions, or flea markets”). Because Beachbody handles payments and shipment for orders placed on its pages, by relying on these tools, Coaches save time and reduce expenses, given that in-person sales would require them to handle payment, plan for advance purchase of extra inventory to have in stock and/or place orders and handle delivery. "
Having limitations on where or how a product is promoted does not establish and employee/employer relationship. For instance, many affiliate offers have restrictions on how to advertise on Google and which keywords you are allowed to bid on.
3.8 Commercial/Retail Outlets
"BODi’s business model calls for product sales through direct contact with customers. Therefore, You may not sell or facilitate the sales of BODi products out of stores, kiosks, food establishments, buying clubs, or any other general public retail or commercial outlets"
Using "Beachbody-controlled platforms" in sure compliance with the law. For instance, what if a person try damaged products or sell a shake similar to those sold in an Herbalife store. If someone gets sick they are not going to blame the coach, they are going to blame Beachbody. This is probably why Herbalife prohibits their brand to be shown in those nutrition stores because all of the risk falls with the distributor.
3.2.13 Fitness Instructors Using BODi Workouts
"Fitness instructors and trainers can also be Independent BODi Distributors but may not incorporate BODi workout programs as part of their own exercise programs within fitness establishments (whether in a gym, community center, or other location). While those fitness classes may reference BODi product-inspired exercises, such as “plyometrics” and “kenpo,” You can never use any BODi trademark (such as “BODi classes” or “P90X Circuit” in the name or description of the class, and may never play any BODi programs (via DVD or BOD) for any such classes."
This policy seems to serve 2 purposes.
1st is to protect their trademark. Let's suppose a gym has a P90X or Insanity class playing the exercise programs. That means that you may have people who would not buy Beachbody on Demand because it is included with their gym membership. This is just simply bad for business. Plus the gym would be taking advantage of the Beachbody brand with the intent to increase their personal business compared to getting more sales for Beachbody.
2nd is to protect their coaches. If gyms were allowed to incorporate BODi classes, that would give them an unfair advantage over regular coaches to attract new customers because the average person cannot offer the incentives that a gym can offer.
3.9 Trade Shows, Expositions, and Other Sales Forums
The policy does state that "Distributors may display and/or sell BODi products and the Distributor Business Opportunity at trade shows and professional expositions" but "Approval will not be given for swap meets, garage sales, online auctions, or flea markets, as these events are not conducive to the professional image BODi wishes to portray."
Selling at "swap meets, garage sales, online auctions, or flea markets" can lead to an unfair competitive advantage because of the risk that the product may be sold at a lower price making it harder for the average coach to compete.
The premise of the lawsuit as alleged by former Beachbody coach that Beachbody build its business through unpaid workers for years, yet suggests ways that would make it impossible for the average coach to compete.
Restrict Sales on Social Media
(p.68) "Beachbody also restricts Coaches from using social media to make online sales; in other words, they cannot sell the Products directly to consumers on Facebook marketplace or similar sites. By making the Coach Sites available and performing the back-end work, Coaches are less likely to seek out other e-commerce platforms to sell the Products. "
The plaintiff does not show how seeking out other e-commerce platforms to sell the products would be more profitable than using the company-replicated site. Most people who join network marketing have limited time and money. Using your own e-commerce platform is more costly and there is a huge learning curve when learning a new software program.
This also leads to legal problems especially if independent distributors do not comply with the rules outlined by federal agencies such as the FTC and the FDA.
The lawsuit has a lot of complaints but no real solutions.
Challenge Groups Designed to Enforce Other Restrictions
(p.69) "Fourth, the Challenge Groups and Sites are designed to force Coaches to adhere to the other restrictions on how Coaches are to generate income through Beachbody. For example, Beachbody requires that Coaches allow participants in Challenge Groups to participate free of charge (i.e., a Coach cannot charge for coaching, instruction time, or advice), see Agreement, § 3.2.12, and the Challenge Groups do not provide a way for the Coach to charge or receive payment. Beachbody also prohibits Coaches from using its platforms to promote other businesses, Agreement, § 3.2.9, and these platforms are not set up to permit for Coaches to sell outside goods."
3.2.12 Management of Your BODi Challenge Group or BOD Group
"You may organize, host and manage Your own BODi Challenge Group or BOD Group".
Notice how the policy says that you MAY form a challenge group but are not REQUIRED to do so.
While an organizer does not make money by charging a fee, they can still make money from the sales of products to the consumer. There is nothing in the policy and procedures that says who you can and cannot invite. You may have a Challenge Group consisting of Shakeology customers.
To protect Beachbody from lawsuits resulting from physical injuries, that same policy states "AT NO TIME MAY YOU ACT AS A FITNESS OR ANY OTHER TYPE OF INSTRUCTOR IN ANY GROUP WORKOUT."
Therefore, charging for coaching, instruction time, or advice would be exploiting the consumer.
3.2.9 Social Media & Online Conduct
As stated before when discussing this same section, there are good reason why Beachbody has restrictions about promoting other businesses.
Think logically about what is being said when the lawsuit says "these platforms are not set up to permit for Coaches to sell outside goods." Beachbody makes money by selling its products. When a coach sells Beachbody products, they get a commission.
You can still sell outside goods, just not in conjunction with Beachbody products.
If Beachbody prohibited you from selling any outside goods, then the plaintiff might have an argument, but they don't.
Enforcement of Prohibition of Bonus Buying and Inventory Loading.
(p.70) "In particular, the Sites allow Beachbody to enforce its prohibition on “bonusbuying” and “inventory loading,” Agreement, §§ 3.18. These terms refer to situations in which a Coach purchases products for purposes other than personal use or to sell to a consumer, typically where a Coach wants to meet a sales quota or get a bonus (or help their downlines do the same)."
and
"Thus, a Coach who wants to increase income through strategic purchases of inventory is not permitted to exercise that discretion."
For a law firm, to include this in the lawsuit is pretty STUPID.
3.18 Inventory Loading
"You must never purchase more products than You can reasonably use or sell in a month, and must not influence or attempt to influence any other Distributor to buy more products than they can reasonably use or sell in a month."
Beachbody compared to other network marketing opportunities, is one of the very few where the company advises you to buy the product that you will actually consume. With Beachbody, there are no large starter or business builder packs, just your basic challenge (total solutions) pack for you to get started.
If inventory loading is allowed, then you run the risk of being accused of being an illegal pyramid scheme.
The FTC states "Often in a pyramid scheme, you’ll be encouraged or even required to buy a certain amount of product at regular intervals, even if you already have more inventory than you can use or sell. You may even have to buy products before you’re eligible to be paid or get certain bonuses."
So what the law firm is suggesting to avoid the employee/employer relationship is that network marketing companies operate as an illegal pyramid scheme.
Both inventory loading and bonus buying are signs that you might be in an illegal pyramid scheme. So according to the law firm representing Jessica Lyons, you have to break the law in order for your salesforce to be considered an independent contractor.
Forced Only to Recommend Certain Products
(p.71) "Fifth, to steer Coaches into only selling and recommending Beachbody Products, Beachbody developed a “Share-a-Cart” service. Coaches can add Beachbody products and programs into specific customers’ online checkout carts, and virtually share the cart with customers for them to purchase. The service does not allow Coaches to include outside products in the carts. Beachbody provides guidelines to Coaches on how to make product recommendations based on the customers’ needs and goals, and any Challenge Groups they intend to join. "
Why would a business allow outside products to be sold on its website?
Beachbody and other network marketing companies sell their own products. They are not like Amazon which is a platform where vendors can sell their products and Amazon charges a fee to be able to list their products on the Amazon website.
By only selling their own products on their website Beachbody can tell their customers they are receiving the highest quality products, unlike Amazon where vendors cut corners to compete on price.
Online Advertising Buys
(p.72) "Sixth, Beachbody prohibits Coaches from engaging in many kinds of online advertising buys. See Agreement, § 3.2.11. Beachbody has designed the Coach Sites and Challenge Groups in such a way as to prevent the Coach from gaining access to the sorts of data that are often necessary to successful online advertising campaigns, thereby promoting compliance. "
3.2.11 Online Auctions, Marketplaces, Keywords, and Shop Sites
"You may not offer or facilitate the offering of BODi products on or through any online auction or classified site, including but not limited to eBay, iOffer, and/or Craigslist, or any online marketplace, such as Amazon Marketplace."
This policy is to protect the average Beachbody coach from people who have more resources and who can still be profitable by undercutting the competition.
"You may not buy or use Keywords, Sponsored Links, and/or Adword buys that include any Company Marks or other prohibited terms as defined in Exhibit A, on any search engines, websites or any other online marketplaces (including Facebook and other social media outlets)."
Most affiliate programs have the same restrictions regarding the use of Keywords, Sponsored Links and Adword buys. Most programs prohibit you from using the name of the company or product, including misspellings.
So if you promote a product for a company that has those restrictions does that make you an employee of that company?
Create Your Own Website
(p.73) "While Beachbody purports to provide Coaches a right to create their own websites that are not on the Beachbody platform to sell the Products, the right is illusory, and Beachbody via the Agreement has removed all incentives to Coaches to create their own platforms. Ex. A, § 3.2.3. It does not waive or reduce the Business Service Fee if Coaches do not use these Beachbody services, creating a financial incentive to use the Coach Sites."
(p74) "If a Coach wanted to create their own website, Beachbody controls its publication. Coaches must first get written permission from Beachbody, which is only given if the Coach first creates a test website for its review and approval."
Section 3.2.3 of Beachbody's policy is about the rules of what your website must contain and the rules to remain legally compliant.
All purchases and distributor enrollments must be done on the replicated site that you are given.
When you are offering Beachbody products on your website, you must abide by the rules set forth in the policies and procedures.
The plaintiff hasn't demonstrated why it would be more profitable to use your own website.
Beachbody Controls Pricing on Website.
(p.75) "Beachbody controls pricing, prohibiting Coaches from using a personal website to advertise Products at a lower price than what it might cost on the Beachbody website. Coaches may not engage in any recruiting on a separate website."
The irony from the law firm is amazing, they must hate consumer protection. Beachbody clearly has policies to protect their coaches from people who are rich enough that they can still make a profit by selling products at a lower price than what it would cost on the Beachbody website.
Online Recruitment
(p.76) "While Coaches are encouraged to engage in recruiting, Beachbody restricts their discretion here, too."
(p.77) "For example, the only way to become a Coach is to complete the application on Beachbody’s website. While Coaches are paid commission by Beachbody if the people they recruit sell products, the Agreement prohibits Coaches from entering into contracts directly with the people they recruit."
There is a very good reason why the distributor application can only be done on Beachbody's website and of course, that reason is to stay legally compliant.
When you sign up as a distributor you must acknowledge that you have read the policies and procedures and terms of service.
There is no advantage of having coaches "entering into contracts directly with the people they recruit."
Cross-Sponsoring
(p.78) "Beachbody does not allow Coaches to seek out talented, experienced Coaches and add them to their downlines. Rather, it prohibits Coaches from recruiting Coaches from “competing” downlines. Ex. A, § 3.11. Because Beachbody, not the Coach, pays the commission and receives the sales made by those under a Coach, Beachbody can enforce this rule by simply paying the commission to the original Coach who did the recruiting. Coaches who are dissatisfied with the support or training offered by their upline Coach must request permission from Beachbody, which it “rarely” permits. Id. at § 3.6.2"
It was disclosed online that Jessica Lyons only recruited 4 people (p.170). That confirmed based on the fact as shown in the lawsuit also says that she earned "$50 a month in commission, often while working more than 50 hours a month. These commissions were for sales made by Plaintiff and/or sales made by people recruited by Plaintiff. " (p.180)
Even if Jessica was allowed to cross-recruit because someone was "dissatisfied with the support or training offered by their upline", why would any want to move to Jessica's downline if the goal was to make money?
Even if Cross-Sponsoring (Cross-Recruiting) was allowed, is it fair?
What if any of Jessica's 4 recruits decided to go with a different coach for better support and training?
After all, wouldn't it be better to learn the business from someone else who has recruited only 4 people in 6 years?
Based on the lawsuit Jessica worked really hard to get those 4 recruits.
Therefore Beachbody put this rule about cross-sponsoring to protect the average coach.
Beachbody Prohibits Use of Lead Generating Tools
More Lies
(p.79) Coaches are further restricted in how they drum up business for themselves and those in their downline. Beachbody prohibits the use of lead generating tools, instructing that: “Coaches may not sell or in any manner profit from (directly or indirectly) or promote any marketing systems or lead generation systems or sell or promote lead lists to other Coaches.” Ex. A, § 3.1. Beachbody also prohibits Coaches from coming up with creative solutions on how to increase their downlines’ profitability, prohibiting even the exchange of “traded or free services . . . for tools, consulting for Coaches, software or other sales aids.”
3.1 Deceptive, Fraudulent and Illegal Activities
Beachbody created policies they feel will protect their customers and coaches from being taking advantage of.
(p.179) "Plaintiff estimates that she has spent approximately $20,000 of her personal funds with Beachbody."
How much worse would it be if Jessica Lyons also purchased a "marketing system or lead generation systems"?
For example, Monat Global has a lead generation system that people can purchase for either $19/month, $49.99/month, and $99/month.
Most people would probably choose the $49.99/month plan because it includes Flash Sale Landing Page, access to websites and funnels, access to social media posting platform, etc.
If the plaintiff had that software for 72 months (6 Years), she would have spent an extra $3599.28.
The lead generation software was created with a White-Label Software called Go High Level which cost the owner $499 per month. It does take some time to set up for that specific company, but after the 1st ten sales, the owner of the software keeps 100% of the profits.
Link to Monat Global CRM
https://cam.effingsimple.com/optin
LInk to Go High Level
https://www.gohighlevel.com/go-new
Look at the style and icons used and you know what is being said here is the truth.
Stealing Customers / Poaching Clients
(p.80) "Beachbody also restricts Coaches in outside earning opportunities, prohibiting Coaches from recruiting other Coaches to join other MLMs or even to market other MLM products to other Beachbody Coaches and limiting Coaches’ abilities to do so. Id. at § 3.10.1."
Why would Beachbody want people to become coaches only to have their customers stolen from them?
Stealing (poaching clients) is an extremely unethical business tactic. Why would a law firm in the lawsuit even suggest it is ok?
Poaching is unethical business practice because the intent is not to sell Beachbody products but rather to convince Beachbody customers and coaches to switch network marketing companies by gaining access to people they would not ordinarily have access to without being a Beachbody coach.
As discussed before, Beachbody allows you to participate in other network marketing companies as long as you don't try to steal their customers.
Business Transfer
(p.81) "Finally, Coaches must get Beachbody’s approval to sell the “business,” i.e., future commissions associated with the Coach’s customer leads and downline Coaches. But they may not sell to another Coach. Id. at § 3.23. "
While this is true, this has nothing to do with the independent contractor status of Beachbody's coaches.
This also proves that a Beachbody coach is not an employee.
Imagine you are at a job in a retail establishment. When you retire, you cannot transfer or sell your position to anyone.
Disclaimers and Approved Language
(p.84) "Beachbody prohibits Coaches from discussing the Beachbody Compensation Plan on any social media site. Id. at § 3.2.9. It heavily restricts how Coaches can discuss their own income, mandating that they use disclaimers and approved language on every post. Id. at § 3.7.3"
Federal organizations such as the Federal Trade Commission (FTC) are becoming stricter when it becomes to income claims and health claims.
As a matter of fact, the FTC sent warning letters in 2020 to various network marketing companies regarding the income and health claims their representatives were making.
https://www.ftc.gov/news-events/
news/press-releases/2020/04/ftc-
sends-warning-letters-multi-level-
marketers-regarding-health-earnings-
Therefore, using disclaimers with approved language is necessary to stay legally compliant with the law.
No Experience Required
(p.90) "Beachbody Coaches are not required to have any background in sales, marketing, fitness, or nutrition prior to becoming a Coach. Coaches are not required to have any particular licensure or meet any educational requirements, either. For example, they do not need to be licensed personal trainers, nor have any schooling, training, or prior employment in fields relating to health and fitness, or nutrition."
So what they are really saying is that people do not deserve an opportunity to make some extra income without spending thousands, sometimes over 100 thousand dollars in education.
The fact that no experience is required is a huge advantage because it gives a person a chance to earn some money with limited risk.
As stated before, under section 3.2.12 in the policies and procedures coaches are prohibited from acting as instructors.
The business model is that a coach can make money by taking a product and sharing their positive results.
You can even get start earning commissions without any results because everyone knows that you can lose weight with exercise and eating healthy.
Some of the coaches who have had the best results as a coach started sharing their weight loss journey from the beginning.
It is easier to be relatable because people can know that they are not the only ones with the same struggles.
Potential customers want results. This is what made Beachbody so successful with their infomercials. People wanted the results people were getting with the exercise programs.
Anyone who has lost significant weight will almost always be asked how they did it. They ask because they want the same results too.
From the information available, Jessica Lyons has always been skinny so why would anyone buy from her if the potential customer doesn't know that Beachbody products are what made her skinny?
Let's be honest, a person who has been skinny for their entire life cannot understand the struggles a person who is overweight goes through.
An example is the Fit to Fat to Fit show on A & E where the fitness trainer did not have any idea what an obese goes thru until he gains 60 pounds on purpose so that he can go thru the same health journey with his client.
Direct Sales Exemption under California Law
(p.98) "The Direct Selling Association (“DSA”), the industry lobbying group, pushed for an exemption. As a result of those efforts, AB 5 exempts from the Dynamex Test any salesperson “described in Section 650 of the Unemployment Insurance Code, so long as the conditions for exclusion from employment under that section are met.” (“Direct Sales Exemption”) Instead, AB5 provided the old common law test would govern the question of misclassification for any worker falling under the Direct Sales Exemption."
The plaintiffs indirectly admit that companies like Beachbody are exempt. They state that people in direct sales are exempt based on lobbying from the Direct Selling Association.
Beachbody Not Meet Direct Sales Exemption?
(p.100) "Direct Sales Exemption is best understood as identifying two specific categories of direct sales jobs, Primarily In Person Consumer Sales Work, and Wholesale/Resale Work, that could trigger the applicability of the Direct Sales Exemptions. The Beachbody Coach falls under neither of these categories."
The focus here is in-person sales.
(p.101) "the California exemption applies narrowly to jobs like door-to-door salespersons, or the direct sellers who work almost exclusively through the home party circuit, i.e., people who sell consumer products by meeting with other consumers in their homes. "
First of all, an exemption under the new California law for "Direct sales salesperson per the Unemployment Insurance Code, Section 650."
The Unemployment Insurance Code, Section 650 does mention in-person sales.
california/2019/code-uic/division-1/
part-1/chapter-3/article-2/section-650/
The key point here was the intent of the law when it was made in 1989 when social media didn't even exist.
That is when the legal principle of 'Originalism' comes into play.
According to Cornell Law School, "Originalism is a theory of interpreting legal texts holding that a text in law, especially the U.S. Constitution, should be interpreted as it was understood at the time of its adoption."
Then there is "Statutory Construction". "Statutory construction is the process of determining what a particular statute means so that a court may apply it accurately"
"Statutory construction begins with looking at the plain language of the statute to determine its original intent."
California Law states "is engaged in the trade or business of primarily in-person demonstration and sales presentation of consumer products" when considering if direct sales can be excluded under the definition of employment.
Network marketing heavily relies on the "demonstration and sales presentation of consumer products".
Using the legal principles of Originalism and Statutory Construction, it could be said that doing demonstrations and presentations online on social media could still fall under in-person sales based on the intent of the law when it was created in 1989.
By the way, you can still do in-person, face-to-face sales as covered in a previous section.
Restricted Access To Information
(p.120) "Beachbody’s Privacy Policy gives it the right to acquire and retain all information provided by visitors to its website (including the Coach Sites). Its Privacy Policy permits Beachbody to utilize tracking pixels, cookies, and other internet tracking tools to monitor the browsing habits of the visitors to its website, and engage in direct advertising to them—broad rights not given to the Coaches who found and referred these customers.25 Thus, Beachbody benefits from the leads and marketing done by its Coaches, even when consumer sales are not immediately made (and thus, no compensation is to be paid to the Coach)"
First of all releasing information to a coach would probably be a legal violation.
Second, this is an advanced topic that 99% of the top leaders are not doing. Why, because it could cost at least $10,000 to obtain the data necessary to run a successful re-targeting campaign.
Even if Beachbody was legally able to give that information to a coach for the people that visited their replicated site, that would not be enough data to run a profitable marketing campaign.
This is extremely risky for most people because they probably would have to spend thousands of dollars on education to learn about it and they are likely to make mistakes that result in zero sales.
This is not like a stock market account where you can "paper-trade". When you run an advertising campaign, you have to send real money that you can't get back if you fail.
Required Tranings
(p.151) "Throughout that time, including and throughout the last four years Plaintiff had to and did keep up with the trainings and information in the Coach Office to keep selling for Beachbody."
Yet another lie
Beachbody does not require a coach to "keep up with the trainings" to "keep selling Beachbody".
Time Spent Generating Sales
(p.152) "Plaintiff often would spend between several hours on Sundays or Monday evenings planning posts, workouts, and sales strategies for the upcoming week, and on some occasions, spending as many as four hours without a break."
When reading the lawsuit, there were lots of activities listed that would not be considered income-producing activities.
This is the biggest flaw in the argument when people say they lost money in network marketing. Some even state that you should have a profit and loss statement, which you should, but they also need a time audit to measure activities that lead to a sale.
Some activities will give you a better chance of success. For instance, going to Facebook Live consistently is better than posting on social media.
One person on the internet who is against network marketing thought she was going to be rich because she was better than her upline at putting makeup on and if your upline could make a lot of money, then it would be easy for her to make a lot of money too.
However, that is not going to happen with her activity of occasionally doing a Facebook like and making infrequent posts on social media.
No Breaks
(205.) "As alleged herein, Plaintiff and the Class regularly worked periods of more than five (5), ten and fifteen hours in a workday without being provided requisite mandatory timely, thirty-minute, duty-free meal periods. Beachbody also failed to pay Plaintiff and the Class an additional hour of wages at her regular rate for each workday a meal period and/or a legally compliant meal period was not provided."
When you work for a company, the company tells you which hours you MUST work, and therefore, must give you a break under the law.
(p.212) "As a result, under Labor Code section 226.7, Plaintiff and the Class are entitled to one additional hour’s pay for each day a rest break was missed, late or interrupted, all in an amount according to proof. "
Beachbody does not require you to work specific times and it does not prohibit you from taking a break. You can take a break anytime you want. Therefore, people are not entitled to extra pay for missing a break.
Beachbody cannot terminate your contract if you are not actively working the business whereas someone in corporate can be terminated if they are not doing their required activities.
Do you really think people are exclusively working on their Beachbody business 10-15 hours in a workday as alleged in the lawsuit?
Overtime
(p.197) "California law provides employees in California must be paid for all hours worked, up to 40 per week or eight (8) per day, at a regular time rate no less than the mandated minimum wage. Compensable work time is defined by the applicable wage order as 'the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.' Cal. Code. Regs. tit. 8, section 11070(2)(G) (defining “Hours Worked”). "
A person is entitled to overtime when they are REQUIRED to report to work and are "subject to the control of an employer" to do certain REQUIRED activities.
Additionally, do you really think people are working their Beachbody business more than 8 hours per day or 40 hours per week?
For most people including Jessica work this as a side hustle separate from their full-time employment.
Even if a person works over 40 hours per week, they are not entitled to overtime if some of those hours are done while working at 2 or more jobs. So if you have two jobs and work 30 hours per week at each job, then you are not entitled to overtime pay.
Beachbody vs Real Estate
Imagine Jessica worked for a real estate brokerage.
A typical real estate agent will have the following expenses
$200-$500 Real Estate Course
$25 State Exam application
$125-$145 State license
$200-$500 Realtor membership
$150-$350 MLS membership
$300-$600 E & O insurance
$25-$500 Broker fees
$50-$300 Continuing Education
$1500 Professional website
$1000 per month or more on Marketing Costs
$500-$1200 per month on Extra Coaching.
https://www.carealtytraining.com/
blogs/fees-to-be-a-real-estate-agent
The cost to be a successful real estate can easily cost you over $20,000 per year. Top agents in the Los Angeles area spend $6000 to $15000 per month on digital billboards.
https://www.lamar.com/inventorybrowser
Without these costs, especially the marketing cost and extra coaching, it is almost impossible to be a successful real estate agent. It would be a waste of money to spend money on marketing if you don't have the sales training to close the sale.
It would also be a waste of money to spend money on sales training if you don't spend money on getting people to call you. How else are you supposed to get clients?
The same is true in network marketing. You have to let people know you are in business whether you are a Beachbody coach or a real estate agent.
Even if you paid a fortune on marketing and education, that does not guarantee that you will make any sales.
So if you are a real estate agent, would you be able to sue your brokerage if you spent (p152) "several hours on Sunday or Monday evenings planning posts," and planning "sales strategies for the upcoming week, and on some occasions, spending as many as four hours without a break"?
Training
In California, you must take the 135-hour Prelicensing course to become a real estate agent, plus 45 hours per year of continuing education.
What if people in network marketing were required to take a 135-hour training course on sales?
In network marketing, you are not REQUIRED to take any specialized training.
So if the plaintiff was a real estate agent for 6 years, does that mean she would be able to sue for 360 hours of MANDATORY education?
Beachbody Growth
(p.36) "MLMs like Beachbody have grown during the COVID-19 pandemic, recruiting salespeople by promising remote work for the unemployed."
It is very difficult to believe that someone would only have recruited 4 people in 6 and a half years, especially during the pandemic.
During the pandemic, many people were looking for solutions to 2 problems.
First, an extra source of income. With many businesses shut down, many people either had no income or relied on unemployment benefits.
Second, people were looking for a method to exercise because the gyms were closed.
Many companies experienced record growth like Zoom, Peleton, and of course network marketing companies, including Beachbody.
So why is it that the plaintiff only had 4 sign-ups during a period of time of record growth?
A theory is that she was doing activities that did not produce income like "planning posts, workouts, and sales strategies". (p.152)
What income-producing strategies were actually done?
There was no evidence in the lawsuit about any income-producing activities like making posts, how many posts per day/week, or how many times the plaintiff go on Instagram/Tiktok/Facebook live.
There seem to be no posts on her Facebook, Pinterest, and Twitter accounts since 2017.
https://twitter.com/jessicalyoo
The Set-Up for the Frivolous Lawsuit
While there isn't much information about her website (whenjessgrowsup.com), it didn't appear it was ever updated.
Here is some of the information that was on that website.
"I’m Jess, a 25 year old Millennial, that’s made my fam proud…sure that sounds great but I have learned that real happiness happens outside the resume, the degrees and what my community deems “successful” for my age:
Resume: Retail Manager of a $38 million store in California (yup – I know labor law.)
Degrees: Undergrad in Human Resources and Organizational Behavior (yup – I graduated in 4 years) Masters in Business Administration (I kissed all my summers goodbye!)
Successful? Sure.
- 4 year degree in 4 years (It’s possible, so said it twice)… check
- Career using my degree…check
- Masters Degree at 23 (yup – my cap said that…it rhymed)… check plus
Ew – if that made you cringe. Let’s be friends – Which leads me to my freak out.
In May 2013 I finished bedazzling my grad cap (which apparently was not the cool thing to do btw) and had a mild freak out – holy crap. I have no idea 'what I want to be when I grow up.' "
** This was from April 30, 2017. It appears that the website was no longer active in 2018, "Not Found The requested URL / was not found on this server." in 2019, and the domain parked in GoDaddy in 2021.
If Jessica knew the labor law as stated on the website, she should know that if you are an employee (as alleged), you are required to take a break and when you are supposed to take that break. She should also have known the law about the requirements to qualify for overtime.
Evidence shows that she was a Retail Manager at Target ("$38 million store in California"). As a manager, you are definitely required to know the law about breaks and lunches.
So without any other evidence, was this a Premeditated Frivoulsy lawsuit?
Conclusion
This seems to be a frivolous lawsuit and the complaint leaves out several important details such as a time audit of activities (especially income-producing activities), and how exactly Jessica Lyons spent $20000.
There are big and obvious differences between an employee and an independent contractor. The main difference is what you are REQUIRED to do and where you are REQUIRED to report.
Internal Revenue Service (I.R.S.) states "an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done."
https://www.irs.gov/businesses/
small-businesses-self-employed/
independent-contractor-defined
Beachbody cannot control which activities coaches are REQUIRED to do, how it is REQUIRED to be done, and when it is REQUIRED to be completed.
The California law was intended to protect those people from employers who wanted to avoid paying workers' compensation and unemployment insurance.
For example, in the case S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) where agricultural laborers who harvested cucumbers.
california/supreme-court/3d/48/341.html
As outlined in this article, the law firm insists that coaches are employees and in order to make those arguments they suggest things Beachbody and similar companies, do things that are illegal.
Beachbody clearly meets the criteria for an exemption under the California law under direct sales salesperson per the Unemployment Insurance Code, Section 650 especially when you consider the legal principles of Originalism and Statutory Construction by taking the intent of the law from 1989 to redefine in-person sales to the modern times using social media.
Network marketing opportunities are one of the few ways people can make some extra money which is desperately needed in the inflationary times of 2022/2023.
Yes, there are some predatory network marketing companies that take advantage of people, but that is a discussion for a different day.
If you agree that people in network marketing are independent contractors click on the link on the YouTube video below and leave a comment.
