Here is the thing I can’t get pass on this. $HLF has sued everyone who has taken them on over the years. That is their MO. Whenever anyone has sued them, they have countersued and with superior resources, force the other party to settle out of court. Ackman has all but begged them to sue him, yet they refuse.
The ONLY reason I can see for them doing this is because they are terrified of discovery. When $HLF has financial superiority over a claimant, they can dictate the judicial process and by dangling cash, they end it before it begins. They won’t have that advantage over Ackman, it would go to trial.
Silence can truly be deafening….
That aside, it is inconceivable to me that $HLF is not breaking countless labor laws in their nutrition clubs. Along with that then comes Dept of Labor and Revenue investigations in the states they operate in and IRS investigations due to the unpaid taxes on that labor. As you’ll see it is virtually impossible for anyone that works at a particular location to be defined as anything other than employee. States do that intentionally, they want the payroll tax revenue.
For instance, this is how NYS defines and employee:
The courts have found that no single factor or group of factors conclusively define an employer-employee relationship. Rather, all factors are reviewed to determine the degree of supervision, direction and control exercised over the services. Generally, an employer controls what will be done, i.e. the manner, means, and results.
An employer-employee relationship may exist if you:
- Choose when, where, and how they perform services
- Provide facilities, equipment, tools and supplies
- Directly supervise the services
- Set the hours of work
- Require exclusive services (An individual cannot work for your competitors while working for you.)
- Set the rate of pay
- Require attendance at meetings and/or training sessions
- Ask for oral or written reports
- Reserve the right to review and approve the work product
- Evaluate job performance
- Require prior permission for absences
- Have the right to hire and fire
How an individual is compensated is another indicator of worker status. Employees typically are paid a salary, an hourly rate of pay or a draw against future commissions with no requirement for repayment of unearned commissions. Employees may also receive certain fringe benefits, including an allowance or reimbursement for business or travel expenses.
The nature of the services performed is also key to deciding if a worker is an employee or an independent contractor.
Unskilled or casual workers are usually employees because their labor is often supervised. However, even professionals such as doctors and lawyers, who have much freedom to perform their duties, may be employees if they are subject to significant control.
The courts have also found that workers may be employees and that an employment relationship may exist if the employer controls important aspects of the services performed, other than results and means.
For example, a referral agency usually does not directly supervise the individuals it refers for assignments. It could be their employer, however, if it controls such important aspects of the services as:
- Client contact
- Billing and collection from clients
- The individual’s wages
If we assume even a fraction of what Ackman said in his presentation is true, the people working in the nutrition clubs are “employees” and thus $HLF is breaking the law. Now, $HLF apologists will come out and say that “these people are independent contractors. Here is how NYS defines that:
Independent contractors are free from:
- Supervision
- Direction and
- Control in the performance of their duties.
They are in business for themselves, offering their services to the general public.
Signs of independent contractor status include a person who:
- Has an established business
- Advertises in the electronic and/or print media
- Buys an ad in the Yellow Pages
- Uses business cards, stationery and billheads
- Carries insurance
- Keeps a place of business and invests in facilities, equipment, and supplies
- Pays their own expenses
- Assumes risk for profit or loss
- Sets their own schedule
- Sets or negotiates their own pay rate
- Offers services to other businesses (competitive or non-competitive)
- Is free to refuse work offers
- May choose to hire help
An employer-employee relationship may exist regardless of how the hiring party describes it. For example, if you give a worker a 1099 Form rather than a W-2 Form, they may still be an employee. Persons who work for you may qualify as employees under the law, even if, for example:
- You have the person sign a statement claiming to be an independent contractor
- They waive any rights as an employee
- You require them to obtain a dba in order to work for you
Under the Unemployment Insurance Law, an agreement by employees to waive their rights under the law is not valid.
Remember that the real distinction between the employer-employee relationship and the independent contractor relationship depends primarily on the level of supervision, direction and control exercised by the person engaging the services. It is not defined by what the relationship is called by the participants.
Again, there is no conceivable way we one can make the argument anyone participating in the nutrition clubs is an independent contractor. No way
I think this is the most immediate danger for $HLF. The NYS Dept of Labor could easily shut these all down, file charges against the owners and then $HLF itself.