May 22, 2023. Today, Tycko & Zavareei LLP and the Clarkson Law Firm PC, filed a class action lawsuit against the Beachbody Company and its leadership, over the multi-level marketing company’s violations of California’s labor laws. In the lawsuit, the plaintiff, a former Beachbody coach, alleges that the company misclassified its California “coach” salesforce as independent contractors rather than employees, and that these coaches are responsible for promoting the brand on social media, referring new customers, providing customer service, organizing support groups, and driving traffic and leads to Beachbody’s website. Beachbody pays coaches only a “paltry commission,” on some sales, and that commission is often offset by the out-of-pocket business expenses coaches must incur.
The company operates as a multi-level marketing business (MLM) and relies on the “direct sales” exemption to California’s misclassification law to justify exploitation of sales personnel. However, the exemption was written decades ago, and is limited only to those making “primarily in person” sales. It does not reach modern e-commerce operations like Beachbody. Beachbody’s sales personnel work as “Coaches” and market and sell fitness programs and nutritional supplements and other health and wellness-related goods and services, primarily through online channels and its own apps and platforms.
Beachbody exercises significant control over its coaches in their role as social media marketers, requiring them to adhere to extensive rules and regulations pertaining to pricing, advertising approaches, and the company’s intellectual property. Beachbody has created systems that funnel all sales leads towards Beachbody’s website and apps, where Beachbody accepts, processes, and fulfills the orders, while also retaining all customer information as well as the exclusive right to track the customers’ online activities for its own benefit. Because of this model, the plaintiffs allege that few people are making money under Beachbody’s compensation system.
“MLMs are notorious for profiting off the unpaid work of their sellers, and Beachbody is no exception, relying on an outdated statutory exemption to justify exploiting its hard-working coaches by classifying them as independent contractors,” said Kristen Simplicio, a partner at Tycko & Zavareei LLP. “We applaud Ms. Lyons for taking this brave and important step to hold Beachbody accountable and do right by those who worked so hard to make the company what it is today.”
“This case has potentially seismic implications not only for Beachbody, but for other MLM companies that are reaping huge profits based largely on avoiding having to pay the people actually growing their business for them,” said Glenn Danas, partner at Clarkson Law Firm P.C. “If the court agrees with us, this will allow thousands of Beachbody ‘Coaches’ to be paid for their hard work and will upend Beachbody’s business model.”
This lawsuit comes at an important time when companies are increasingly taking advantage of workers who are classified as independent contractors but should be considered employees due to the amount of control the company exercises over them. The plaintiffs are seeking unpaid wages, overtime compensation, penalties, interest, injunctive relief, etc.
Read more about the case: MLMMisclassification.com
The case is Jessica Lyons v. The Beachbody Company, et al., case no.: 23STCV11459 in the Superior Court of California, County of Los Angeles.