ARTICLE

Are Network Marketing Distributors Business People?
Perspectives from a network marketing attorney whose practice emphasizes distributors rights
by David G. Eisenstein, Esq.

In the network marketing industry, there are many successful distributors who have found a nice niche as a home based business owner.

Many more are diligently working to be successful. But, do they really own their own businesses, or are they more like employees of the companies for whom they are often called "independent distributors?"

The answer is more difficult than the corporate marketing departments of most network marketing companies would have you believe.

While the corporate types hype the "financial freedom" and purport to cater to the "be your own boss" mentality of home based business people, the answer to the question of whether the distributor really owns his or her own business, or is actually treated more like an employee by the network marketing company whose products and services the distributor sells, must be arrived at on the basis of answers to some very specific questions about the opportunity in which the distributor has become immersed.

How much control does the "company" exercise over the distributor?

This is a familiar distinction in the context of the IRS definition of employee versus independent contractor and in the legal context in general.

If the company sets requirements as to the precise means and methods by which the distributor accomplishes his or her objectives, down to such details as required uniform, work hours, and micromanaging the efforts of the distributor through a thousand pages of company policies and procedures--in substance providing a "supervisor on paper" to "look over the shoulder" of the distributor, the distributor, arguably, is then under the "control" of the company as much as if that distributor reported for an 8 to 5 shift at the company's home office Monday through Friday.

There is not a thing which is independent about such a distributor "employed" by the company.

Does the "company" allow the distributor to freely sell his or her distributorship or will it to heirs?

A true test of whether a company allows its distributors to actually be in business for themselves and not just have a JOB with the company is whether the company's policies allow for an easy exit by the distributor through sale of the business, with few if any strings attached.

Remember the concept of working to build your business so that you can earn "residual" or "walk away" income that would continue to be paid regardless of whether you continued to be active?"something an employee never has the right to do and a key reason why network marketers have been drawn to the valuable business asset which residual income represents and which their successful hard work at business building could bring to them, that no JOB could.

This unfettered right to sell one's own distributor business should not be lost or taken away by the company, when the company decides to terminate a distributor who has built a business. A reasonable opportunity to sell their distributor business, say one year , should be given to those distributors who have parted ways, voluntarily or involuntarily with a company.

Are the company's policies and procedures regarding cross-recruitment overreaching and extreme or are they fair and drafted to allow for the least amount of interference required to protect the businesses of the company's distributors?

We all know the drill by now. The companies which draft their anti cross-recruitment policies narrowly and without unnecessary restrictions are allowing their distributors to truly be independent distributor business owners. Reasonable approaches to cross-recruiting allow a distributor to correctly believe that he or she is truly an independent, intelligent business person, not an indentured servant who is stuck, hogtied or handcuffed to any particular company forever.

However, the policies, and even the distributor advisory board contracts which read like a sentence to a term of years in the company's confinement are anti-competitive and illegal in restraint of trade in many states, because they go well beyond what is reasonably necessary to protect the company's distributors' business expectancies.

Unduly harsh restrictions on distributors freedom of association, while not always adopted with bad motives, have resulted in some unnecessarily egregious results in the lives of distributors, many of whom have behaved honorably, when those undue restrictions are enforced or enforcement is threatened by the company, the entity which writes the checks and therefore carries near absolute leverage in the relationship.

As a distributor owner of your home based business are you spending and investing your earned income responsibly so that the money sticks to you or do you spend it faster than you make it?

It never ceases to amaze me how so many successful distributors do not do the things necessary, such as spend less than they make, and save and invest the difference in their own portfolio of diversified assets, so that the money they make sticks to them. Even in network marketing, as the owner of your own distributor business it's not how much you make, but how much sticks to you.

This means if and when you have a medical, legal or other emergency in your life or business, just like any other owner of a substantial business"which is exactly what you own when you generate significant commission income on a monthly basis --- you must have the money readily available to rectify the urgent necessity just like any other true business owner must do.

If you are a distributor and can answer the above question in the affirmative, then the main question posed by this article---are distributors really business people?---can be answered, as to you, with a resounding, "Yes I am."

Source: Law Offices of David Eisenstein, Esquire. - As a Supplier Member of the Direct Selling Association - DSA - Mr. Eisenstein is available to consult with or represent MLM, network marketing companies with legal needs such as lawsuits in the courts and problems with the FTC (Federal Trade Commission), state AG - Attorney General. Click here for more information