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When I first heard of this case, where Mary Kay Cosmetics used the opportunity of a distributor's problem to steal that distributor's downline, I felt quite outraged.

Regardless of how insensitive and unconscionable that action may have been, it then struck me as nothing short of stupid when they allowed a case based on wrongful termination to go to trial.

Although it may have seemed clear in the minds of Mary Kay's executives that the "independent contractor" status precluded the possibility of a successful lawsuit for wrongful termination, it seemed improbable that the court would foreclose any and all remedies by the distributor against Mary Kay.... but a successful action for wrongful termination could have created a humongous can of worms for Mary Kay.

So to summarize, I first thought this was just a case of insensitivty and bad judgement.

Then I thought it was a case of blatant stupidity.

And then I thought some more. I thought, what if Mary Kay had allowed Claudine Woolf to retain her distributor position but she never got well. Would they let her continue receiving commissions from her group's sales? If not, they would be back at square one, effectively stealing from her the distribution channel she had built up. But if they did let her keep receiving those commissions, this would set a precedent. It would mean that Mary Kay allowed its distributors to continue to receive earnings based on the business brought in by their group, even if the distributor did not continue to agressively pursue new recruits.

And then I realized: that is the Mary Kay system they teach at Harvard Business School: give your sales force incentives to bring in more people on a regular basis, let them think they're building their business, but when they stop bringing in more and more and more business, when it gets to the point that they stop building your business, then you just take it away from them.

In other words, let people think that they're building their own business, creating some kind of a residual income, then when the distributor is no longer useful to you, just cut them off.

Yes, folks, I'll bet they do teach that at Harvard Busiess School.
EliMantel web search for EliMantel - 02 Jan 2004

Additional comments.......Most of these MLM's including Amway/Quixtar claim to be taught about at Harvard......another goofy 'marketing plan claim'........what IS probably taught is the genius of MLM's in general whereby a company doesn't have to pay government benefits to those "Independents".......check out Mary Kay Opinion #89....this lady knows about the legalities of MLM's....interesting reading!

Also, to add to Eli's comments, when a director loses her unit, the unit members go to the senior director thus building her unit back up. Also, many directors in these companies rely on their unit members 'moving up into management' to grow their units and provide those nice commission checks for the directors!
Laura Ryan web search for Laura Ryan - 03 Feb 2004

That lady was not a distributor!!!!!! She was an INDEPENDENT sales director. We are not distributors big difference in terminology.........If you would for a store and are paid on commission and build a base of customers that faithfully come to see you at the store and then one day you are fired or quit do you expect to continue to get paid on those customers when they come it???? NOT!!!! Absurd! To even think. Let it gooo!
Michelle Figures web search for Michelle Figures - 16 Mar 2004
Michelle--

In just a few lines, you have introduced so many logical fallacies I don't know where to begin.

In reality, I suppose the interpretation of an agreement should all depend on what expectations are created and not the specific words used. But every contract includes an implied covenant of good faith and fair dealing. It is certainly plausible to interpret this as prohibiting enforcement of any clause which would result in unjust enrichment of Mary Kay or of anybody else in Mary Kay.

If you work for a store, a store which pays you a guaranteed salary plus commissions, you don't pay for and take title to the merchandise, and you're not paying for your space, there's little likelihood of expectation that you "own" the customer relationship.

Am I understanding you to say that indepdent sales directors are not distributors? What exactly do you think is the significance of being a "distributor"?

"Sales director" is just Mary Kay's own term. It really has no meaning other than what Mary Kay assigns to it. The governing issue is the contractual relationship Mary Kay and its "beauty consultants".

The nature of this contractual relationship is:

In spite of the above things which suggest that the Mary Kay beauty consultant is an indepdent business operator, Mary Kay imposes various practices on its beauty consultants.

This puts Mary Kay in the worst of both situations... that is, when it's advantageous to Mary Kay for beauty consultants to be independent contractors, they will be treated as employees. When it's advantageous for beauty consultants to be employees, they will be treated as independent contractors. IMO, Mary Kay is reaping what it has sowed.
EliMantel web search for EliMantel - 03 May 2004

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