Max International Settles with Melaleuca

by louabbott on February 15, 2011

Max agrees to pay $1.2 Million over alleged ‘poaching’

In an interesting lawsuit that involved some of Melaleuca’s very high ranking “Marketing Executives” leaving Melaleuca to join the younger company, Max International, Melaleuca sued Max and Max’s lead distributor.

Allegations centered around claims that Max’s lead distributor targeted the Melaleuca leaders and paid them then to raid their own Melaleuca downlines thereby breaking their non-solicitation and other agreements in Melaleuca’s Statement of Policies.

A Utah health and home product company has agreed to pay $1.2 million to its Idaho Falls-based rival to settle a lawsuit over allegations it poached employees and urged them to breach contracts.

Max International in Salt Lake City was sued by Idaho’s Melaleuca in fall 2009, who contended the Utah company raided its marketing executives and then conspired to have those former workers breach their contracts with the company by recruiting other sales people.

. . .

The settlement was reported by a story published Sunday in the Post Register.

“Our actions here were vindicated, and the outcome says the actions we tried to seek against Max International were finally realized,” Melaleuca President McKay Christensen told the newspaper. “We think Max took the right actions here in settling the case, and we’re pleased to have a positive outcome.”

Max co-CEOs, Joseph Voyticky and David Bagley, apologized to the Idaho company, saying it “deeply regrets any actions, if any, by its officers, employees or associates that contributed to any contract violations by former Melaleuca (sales agents).”

Christensen said that, as a condition of the settlement, Max officials agreed to honor Melaleuca’s contracts and nonsolicitation agreements …

Read more at the Washington Examiner.

Editor’s note:  I found it interesting that many of the news reports (including this one) refer to the Marketing Executives as “employees” and wonder who provided that language.  In fact, they are not employees at all but are legally classified as Independent Contractors.  Independent contractors, of course, are much different than employees in lots of significant ways and the improper use of the words serves only to cloud the real issues.

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{ 2 comments… read them below or add one }

Stacy August 20, 2011 at 8:06 am Thumb up 2 Thumb down 0

In response to the editor’s note, marketing executives are independent- which gives them power over their own businesses. However that term usually implies that the independent business owner is contracted to work with multiple organizations/companies, which is exactly not the case as highlighted in this article. In my experience, a closer phrase for the bond between marketing executives and Melaleuca would have been “members of our Melaleuca family” which is how McKay treats each of our marketing executives.

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louabbott August 20, 2011 at 8:35 am Thumb up 0 Thumb down 0

“Members of our Melaleuca family” clouds the issues also and is meaningless.

From a legal standpoint, the relationship is either employee/employer or contractor/independent contractor. The difference is crucial for all kinds of reasons including whether a company must withhold taxes. Too much control in the relationship runs the risk of making the “independent contractor” an employee and therefore the employer must withhold all of the various taxes.

See IRS article here.

One area of control to consider in light of our industry, as you mention, is whether the “Independent Contractor” can work with “multiple organizations/companies.” And you point out, it is practically impossible for a Melaleuca “marketing executive” to do that.

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