Q: I work as a personal trainer at a small local gym. I also have a membership there and work out on my own time with a small group of people I train with. Recently, the company owner decided to bring in a nutrition product and told all of us that we had to sell it. It was network marketed via a pyramid scheme.
I researched it and didn't like what I saw, nor did I like that the owner was trying to use the other employees and I for his personal benefit. I was told if I didn't support the product I'd lose my job. When I asked what this meant, I learned I couldn't voice my doubts about the product. I also learned I'd have to pay a signup fee to sell the product, and it would only be reimbursed if I sold $3,000 of the product in six weeks.
The next day I was in the gym with friends on my personal time and told them I worried about losing my job if I didn't "support" a product I didn't think was healthy. A gym member overheard me and canceled the product order she'd just placed. Then the gym manager called me and said we'd have to talk about "my future with the company" and whether we were "a good fit." I got the hint and wrote a resignation letter before they could fire me. They accepted it within five minutes.
I then learned they also canceled my gym membership. I've also heard that the managers had a meeting and were told that those who didn't elect to sell this product within six months would be considered "bashing the product" and fired. Is this legal?
A: According to employment attorney Thomas Owens III, multilevel or pyramid marketing programs frequently run afoul of state and federal criminal laws as unlawful Ponzi schemes. As a result, employers need to realize "it may be a spectacularly bad idea to terminate or pressure an employee for refusing to participate in one."
Owens adds that "all Alaskan employers are legally bound by the implied covenant of good faith and fair dealing. The implied covenant requires, among other things, that employees be treated in a manner that a reasonable person would consider fair. Terminating an employee for refusing to engage in conduct that is at least potentially illegal, not job-related, and primarily intended to further the personal interests of an owner or officer of the employer is not consistent with the implied covenant and is likely to result in a successful breach of contract action by the employee. By the same token, terminating an employee for having a personal conversation on his own personal time -- whatever the subject matter of that conversation -- offends fundamental notions of fairness."
While you beat your employer to the punch by resigning, you may have a case that they pressured you -- and their denying you access to your former gym membership supports this.
Attorney Lucinda Luke notes that in an "at-will employment relationship, the employee had the right to quit and the employer had the right to terminate the relationship. The employer had the right to require employees to take on new duties and responsibilities, including becoming a salesperson for new products and meeting certain sales goals. If the product marketing scheme was illegal, however, the employee had the right to report that illegal scheme to an outside agency and could have obtained some protections as a whistleblower."
Further, there's a possible claim "whether the employer can require an employee to pay a signup fee for the product. It appears this benefit was initially more for the employer than for the employee. Would this reduce the employee's wages below minimum wage?
"This employee was also on her own time which gives her some protection. Further, if she was specifically discussing wages and the fear her wages might be reduced by this signup fee 'required to keep her job,' her conduct might be protected by the National Labor Relations Act.
"At the same time if this employee was having a discussion with a potential customer and her conversation had the potential for harming the gym's business and goodwill, the employer had rights as well."
So, was this all legal? Maybe and maybe not.