A question for our legal minds out there..
Is it illegal for an employee of a company to subcontract his own LLC to his employer?
As an added caveat, said employee is selling the "work" that in turn is subcontracted to the LLC.
A question for our legal minds out there..
Is it illegal for an employee of a company to subcontract his own LLC to his employer?
As an added caveat, said employee is selling the "work" that in turn is subcontracted to the LLC.
So you are saying an employee has a side company and his employer is buying product or a service from that side company?
i doubt it?s illegal, there are worksheets out there that the government has for determining whether work being performed for a company by an individual falls under being an independent subcontractor vs employee when it comes to taxes and so on.
Sounds like the employee is charged with doing the work and is turning around and contracting to his own LLC to do that work.Quote:
Originally Posted by def90
As long as the employer has full knowledge of it and has approved it, I guess there would be no problem.
I am trying to envision a circumstance as an example.
Yeah, that was one thought I had, as long as employer knows where the product is coming from.Quote:
Originally Posted by BladesNBarrels
Employer does not know.
Conflict of interests are usually only an issue if they are hidden. As above, of they know about it, its condoned.
Not unless there is a self-interest or conflict of interest clause in his terms of employment.
It may be unethical as hell, and is a form of “double dipping” the company, but as long as it is all above board and in full knowledge of his superiors, and is approved.
You posted the statement “Employer does not know” after I had written this,
This action would be most likely a violation of his employment and grounds for immediate dismissal without any benefits, termination of the contract with the employee’s LLC and possible prosecution for damages.
Illegal? Probably not.
Immoral or unethical? Maybe.
Might also depend on whether the industry is regulated (FERC, PHMSA, DOT, etc.) which may factor in as well.
Disclaimer- I am definitely not a lawyer and have little to no legal experience so take my comments for what they?re worth.
Thanks gentlemen!
Nothing illegal but probably goes against company policy.
I knew someone that did this exact thing. When he got ?caught?, the company did not have anything in writhing saying that he couldn?t use his own company to support his job and he knew this. HR tried to fire him by saying he was using his company first, without following protocol for pricing. They had a policy that three quotes had to be sent prior to purchasing/renting. Since he was the one bidding the job for the company, and having access to everyone else?s pricing; he always made sure his company was the cheapest prior to sending it in. It was a really screwy situation and the guy was try to sneak one in any chance he could. IIRC, he even had the LLC setup in someone else?s name. He eventually left on his own terms, but they didn?t make it easy for him once this was out.
Needs more info. What kind of field? Commercial, government? What kind of contractual obligations apply with the employment? It sounds like a conflict of interest, but outside of government and select industry, that's going to come down to the agreements he made between the employer.
If a private employer doesn't prohibit an employee from awarding bids to the employee's company, and they aren't doing e.g. federal (or municipal or state contracting) it's very likely only an ethics problem. A private employer is ordinarily not required to bid at all prior to awarding work, and by far and large, can hire any company they want, whether or not an employee also owns it.
And outside of government, even if the employer prohibits the behavior, it's most likely a civil issue at best. The most you'd see is likely termination.
In some circumstances, there could be more implications with publicly traded companies.
Even then though, the only ramification the employee would suffer would be termination 95/100 times.
Civil cases cost money, and they don't recover anything from most employees, at all. (exemptions and bankruptcy protection). So a civil case is little more than a great way for a company to flush another $250k away, unless the employee is very rich and has no asset protections in place, which is uncommon.
Lastly, a lot of states are "at will", including Colorado. We all can be fired tomorrow if the boss wants to hire a smokin' hot 20 year old woman to replace us. (bad example)
They don't need anything to be illegal to terminate an employee. They don't need anything at all. If the employee is the CEO's nephew, you'd be the one to be canned.
And this is very much the same thing that is occurring at my employer.Quote:
Originally Posted by SouthPaw
Depends on the situation probably. My coworker owns and runs his own metal fan company on the side and we(hvac contractor) hire him all the time to build things for us, structural brackets, custom pipe/pump mounts, various stands. He gives us a quote, we give him a po, everybody wins. Though he does the second job on his own time
In a sense, he was doing what was best for the company by keeping the prices low, but on the other hand, he pissed off a lot of vendors that had supported the business for years by under cutting them. They continued to let him do it, but it was really bad for moral. Towards the end, he started to get out of it, but it was just a sketchy situation no matter how you looked at it.Quote:
Originally Posted by <MADDOG>
Illegal, I cannot speak to. But if it is for a large company, it is probably against company policy to subcontract company work without consent, whether to yourself or someone else. If you had the power to contract, this would lend to the appearance of self dealing and would be a violation of most codes of conduct, if not a violation of a state or federal deceptive trade practices act. I can also see this creating vicarious liability issues I would not be amused by if one of my folks pulled these shenanigans. Out the door they would go, good intentions or not.
Deceptive trade practices under the CCPA have to be brought by a customer or prospective customer in Colorado. I can't speak to other states. Common law unfair competition perhaps if brought by another bidder.
Are you said employee?
I owned a business where we used in house and subs. We preferred to be in house when we could to control the process and expand our coverage, but would use subs if we didnt have the skill, timing, geography etc. This was very much understood amongst our employees. We had a code of conduct that all managers would annually disclose any relationship like this (family relations, business interests, etc ) and although our procurement process ?should? have caught, it sometimes did not.
If the employee made us aware of it when we implemented the code of conduct, we figured it out with them. If it was the other way around and afterwards, the employee was gone.
In my owner?s mind, that employee is stealing from me. They have made themselves a competitor.