Can a company buy from their employee’s own personal business?

I’m double checking this for my cousin. He just got fired; here is some background. The company that he worked at didn’t have any policy or an official purchasing procedure maybe it was official. What he basically did was create a resell website to resell lab supplies to his company. They were just getting the items they needed at a marked up price. Their procedure for their company was just to put anything they needed on an excel spreadsheet and the purchasing manager would just approve and buy it. He didn’t force them to buy the items and he just put in the request on an excel spreadsheet. Basically, they were buying lab items for a few months and in the end, he made a mistake and they figured out he owned the company. Is was what he did okay technically? He didn’t put in the purchase and he had no access to the billing information. He just put in a request and the item was bought.

Asked on October 26, 2017 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

It is legal: there is no law saying that a company cannot buy from its employees.
But there is also no law saying a company can't fire an employee for selling to it without disclosing that it was him doing this. Remember: employment is employment at will. An employer may terminate an employee at any time, for any reasons whatsoever--including believing that is inappropriate for an employee, who has a duty of loyalty, to sell things at a "mark-up" to make additional money (beyond his salary) off his employer rather than letting the company buy at the cost he acquired them at (e.g. he could have let them buy directly from the same sources he did), especially if he hid his ownership of that supplier. 


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