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

UPDATED: Oct 1, 2022

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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


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 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. 

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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