Is it legal to have a friend willingly steer vendor business from his employer’s company to my small business?

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Is it legal to have a friend willingly steer vendor business from his employer’s company to my small business?

I’m considering a partnership with a friend of mine to supply his employer with a
product they buy regularly. At the company he works at, he decides where this
product is sourced. He would steer that business to me. I would produce and
supply this product which would be of the same level of quality and materials as
what they’re buying now to his employer at a competitive rate, and pay taxes on
the income. He would retain a percentage of the profits I receive in return. Seems
a little shady, but is it illegal?

Asked on December 22, 2016 under Business Law, New York

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

There is nothing illegal about an employee of a company selling goods or services to his employer, either directly or through a company he owns, or steering business to a friend. Your friend cannot do anything intrinsically illegal in doing this--e.g. he can't conceal his relationship wth the supplier from his employer or any terms of the transactions, since such misrepresentations could be fraud--but as long as he is open, transparent, and above board, it is legal. It could still be, of course, against company policy--many things that are legal, such as dating a coworker, are against company policy--and if his company has a policy against this or he has a supervisor who objects, they could refuse to let him do this or even fire him, but that's because companies have broad discretion to set policies, to terminate employees, etc. From the law's point of view, though, as stated, this is legal so long as it is done in a transparent, legal way.


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