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

UPDATED: Sep 30, 2022

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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


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 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.

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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