I am compensated a salary for running a business and my duties include signing on new customers. Some customers require services that require me to bring in subcontractors. I mark up and bill the customer for these subcontracted services however, the subcontractor also pays me a personal commission for bringing the work to him as a bird dog or finders fee. Is getting paid a salary form of income from one company and commission form of income from another company legal when the service provided is to the same customer and it's actually based on the same task, job or work performed? If it matters, this is in Florida and if it matters, both principles of both companies that are compensating me are aware and ok with the arrangement.
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2It’s probably not illegal to recommend a solution and be paid to make that recommendation provided you are not the one make the decision to implement that recommendation. It’s probably crossing some ethical lines. Consult a lawyer if you are worried. An example of what isn’t likely legal, is being the CTO of a company, and being paid by a company of a technology solution to implement that solution at the company you work for. What I describe, is a broad description, of a real case that was in the news recently– DonaldCommented Sep 4, 2021 at 10:51
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2@JoeStrazzere the question says they're aware and ok with it.– KilisiCommented Sep 4, 2021 at 15:53
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Why are you even asking us? Do you belong to a professional association? Is this kind of arrangement forbidden by your professional association or by law of the land? For instance, are you a medical doctor or a lawyer? If the answer is no, I don't see what the problem is, since both parties seem to be aware of your conflict of interest (and assuming you can prove that). But maybe tell us what profession you're in. That may help us answer your question. If you're a car salesman for instance, that would be fine.– Stephan BranczykCommented Sep 4, 2021 at 18:48
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2I challenge/clarify something in your question: "when the service provided is to the same customer and it's actually based on the same task, job or work performed" ... it's not the same task, though. It's there because of the same original project, but one pays you for the concrete job done and subcontractor pays for another reason, right?– JoonasD6Commented Sep 4, 2021 at 19:05
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The question doesn't say how many parties are involved and what written (yes, written) agreements they have with one another. Are you an employee of the business you run or the sole proprietor? Can you obligate your company by signing a contract yourself? During the performance stage will the "subcontractor" work for you or for your customer: i.e. whose signatures will be on the contract? You need a lawyer.– stretchCommented Sep 7, 2021 at 0:53
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3 Answers
This should be fine.
The danger is if it's construed as a Kickback. But these are done secretly whereas yours is all transparent and agreed to.
I don't know your full situation, but, general rule of thumb though is not to mention subcontractors at all. There is always a danger of them being head hunted or other issues.
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3The way I understand it is its not colluding if it's agreed to, approved by the persons providing the services and a mutual understanding providing it is not monopolizing to the consumer.– lrpropCommented Sep 4, 2021 at 9:33
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3Kickbacks are about defrauding your own company. There is no need for an outside company to know anything about your dealings with a different company– KilisiCommented Sep 4, 2021 at 9:39
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The fraud in kickbacks is at the expense of fair competition, not only the risk of gouging of the company... Commented Sep 4, 2021 at 11:56
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@LukeSawczak sure that is part of it in theory, but immaterial to the question, and in pragmatic terms no one does anything unless the company is getting shafted and finds out.– KilisiCommented Sep 4, 2021 at 12:35
This is a conflict of interest issue. You now have an incentive to use that sub-contractor even if they are not the best company for the job. Even if you consciously try to be objective and use other companies if they are better, there will probably be some degree of confirmation bias in favor of the sub-contractor. Or you just won’t look very hard for a better sub because you’re sub-consciously afraid that you’ll find one.
I’m not saying that these things are likely to happen because you’re a bad person, rather because you’re human, and we’re very good at rationalizing the conclusions we want to arrive at.
That being said, it’s only a problem for your company. If they are aware of it and don’t care, then legally you are good. Ethically may be a different matter, though I do give you major props for telling your boss about the kickback.
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No kickbacks happened here, and it’s unlikely to be a public funded project where the OP is forced to legally find the cheapest, there is no indication that the OP must find the subjectively best option, so there are no conflicts of issue either. Commented Sep 4, 2021 at 15:08
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1In the public sector the Q represents a clear case of corruption.– fraxinusCommented Sep 4, 2021 at 22:18
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"even if they are not the best company for the job" - and, why should the OP seek "the best company for the job", and by what criteria? Is it the most expensive one? Is it the one that offers the best tradeoff between quality and cost? Could criteria differ by customer? Could it be that the customers trust the OP to make a judgement call based on their industry expertise and their understanding of the customer's problem? Why not a company that the OP trusts and knows can do a good job for the specific customer. You can't easily map public sector needs & constraints onto the private sector. Commented Sep 4, 2021 at 23:13
IANAL and can't cite any specific regulations but the potential issue I see is that if you're billing the customer as a representative of the company and paying the subcontractor out of that amount, then the subcontractor would technically be employed by the company rather than by the customer. It would then follow that any "finder's fee" would also belong to the company and not you as an individual.
In your case, since the owners of the company are aware of the arrangement and don't have a problem with you keeping the money, it shouldn't raise any direct legal issues; however, I believe that for accounting purposes, the finder's fees should be considered a bonus paid to you by the company rather than as a separate source of income which may have different tax implications. (I'm not an accountant either).
answered Sep 4, 2021 at 17:22
