Have you ever had a client go behind your back and ask your employees and/or subcontractors to work for them outside your company?
Owners believe this request is okay because their neighbor did it and saved some money. I don’t think many of them consider it dishonest. They just want to save a few bucks. What they don’t consider are all the other things that can happen, such as work not being done right, someone getting hurt, time schedules not met, or problems that may show up after the work is done.
And it’s dishonest. Your company invests in getting leads and converting them into sales. Your employees and subs are cutting you out of the loop, profiting from your investment and the goodwill you’ve created with this client.
Can you prevent it? No, but you can reduce the chance of it happening.
First, this needs to be discussed with potential clients prior to job start. In your contract add a paragraph that specifically prohibits your clients from talking to anyone that you’ve brought to their job site about doing any work for them that is not in your contract, or a change work order. This is one of those items you specifically call to the owner’s attention when reviewing the contract prior to signing.
We have this language in our Fast Track Proposal Writer software:
Owner(s) understand and agree not to effect any side arrangement or separate Contracts with any of <CONTRACTOR>’s employees, vendors, or subcontractors performing work on this job, for additional work on this or any other job for a period of at least one year following the completion of this job, except as provided by agreement with <CONTRACTOR> pursuant to the terms of this Contract.
Any such agreement must be approved by <CONTRACTOR> prior to such agreement or Contract in writing. If a separate agreement is made between the Owner(s) and others, the Owner(s) may not hold <CONTRACTOR> responsible for the quality of workmanship and materials utilized by these persons, or their time schedule or job cleanliness.
Now that you have the ground rules in place with your client, you also need ground rules for your employees and your subs. Let’s start first with your employees.
In your employee manual, it should state that any request by a client for the employee to work on any job other than those contracted for by the company must be reported to you immediately. Your employee manual should state that if the employee does not report such a request immediately, it is a termination offense. An example from our Employee Manual:
Moonlighting for any customer, past or present, is strictly prohibited and grounds for immediate termination.
Of course, your employees should read your employee manual each year, and they should sign a document, in front of both you and a neutral witness that they have read and understand that employee manual.
Your subcontractor agreement should also state loud and clear that the sub is not to talk to the owner about any other work for any reason. Again, they should report all such requests directly to you immediately. It should be a termination offense if they are caught doing such work. If they violate this agreement, you will not use them again and you will sue them for loss of overhead and profit for all work done for the owner. Again, this should be in the subcontract agreement that you sign with your subs covering their work for you in general. Part of the language from our Subcontractor Manual:
Under no circumstances are Subcontractors permitted to enter into any side arrangement, agreement or contract with the owner during the progress of this project.
One final thought. Even though you tell your client that this isn’t allowed, some will still try to engage your employees or your subs to do a “little job” for them. If you hear about it, you need to confront them right away. Not by being mean or nasty. They just need a gentle reminder that this is in the contract, and you meant what you said. This will protect you and your company from a litany of problems. It also protects your pocketbook and even more important, it shows your client that you’re serious and you follow the contract.
Nothing in this article is intended to be, or may be construed as, legal advice. I am not an attorney. You must consult an attorney before using any suggested language or any other information contained in this article to determine if it conforms to your state laws or your particular situation.
Comments by Michael
It isn’t easy being a business owner. Sometimes you keep going when it seems like anyone with a brain would quit.
That’s why I loved this video, and you don’t need to be a football fan to appreciate it. Two high schools in our area. The team in purple (Columbia River High School) was down one point when their field goal at the end of the game was blocked. The other team celebrated – but the ball wasn’t dead. Columbia River picked it up and scored, winning the game.
After watching the video, the other team agreed to not appeal the touchdown.
My favorite part is the ball holder for River collapsing when the kick is blocked. You can see him hunched over, obviously heartbroken. I know that feeling, the feeling that it’s all over and it won’t ever get any better.
Don’t give up. You never know what’s coming next.