# Client steals subs from GC.



## JTECo. (Mar 23, 2014)

Hello all,

Looking for legal advise. I have an interesting scenario here. I haven't included names for privacy copyright purposes. For 7 years an independent company contracted my GC business to perform in-home installations of prefabricated closet systems for their major retail client. They signed me up as their exclusive contractor within a 100mile radius. Instructions were to build a crew to handle the increasing volume annually. I was able to recruit up to 10 installers whom I personally trained, mentored, subcontracted and paid directly. The structure was widely accepted during the first 5 years. Here's where it started to become unstable, the independent company got bought out by the major retailer. Prices dropped and volumes doubled. Great for business!! Then the retailer got publicly traded. Investors influences kicked in after 2 years. They didn't renew my contract and asked me to step down within 2 weeks. They went straight to my subcontractors and offered them individual contracts at a significantly lower price to carry on installing. Based on our loyalties to each other, My subcontractors asked if I had any other projects for them and that they would rather go with me. I said "Not within the span of 2 weeks as I'd dedicated all my time trying to grow the business around the retailer.". So most signed on and scored contracts while I got dropped. I guess my next question is as a licensed general contractor, how ethical was this take-over and what legal actions can I take to get some settlement on at least consultation fees. Any word of advice is greatly appreciated!


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## mikeswoods (Oct 11, 2008)

You are out of business----


I'm surprised you did not see that one coming----

I doubt if you have legal recourse---have you spoken to your attorney about this?

When you only have one customer and that customer goes away you are done.


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## JTECo. (Mar 23, 2014)

Not spoken to any attorney as of yet. Wanted to gather as much as I can hence the post.


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## brunothedog (Sep 8, 2013)

sorry 'bout your situation and you will be entering a dark tunnel,

-_All the eggs in one basket_- comes to mind


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## WBailey1041 (Jan 31, 2014)

Hopefully in the last seven years you saved a big wad of cash. It may not be ethical but it sure doesn't sound illegal, actually sounds like the usual and frankly EXPECTED outcome. What are the chances you had your subs sign non compete agreements? I'm betting slim to none and slim just walked out the door. Maybe one of your former subs will hire you?


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## Kent Whitten (Mar 24, 2006)

A little mean, but it is business. You are SOOL. An attorney is only going to cost you money. Time to move on and learn a hard lesson. Sorry.


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## tedanderson (May 19, 2010)

The interesting thing about big corporations is that they have lawyers who are always running the scenarios to determine what they can "legally" get away with. Trust me when I tell you, they've already figured out every move that you can possibly make and they have every single counter measure ready in case you decide to take action against them. 

But the one thing that you have that they don't have is that relationship. The first time that one of your subs doesn't show up for a job and/or doesn't answer his phone, the next person that they are going to call is you. That's where you'll be able to use your leverage if you even decide to do business with them again.

As unlikely of a scenario this seems be, they always call you back. There is a reason why you are the contractor and they are the subs. As a GC you have the ability to replace and mobilize more subs if a sub calls out sick or has some other issue that prevents them from getting on site. People who want to cut out the middle-man don't quite understand this until they get left high and dry. 

To this day, I have a nagging former client who decided that she wanted to deal with my sub "Joe the plumber" directly. But every time Joe doesn't show up as promised or he does damage, she expects me to do something.


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## 480sparky (Feb 1, 2009)

"Your" subs? When did slavery become legal again? :whistling


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## Cole82 (Nov 22, 2008)

IMO you messed up. You have no legal action they found some one cheaper to do the job and like 480 you don't own your subs they can work for who ever.

Cole


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## loneframer (Feb 13, 2009)

If I were in "your" subs position and you told me "Hey, s#!t hit the fan and I have no work for you, nor can I promise you anything in the near future.", I would mind "my" business and do what is necessary to feed my family and myself, as I have done several times in the past.

"Your" subs are not employees, they are business owners and business is business. If you think their actions are unethical, you have the right to disassociate yourself from them in the future. This may or may not be in your best interest.

I've been down that road with GCs who believe I owe them my life because they fed me work for X amount of years. Well, they fed me work because I offered them the best value for their dollar, otherwise, I wouldn't have been doing their work.


Just a quick thought. What would you have done if the company said to you "Listen, we're willing to keep you on, but we need you to release all your sub-contractors and use "our" subs."? Would you have been loyal to them?


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## tedanderson (May 19, 2010)

loneframer said:


> I've been down that road with GCs who believe I owe them my life because they fed me work for X amount of years. Well, they fed me work because I offered them the best value for their dollar, otherwise, I wouldn't have been doing their work.


Very good point!
:thumbsup:


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## Anti-wingnut (Mar 12, 2009)

You had one customer and no employees, only sub-contractors? It was inevitable that at some point, somebody in your customers organization was going to question your role, and what you did to earn your keep.

There's no question of ethics anywhere here, either with your subs or your customer. You got lazy and greedy until the market left you high and dry.


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## Patsfanindallas (Aug 27, 2013)

Jesus, you guys are gonna make him jump off a bridge. I'm sure the point is taken that he doesn't own the subs, and working for 1 client wasn't a great move. This is the part of the movie where you let it go, adapt your plan, and build back up. To quote rocky " it's not how hard you can hit, it's how hard you can get hit and keep moving forward. That's how winning is done.-compressed version.


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## Metro M & L (Jun 3, 2009)

I think the only way you could have played it would have been to lie to your subs and start your own closet company. Compete with the old chain until you make it or they buy out tk get the market and the subs. Better still was to have built your company prior to this issue. Hindsight and all that. What do you want yojr new company to be?


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## The Coastal Craftsman (Jun 29, 2009)

Sounds like they did you a favor. When you hear the words "Prices dropped and volumes doubled" then its not long before your making nothing for working your ass off.


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## JTECo. (Mar 23, 2014)

Lesson learned I guess... The subs did sign non-compete forms and non-disclosures but I guess at this point it's useless because it would be totally against their favor. Plus I'm sure everyone here is on point with me only having 1 client. Onto the next venture it is....


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## Anti-wingnut (Mar 12, 2009)

A non compete was probably never legal in this case in the first place:http://californianoncompete.com

Secondly, a contract is not a suicide pact. You have no work, so there is no legal justification for you to force your contractors to not work either.


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## JTECo. (Mar 23, 2014)

Although the major retailer also had me sign a non-compete/non-disclosure too


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## 480sparky (Feb 1, 2009)

Patsfanindallas said:


> ....I'm sure the point is taken that he doesn't own the subs......


You'd be surprised how many think they DO. And not just own the subs, but the customer and all future work as well.


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## Patsfanindallas (Aug 27, 2013)

480sparky said:


> You'd be surprised how many think they DO. And not just own the subs, but the customer and all future work as well.


yeah that's a whole other thread there. While I'm well aware that subs are free to do whatever they want, I will say this. If my customer solicits them and they don't tell them they have to speak to me, they won't be my sub anymore. If they do work for one of my customers down the road without contacting me first, they will no longer be my sub. Just as they are free to do whatever they want, I'm free to protect my customer base.


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## Anti-wingnut (Mar 12, 2009)

http://www.mondaq.com/unitedstates/...ontractor+Cannot+Sign+A+Noncompete+Never+Ever


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## JTECo. (Mar 23, 2014)

Anti-wingnut said:


> http://www.mondaq.com/unitedstates/...ontractor+Cannot+Sign+A+Noncompete+Never+Ever


Interesting


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## brunothedog (Sep 8, 2013)

you should ask if one of your ex subs are hiring, I read they have alot of work 

I never heard of a sub contractor non compete clause, because it doesnt make sense.


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## builditguy (Nov 10, 2013)

After 3 pages there really isn't anything to add. Same old eggs in one basket deal. Your subs will be broke because the company will use them up. You need to move on. I'm sure you realized this, 3 pages ago.
Good Luck.


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## Jaws (Dec 20, 2010)

I would mow yards before id work for that corporation again. Although it is their prerogative to get a cheaper price if possible. 

I wouldnt hold it against the subs you worked with though, everyone has to eat.


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## JTECo. (Mar 23, 2014)

brunothedog said:


> you should ask if one of your ex subs are hiring, I read they have alot of work
> 
> I never heard of a sub contractor non compete clause, because it doesnt make sense.


Hmmm....So basically it sums up that non-compete clauses aren't legal if you're hired as an independent contractor since it's purpose is only used primarily for employee status? Having my subs sign the non-compete - corporation having me sign non-compete....all illegal?


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## Inner10 (Mar 12, 2009)

jamestrd said:


> another thread running wild..
> 
> he initially said he hired and trained each sub.
> 
> ...


How did the corporation dupe him? They just fired him because they felt as though he added no value added service and they wanted to manage subs in house instead of paying him. What's the problem?

How many subs have tried to sue you when you stopped feeding them work?



JTECo. said:


> Hard not to be vengeful but it definitely is the corporation I am looking to legally challenge for undermining my livelihood. I was basically their consultant in this market as they weren't base in my state.


You got fired, deal with it.


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## 480sparky (Feb 1, 2009)

jamestrd said:


> another thread running wild..
> 
> he initially said he hired and trained each sub.
> 
> ...


So, it's another case of hiring employees, training them, then _calling _them subcontractors so you don't have to pay bennies & taxes.


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## JTECo. (Mar 23, 2014)

Inner10 said:


> How did the corporation dupe him? They just fired him because they felt as though he added no value added service and they wanted to manage subs in house instead of paying him. What's the problem?
> 
> How many subs have tried to sue you when you stopped feeding them work?
> None, but I'd never take their resources.
> ...


They could've easily hired other contractors and created competition and paid them less. Better yet hire employees to do their work since it was integral...they needed my license for a reason.


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## Inner10 (Mar 12, 2009)

480sparky said:


> So, it's another case of hiring employees, training them, then _calling _them subcontractors so you don't have to pay bennies & taxes.


Then your one and only client realizes you are of no value to them, fires your company and deals direct with your independent subcontractors and we all live happily ever after.


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## Inner10 (Mar 12, 2009)

JTECo. said:


> They could've easily hired other contractors and created competition and paid them less. Better yet hire employees to do their work since it was integral...they needed my license for a reason.


If they _need_ your licence why aren't you still involved?


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## JTECo. (Mar 23, 2014)

Inner10 said:


> How did the corporation dupe him? They just fired him because they felt as though he added no value added service and they wanted to manage subs in house instead of paying him. What's the problem?
> 
> How many subs have tried to sue you when you stopped feeding them work?
> 
> ...


I'd presume that if I never fed subs any work, doesn't entitle me to jump on their own resources. Only reason for im resentful was that they requested me to my find workers with my connections and supervise them to handle the volume and they swooped them from me once they got comfortable with them.


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## CarpenterSFO (Dec 12, 2012)

JTECo. said:


> Hmmm....So basically it sums up that non-compete clauses aren't legal if you're hired as an independent contractor since it's purpose is only used primarily for employee status? Having my subs sign the non-compete - corporation having me sign non-compete....all illegal?


The enforceability of non-competes varies greatly from state to state. If you spend a little time on-line you can get a pretty good picture of what's up with non-competes in California (where the law is relatively hostile to non-competes). Or you can talk to an attorney.

Let go of that word "illegal" - "unenforceable" is more likely to be the case. You and I can sign a construction contract with a clause saying that you have to eat ham sandwiches for the rest of your life. It's not illegal, just not enforceable. Many non-competes are included in contracts by parties who know perfectly well that they're not enforceable, and are signed by the other side, knowing that they're not enforceable and planning to do whatever they want once the contract term is up. It's just part of the negotiation of the balance of power in a contractual relationship.

Sometimes someone chasing down the notion of the "illegal" clause grabs on to the idea that the rest of the contract is therefore not legal or enforceable. But most professionally written contracts have a severability clause, so that one unenforceable provision (e.g. the non-compete) has no effect on the validity of the rest of the contract.

Whether or not you have some case for damages or settlement over how your relationship was terminated (did they simply decline to renew at some renewal date?), it seems likely that it's time for you to move on. If you need to talk to an attorney, find a good one who already knows about this all, and pay their high rate for some good advice, so that you can move on.


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## Inner10 (Mar 12, 2009)

JTECo. said:


> I'd presume that if I never fed subs any work, doesn't entitle me to jump on their own resources. Only reason for im resentful was that they requested me to my find workers with my connections and supervise them to handle the volume and they swooped them from me once they got comfortable with them.


You have every right to feel resentful, I just don't see how you feel as though they owe you money that you will sue for? Just process that logically in your mind.

You said yourself the business was bought out and the corporation went public. At that point someone looked at the books and decided it would be a good idea to "trim the fat" by cutting out the middle man.

If you are as good as you think you are then maybe they will come crawling back.


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## JTECo. (Mar 23, 2014)

CarpenterSFO said:


> The enforceability of non-competes varies greatly from state to state. If you spend a little time on-line you can get a pretty good picture of what's up with non-competes in California (where the law is relatively hostile to non-competes). Or you can talk to an attorney.
> 
> Let go of that word "illegal" - "unenforceable" is more likely to be the case. You and I can sign a construction contract with a clause saying that you have to eat ham sandwiches for the rest of your life. It's not illegal, just not enforceable. Many non-competes are included in contracts by parties who know perfectly well that they're not enforceable, and are signed by the other side, knowing that they're not enforceable and planning to do whatever they want once the contract term is up. It's just part of the negotiation of the balance of power in a contractual relationship.
> 
> ...



On your "Ham sandwich " non-compete clause, if I terminated your contract with me because I caught you at Subway at lunchtime devouring a delicious smoked footlong, are you able to sue me for damages and settlement because of the clause?


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## JTECo. (Mar 23, 2014)

Inner10 said:


> You have every right to feel resentful, I just don't see how you feel as though they owe you money that you will sue for? Just process that logically in your mind.
> 
> You said yourself the business was bought out and the corporation went public. At that point someone looked at the books and decided it would be a good idea to "trim the fat" by cutting out the middle man.
> 
> If you are as good as you think you are then maybe they will come crawling back.


I guess I'm looking at the fact that I found the subs through my network, hired them under my company name, moulded them to meet their requirements, personally trained them, paid them fair wages , gave incentives to keep em comfortable, the corporation even approved of my management and operations then one day dropped me.


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## CarpenterSFO (Dec 12, 2012)

JTECo. said:


> On your "Ham sandwich " non-compete clause, if I terminated your contract with me because I caught you at Subway at lunchtime devouring a delicious smoked footlong, are you able to sue me for damages and settlement because of the clause?


You can sue anyone for anything you want. How far your case goes, and whether you get punished for bringing a frivolous lawsuit, is another question.

I mentioned the ham sandwich purely as an example of something unenforceable - chasing down the details might be interesting to a law professor, but not to me. Sorry.


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## 480sparky (Feb 1, 2009)

JTECo. said:


> On your "Ham sandwich " non-compete clause, if I terminated your contract with me because I caught you at Subway at lunchtime devouring a delicious smoked footlong, are you able to sue me for damages and settlement because of the clause?


The clause never said anything about eating ONLY ham sandwiches. It only said I had to eat them for the rest of my life. I'll eat one tomorrow. Or next week. I'll likely eat one in April, then again in June.........


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## Jaws (Dec 20, 2010)

My personal advice is to forget suing them and start your own gig doing closets. Id take every one of their clients in my area probably, screw anything you signed as they dont have any more moral or legal recourse than you do. I dont handle my problems with legal proceedings of any kind. If I get screwed I screw you back. I get hit I hit you back even harder, and whoever is standing next to you or looks like you. 

Id definitely take the subs back if they wanted to come back, with open arms. When my clients run out of money I leave. Same for subs or for that matter employees. I am loyal to my subs all day, but if they cant make time for me or start putting me off i drop them like hot rocks. Nothing personal, just business. If my long time lead hand did the same I wouldn't hold a grudge. 

Id definitely get that company back any way I could though.


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## Inner10 (Mar 12, 2009)

JTECo. said:


> I guess I'm looking at the fact that I found the subs through my network, hired them under my company name, moulded them to meet their requirements, personally trained them, paid them fair wages , gave incentives to keep em comfortable, the corporation even approved of my management and operations then one day dropped me.


Yes it really sucks but the company has every right to can your ass. 

Look, ya got the shaft, so wipe away the tears and find some more work.

The last thing we need in this world is more assholes suing for no damn reason.


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## Inner10 (Mar 12, 2009)

480sparky said:


> In all my years as a sub, I've never had anyone tell me what they will pay me.


Do some installs for large companies that use a set rate take it or leave it price.


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## 480sparky (Feb 1, 2009)

Inner10 said:


> Do some installs for large companies that use a set rate take it or leave it price.


No thanks. They're not my target market, and I'm not that hungry.


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## thesidingpro (Jun 7, 2007)

I typically let the sub give me his piece rate. I find these types of small company's are typically leaving lots of money on the table. They give me their rate and i'll pay it.

Most of my jobs are not heavily bid. Sure some are tight but typically there is good money in the labor side of things. I bid all my work and spent 10 years on the walk board so i can see potential time consuming problems and account for it on the front side.

For the hours part. I don't really care as long as it done in a typical work day and the coming and going is minimal. If there is a problem in this part I just don't use them anymore.


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## Cole82 (Nov 22, 2008)

480 is booked this summer he wiring stuff for me tree fiddy flat rate


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## loneframer (Feb 13, 2009)

Every builder I ever worked for tried to dictate price, unless I under bid the project. Even then, some tried to haggle.

Usually goes like this..."Your number is kinda high. I don't have that in the budget. If you could wiggle down to $***x, we can do business."

Depth of schedule generally dictates flexibility in the contract price....or Supply and Demand. It's been that way since the beginning of Capitalism.


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