Moonlighting: Going Behind a Contractor's Back
Having a second, part-time job is one thing, but for a technician or installer to perform this "other job" using company equipment or on company time - or to downright steal customers away from a contractor - is another.
And with an estimated 600,000 technicians working in the HVAC field, even if just half those technicians do just $100 worth of moonlighting each year - it would cost contractors $30 million.
"Several years ago we had a tech replacing good parts and reselling the removed parts to customers he did after-hours work for," said Ben Stark of Stark Air (Hurst, Texas).
"We have also had a guy delivering pizza out of our truck. But, the ones that cause my blood pressure to rise is the tech that offers the repair to our customers later on that day after they get off work.
"It's not unheard of for us to do a sting on our own employees every now and then if we suspect a problem."
Many contractors will allow techs and installers to install units for family members or close friends, provided they inform the owner accordingly. In most cases, the employee must put something in writing and get approval from the supervisor or owner.
"That's OK with us," said Kevin Comerford, owner of Service Champions (San Ramon, Calif.).
Just don't try to go outside that box, though. "I have in the past had reason to believe that I had an employee giving estimates from our company, and if the client said it was too much money, he would tell the client, â€˜Well, you know, I can do this work for you myself and save you a lot of money.'
"We had a hunch that this was going on and we got some information from a not-so-reliable source. What I did is I began calling back on the estimates this person was running and asked the client a few questions. I never got any confirmation that any of this was going on, so I stopped with the calls personally and I have someone in my office continue to make the calls for me behind every sales lead and service call we run."
In other words, Comerford believes it is critical that contractors call behind every service call and every sales lead.
"We have found out so much information by doing this," said Comerford. "Yes, these are called â€˜happy calls,' but I also look at them as information calls as well."
SLY DEVILSWhen it comes to moonlighting, there are plenty of horror stories out there. For instance, at the beginning of last year's cooling season, Jerry Kelly Heating and Air Conditioning received a phone call from a homeowner who had no cooling and stated that the St. Charles, Mo.-based contractor had just installed his unit at the end of the previous summer. General manager Steve Miles could not find a record of the transaction.
"We could find no record of the install and told the customer, â€˜We don't have any record of your home, but naturally, if we installed the air conditioner, we will take care of it,'" he said.
When the contractor arrived at the house, Miles found a used, hail-damaged unit installed that he remembered his company had removed from a commercial account the previous year.
"We were very polite to the homeowner and stated that we had no record of the installation, but if she could produce a receipt or canceled check to prove we installed it, we would be happy to fix it."
In this case, she produced a canceled check for $600 that was made out to one of Jerry Kelly's employees. "We told her that since it is a used unit she purchased as a â€˜side job,' there was no warranty, and it will be $450 to repair it. She paid, and we fired the employee the next morning," said Miles.
When asked about this issue, contractor Skip Snyder reflected back on his experience as both an employee (son of the boss) and then as the owner.
"I've got conflicting feelings," admitted the president of Snyder Co. (Upper Darby, Pa.). "Before I became a mechanic, I was barely making enough money to feed my family. Money was tight. I was a hard worker and the temptation was there. Fortunately, I was able to find work moving furniture on weekends to provide cash. I can understand the motivation from one perspective on the need to moonlight."
Now, as a business owner, Snyder admits that moonlighting is, as he put it, "one of my greatest fears."
"Our technicians are constantly in direct communication with our customers providing a unique opportunity for this type of behavior," said Snyder. "Our company had this problem years ago with two apprentices."
Upon discovering the moonlighting episode via other employees, Snyder had to take the individuals aside and confront them with the situation.
"They admitted to it and promised not to continue the practice. Knowing that it may be a hollow promise, I decided to take this issue a step further. I contacted my attorney, and my insurance company, and found a recent article about a family that died from carbon monoxide poisoning. I brought the company in for a meeting on moonlighting and discussed their potential liability if their moonlighting work failed causing damage, injury, or death.
"I explained the lack of insurance coverage, potential jail terms, and economic losses. Also factored into this discussion was living with the idea that what they did harmed or possibly killed an individual. After all, most moonlighting jobs I've seen are done half way, leaving room for failure and exposing the occupants to potentially lethal consequences.
"Was it a scare tactic?" asked Snyder, before producing his own answer. "You bet, but was it effective, I believe so. If they were caught again, they would be terminated. In our case, to the best of my knowledge, they didn't continue to moonlight."
TAKING AWAY PROFITSOver the past two years, Mike Faszold, of Faszold Service Co. (St. Charles, Mo.), has had to terminate three employees for moonlighting.
"The first was a salesman that was skimming jobs," he said. "In August 1994, we were slowing down from a summer of installs. Our installers were only working about 30 hours a week. We noticed our salesman didn't seem to be selling as many leads. Then we heard from a reliable source that our salesman was moonlighting after work.
"By his moonlighting, he was hurting our loyal employees by taking jobs and doing them himself, rather than for the company where our installers could have had a 40-hour work week. We later found out the moonlighting job he was doing was a $10,000 commercial project. This salesman was terminated instantly upon finding out about his activities."
Another surprise occurred while running an emergency service on a Saturday during a cold spell in January. Faszold pulled up to a home his company was scheduled to service and found a hand-written note on the garage door from one of his employees, stating that he had missed the homeowner and that the homeowner call him.
"The employee was one of our installers who was off work that day and the phone number he left was his cell phone," said Faszold. "This employee was moonlighting by running service calls on weekends that he was off work. We had no idea how this customer contacted this employee outside of the company."
In the end, Faszold performed the service call because the customer was not home.
"This employee is no longer with our company," he assured.
Yet another time his company's installers were working on a commercial project when the building owner confronted the install manager. The building owner stated that one of Faszold's salesmen, when giving the bid, said he wanted to give a bid for Faszold Service, as well as another company's bid. The building owner told Faszold that he was familiar with his company, so he declined the other bid. Needless to say, Faszold terminated the salesperson.
But, wait. There's even more to this story.
"After this salesman's termination, a customer called the next day to confirm a scheduled furnace install," said Faszold. "After checking, we found that our terminated salesman had given them a bid the week before. We had no knowledge of any install scheduled, so we called the customer to explain what happened. This customer agreed to us installing the furnace. This terminated salesman got a surprise when he showed up to install the furnace he thought he would do on the side, and found we had already beat him to the job."
In Faszold's eyes, moonlighting takes away profits because of lost work and vanishing inventory. At the same time, it hurts other employees "by taking away hours they should get," he said.
"The customers also lose because most times permits are never pulled. The work done is normally substandard, and if there is a warranty issue who will take care of it?" asked Faszold.
TAKE STEPS TO PREVENT ITMoonlighting has never been a problem for Richard Dean, the new president of the Air Conditioning Contractors of America (ACCA), "because we know it happens and have taken steps to prevent it in our company."
"We address it at pre-hire and in our employee manual," said one of the co-owners of Environmental Systems Associates (Columbia, Md.). "We do allow employees to do things for close relatives, but with our knowledge. We accept the warranty problems that may arise from this, if they purchase the equipment through us. If we find out they are using our materials, our trucks, or our name on side work, it is grounds for termination of employment. We have not had to fire anyone yet!"
To help matters, all of the company's trucks have @Road global positioning systems in them "and we check regularly for unauthorized use."
"I would like to think that if we keep our employees busy year-round and pay them fairly, that will eliminate some, but not all, temptation," said Dean. "We have had a couple of employees leave us and start there own businesses and I would be stupid if I thought that it had not happened. But, if it is not with my material, my equipment, and my time, it is impossible to eliminate completely."
In Dean's estimation, distributors should share the responsibility to try and control the problem, but realizes "it is very difficult for them." As he put it, "Today's moonlighter may be tomorrow's customer."
"I think it would go a long way for each contractor to put their suppliers on notice that if they sell for cash to any of our employees, it is probably for unlicensed, unpermitted work," said Dean. "I believe the biggest risk in this is not to my company but to the manufacturers, distributors, and consumers."
Regarding the issue, Donald Frendberg, executive vice president and COO of Heating, Airconditioning and Refrigeration Distributors International (HARDI), surprisingly said, "Wholesalers typically have very little contact in this area," terming it "a big problem for contractors and dealers." However, Randy Tice, chairman of APR Supply (Lebanon, Pa.), said wholesalers can help contractors.
"You begin to know who comes into your place," said Tice. "We always ask if a person has met this with approval of his boss. We often call the contractor to make sure."
In a recent letter to The NEWS, Alan C. Longley, president of Stamford Winair Co. (Stamford, Conn.), was even more direct regarding the subject.
"We handle moonlighters very carefully," he wrote. "First of all, if a helper or apprentice comes into our counter looking for material, we call the contractor whom he works for. We do not do this to embarrass or harass the moonlighter. We do this to protect our business partner. In most cases, in our experience, we get the OK from the contractor. If the customer tells us not to sell to their employees, we do not sell to their employees. Many times we have walked away from nice orders because we were told not to sell to them."
Longley admitted that if a moonlighter does legitimately go into business, "we have to look at him as a potential customer."
"What are we to do?" he asked. "If we get the approval of our current customer, then it is our job to treat that moonlighter as a business partner as well."
"It is very difficult to be everything to everybody," concluded Longley in his letter, "but it is a fine line that we have to walk everyday. I do believe that we wholesalers have to be part of the solution, but we also need the help of our customers."
Dean relayed a recent incident, which illustrates the problem.
"This morning, for instance, one of my technicians went out to investigate a water leak for someone who turned their a/c on for the first time this summer. He discovered that the customer had a new high-efficiency furnace installed last October and the condensate was running uphill. This was an easy problem to fix.
"The more serious problem was that the combustion air for the furnace had been piped into a tee on the B-vent for the gas-fired water heater. In this case, the furnace had been installed by an unlicensed contractor that the home-owner could no longer find. But you can be certain that with a little effort she could find what distributor sold this furnace and a major manufacturer's name is right there on the front of the furnace. Code enforcement is so spotty that local governments are not much use in controlling this and the fines are pretty insignificant."
At Isaac Heating and Air Conditioning (Rochester, N.Y.), it is simple. When it comes to moonlighting, it has a zero tolerance policy.
"The way I look at it, it is stealing from the organization that provides you with a good living, and not by picking the low-hanging fruit," said president Ray Isaac. "It takes considerable effort and resources, including money, to keep an employee gainfully employed during busy times and slow times. To take on side work, at undercut prices, is wrong and unfair.
"If an employee wants to do work on his own, then congratulations to him. He should go out on his own, start his own business, pay taxes, buy insurance, buy equipment, tools, supplies, trucks, copiers, fax machines, etc., etc., etc. - and make a go of it. If this is not desirable, then don't compete with the company that supports you."
At Isaac Heating and Air Conditioning, if an employee has a relative that he/she wants to do a job for, the company allows the employee to be the salesman on the job, either collect or decide not to collect a commission, and run the job through the company.
"This way," explained Isaac, "they can control the pricing of the job, to an extent, get the warranty coverage, and not have to worry about 2 a.m. phone calls because the furnace they just installed for grandma isn't working.
"In the past several years, we have had to fire few individuals for this problem. I could go on for a while about this, but our policy is cut and dry."
Sidebar: Keep Employees Happy and BusyThere was a time when Larry Taylor, of AirRite Air Conditioning (Ft. Worth, Texas), had problems dealing with employees moonlighting.
"Once we find out about it, and if it is for money, then we typically find that they are also using our truck, parts, refrigerant, etc. and sometimes even our invoices or copies of them," said Taylor. "If and when we have found this to be the case, they are terminated on the spot and we try to recover anything we can from them. Sometimes we have even called the police to try and recover whatever it might have been, mainly tools."
In his estimation, though, whether moonlighting is widespread in a company is based on the type of company one is running and the way the owner pays and treats team members. "If you are paying them well, taking care of them, they don't want to have to go out and work the extra hours," said Taylor. "So the best way to minimize or stop moonlighting, in my opinion, is to pay them good, treat them good, and make your company and their employment so good they don't want to moonlight."
Contractor Ben Stark, of Stark Air (Hurst, Texas), could not agree more. "Our goal is to keep our techs busy enough that they don't want to do side work, and pay them good enough that they won't risk losing their job," he said.
Never one to mince words, contractor Skip Snyder, owner of Snyder Co. (Upper Darby, Pa.) sees the value in providing solid work and pay, which can eliminate moonlighting.
"I believe the moonlighting issue is a result of a condition in the HVACR industry," said Snyder. "And, this condition needs to be addressed. We will not rid the industry of moonlighting, but we can dramatically reduce the amount of moonlighting. After all, moonlighting is a result of many conditions, including lack of respect to the company and its owners/managers, lack of adequate compensation/benefit packages, lack of knowledge and understanding of the risks associated with this behavior, and those who sell equipment to technicians knowing it's a moonlighting job."
In Snyder's view, if the industry elevates the level of professionalism for both the technician - via, as he put it, North American Technician Excellence (NATE) - and the contractor - via, as he put it, accreditation and/or certification - "we will be taking a large step in the right direction."
"Both of these programs require investment in both our employees and our organizations," he said. "It's time we start looking at education as an investment, not an expense. We need to educate not only the contractor and technician, but also, more importantly, the consumer and equipment owner.
"If we, as an industry, deliver a message to the property owner that there is the need to use qualified organizations, we can all increase the value of our services."
Sidebar: Lawyer â€“ Have Policies, Procedures in PlaceIn the eyes of lawyer Hilary Atkins, there are many good reasons why employers should have in place policies and procedures prohibiting moonlighting.
"First and foremost, employers have a vested financial interest in keeping their customer lists to themselves and protecting the confidential information included in those lists," said the general counsel and vice president, Finance and Administration, Air Conditioning Contractors of America (ACCA). "Further, there is a certain amount of liability associated with moonlighting employees that can't be avoided by maintaining some type of comprehensive insurance policy, simply because the typical policy only extends to work conducted by the employees on behalf of the employer, and excludes work which is not sanctioned or approved.
"Hence, the employee is acting as an independent contractor when engaged in outside HVAC work, yet he or she may still be driving the employer's vehicle, using the employer's tools, and possibly even wearing the employer's uniform. In any of the ensuing litigation that might follow in the wake of such unsanctioned activity, even if the employer can demonstrate that the employee clearly, and without the employer's knowledge, violated the employer's conflict-of-interest or anti-moonlighting policy, the expense of defending the employer's position is still a big factor in the equation, and not something any employer would every willingly want to face."
Another consideration, said Atkins, is that the employee may injure himself or herself while conducting activities outside the workplace, yet may still attempt to claim worker's compensation. "And, despite the fact that the activities took place while the employee was moonlighting from his or her employment, the company may still expect to receive a claim, and there have been some cases in the past - though not involving HVAC contractors - in which the courts have found both the employer and the secondary â€˜employer' jointly responsible."
In the end, said Atkins, all HVAC employers should have a company personnel manual that outlines its policies on moonlighting, and what exactly constitutes a conflict of interest.
"It's probably not wise to have an outright ban on outside employment, but prohibiting employment with competitors and reminding employees that outside jobs should not conflict with or take precedence over the employee's current job is prudent," she said. "There are also various state laws that do protect employees to a certain degree on how they conduct themselves outside of their workplaces, and there has even been some legislation introduced to protect employee's privacy in their off hours."
For example, she said Michigan introduced the Employee Privacy Protection Act of 2005, which prohibits an employer from firing an employee due to lawful activity that is both off the premises and during non-work hours. However, the bill's language still protects employers and permits them to take employment actions to prevent "activities that create a substantial conflict of interest with the core mission of the employer," she said.
"Presumably moonlighting and taking potential business away from the employer would be considered a conflict of interest with the core mission of the employee's HVAC company," said Atkins. "As another example, under California Labor Code section 96, subdivision (k), the Labor Commissioner is authorized to take assignments of claims for loss of wages due to adverse action taken against an employee for engaging in lawful conduct during non-working hours away from the employer's premises.
As a result, a well-written policy, which outlines the conflict of interests important to the employer and both prohibits the use of confidential business information for the employee's personal gain and addresses the use of company time and equipment for the employee's personal benefit, plus a certain amount of policing by employers, are the best defense to potential legal problems - both internally and externally - down the road, she summarized.
"Some employers even go so far as to execute written employment agreements, which clearly spell out what conflicts of interest are, and that they are prohibited so long as the employee works for the company," she said. "And some employers take it one step further and assign impermissible conflicts and other restrictive covenants, even after termination of employment. However, employers must be very cautious in so doing, as many state courts take a very skeptical view of broad-based, non-compete clauses in these agreements, and often limit such agreements by the scope of work, duration of time, and geographic area covered." Once again, in California, these clauses are legally unenforceable, she said.
In regard to policing, many HVAC employers now utilize global positioning systems in the normal scope of their employee's workday. And, this is a good thing, she said.
"Certainly these same systems can be used to track the same vehicles when the employee is off the clock," said Atkins. "Moonlighting employees are a risk to employers that can be predicted, and thus can also be prevented, transferred, and mitigated. Employees put on notice that such activity is not permitted and, if discovered, serves as grounds for immediate dismissal, are far less likely to assume the risk on their end."
Sidebar: A Proactive ApproachSteve Lauten, president of Total Air & Heat Co. (Plano, Texas), remembered catching a service technician illegally moonlighting nearly 10 years ago. At that time, he thought he had a pretty tight control on preventing moonlighting, "but that incident led me to the point I am today."
"The most important thing I can say is that locks do not keep the thieves out; it just keeps honest men honest by eliminating temptation," said the president of the Air Conditioning Contractors of America (ACCA) North Texas Chapter. "No matter what levels of prevention you put in place, if somebody wants to get around the layers of protection, they will."
Over the years, Lauten made the following proactive moves:
1. Vehicle tracking for all vehicles that are taken home at night.
"In addition to always knowing where your vehicle is located, tracking adds a layer of security if the vehicle is stolen," he said. "If something happens to an employee where they get sick or are in a accident, you have a way of helping them. Vehicle tracking has advanced significantly since it became popular in our industry about eight to 10 years ago."
2. Inventory control.
"If you are worried about moonlighting, which is stealing, then you really need to worry about controlling your inventory," he said. "We track every part that we purchase from the time it enters our inventory until the part is sold. If you have a tight control on your inventory, you are sending a strong message that you will not tolerate theft."
3. Invoice control.
"We track every service ticket issued to our technicians," said Lauten. "We know which ones are missing and expect every invoice to be turned in whether it's billable or not, and even if it's an invoice that gets thrown away. We want to know where every invoice ends up."
4. Employee perks.
"We allow employees to purchase parts and equipment to be used in their personal home at our cost," he explained. "If they have a parent, we mark up the cost 10 percent, blood relatives 20 percent, and everybody else pays our normal rates. If a manufacturer or supplier offers discounts for employees, we make sure they get those discounts.
"We also pay a bonus to each of our departments when they meet revenue and profit goals. Those goals include keeping labor and material cost within industry-accepted guidelines. I feel that our employees also do a great job of supporting each other and keeping the temptation to moonlight at a minimum."
In the end, Lauten believes employees that do moonlight mainly do it to feed their families during slow times.
"If you keep an employee busy year-round, they won't have the time or desire to moonlight," he said. "I feel moonlighting is a scenario that is very preventable by being proactive and eliminating the opportunity and desire."
Publication date: 05/08/2006