This is the world of cut throat business. It is unfortunate the former employer wasn't more generous, but what he did is not out of line.

If he pays it, he may get more referrals.

If there were no previous agreement or contract between the two stipulating a "referral" fee then the former employer was out of line (in my opinion).

mdln brings up a really good point. How about the dude talks to the invoicer and say, we didn't agree to this, but I will in the future, and give him a contract. He might even choose to pay this one as a show of good faith. Then, it'd be ok. Otherwise, it isn't right.

I have heard of this practice. I think it's presumptuous. I think rob333 has a good point of talking to the invoicer to set a precedent for future business, and paying out of good faith, for the hope of more referrals.

IMO, there was no contract and no obligation. We don't know how 10% would even affect the job. It might not be feasible for the second contractor to take the job with that fee.

I wouldn't be against the second guy giving the first guy some token amount as an act of good faith and the two of them getting together and discussing a respectable amount or procedure for references.

Referrals can go both ways.

let me preface this with, I am totally joking.... maybe he could refer a job that was too big for him to the former boss and charge him 10% ;) It's a joke

Doctors and lawyers get referral fees all the time, but I don't know what the common practice is for contractors. Maybe this is something the former employer assumed the other guy would know.

Doctors and lawyers don't get referral fees, I believe that's precluded by ethics requirements. Specialists have been known to give gifts of nominal value to referring generalists , for instance, but a direct fee sharing is not done. Contractors and others doing construction work certainly live and work to different standards , so I'm not surprised about the situation , but legally, if there were no advance agreements nothing is due

Alisande, I didn't know about drs getting referrals fee. And how are referrals, any referrals verified? Sometimes I notice forms ask if somebody referred you but if new customers forget to say so, then what?

Lawyers can accept referral fee's from other lawyers, but there are strict guidelines according to the ABA. They can't accept fees from non-lawyers.

IMO, the painter is wrong to bill for a referral though. Unless there's a painter's association where they have to get a license in order to paint.

If the ex-employer wants to get a fee, then he can help paint to earn the fee. :)

wonder legal implication if referred contractor is a disaster. Can they go after person who referred? I don't think guy should have invoiced w/o agreement but to say something now might create tension in what seems to be an otherwise good relationship

I'm "in the construction business"....it's NOT done this way! Ever! "IF" YOU don't want the job....it's nice of you to recommend someone else and keeps them happy. The person getting the referral is actually HELPING the guy not taking the job by keeping the customer happy. 10% is easily $150-$350 around here. The cost of painting supplies is about 10% of the total job.....so to a painter...that's a chunk of change!

Years ago, in 1984.....I called a lawyer. I asked if they gave a free consultation, he said yes, what was my question...then...I got a bill for his time. :0) I paid it in case I ever wanted to use him again....and it was only $75. But.......it was not legal or "right" of him to have charged me, with NO disclosure.

I know about lawyers getting referral fees because I do some work occasionally for a lawyer and am friends with several. As for doctors, back when I had no medical insurance I asked why the bill from a specialist was so high. The response was that they had to pay a referral fee to my primary care physician, so guess who paid it--me.

Much more recently (last week) a woman my PCP's office said, "But we always refer patients to the XYZ medical group" when I told her I'd made an appointment with a specialist in the ABC group. She didn't sound happy. It's possible her disappointment had nothing to do with referral fees, but I doubt it.

Or it could be she know something about ABC group and can't say. I hope YOU are right and not me alisande.

For lawyers in California, fee splitting with another lawyer is permitted ONLY if the client consents in writing. In my 35 year career of working closely with lawyers, clients and their lawyers, helping clients pick lawyers, etc., I never experienced that happening.

For physicians, federal rules prohibit kickbacks when a Medicare patient is involved and California rules in general prohibit referral fees.

Conduct doesn't always comply with rules when money is involved (unfortunately) and I know that rules can vary from place to place.

Kathy, I agree with you. The ex employee should have been up front and said that with each referral, he wanted 10 percent.

You will be surprised as to what professionals do. We had an accountant that charged my husband's widowed sister a very large amount for her basic tax return.

When my husband questioned him, he said that since he saved her x amount, he deserved y amount! We found a new account who then charged her a third of the price.

health.usnews.com/health-news/patient-advice/articles/2016-04-07/whats-behind-that-medical-referral%3fcontext=amp

mdlin, I read this to say it's an indirect relationship, correct? Like a doc in the group practice referring to a specialist in the same group instead of to someone elsewhere, in another group, etc. The referring doc doesn't get specific compensation from the specialist but they all share in the group's profits.

This isn't so much of an exception as a clarification of what is and what isn't a referral fee. What's thought of as a referral fee is more direct typically involves direct payment or benefit, as the construction example would demonstrate.

Until recently, DH had a medical practice in Pennsylvania for nearly 40 years and as a specialist he only saw patients when referred by another physician. Honestly there was no question about getting paid by the referring doctor. It didn't matter whether the patient had insurance or not - it just isn't done. It violates medical ethics. And when a physician in DH's group referred a patient to another specialist or surgeon there certainly wasn't a payment involved. They referred the patient to the physican or specialist best able to treat the patient.

It's a shame Alisande experienced that - it's just wrong. As Elmer said - "Conduct doesn't always comply with rules."

As for the example about the PCP's comment "we always refer to the XYZ medical group" - I can see a few reasons why they might have said that. Perhaps the PCP thought XYZ ran a better practice, or maybe they trained together or it's even possible that the XYZ group operates in a more professional manner. But I really pray it wasn't due to an illegal kickback. Any chance it will happen again and you can ask them?

As for mdln's post - I think many of us have experienced the "in network - out of network" cost differential.

Going back to the OP. Two years ago we had a Contractor do some work at our home and as part of the job he subbed out work to a local landscaper to replace our old brick walkway with bluestone. This summer we contacted the landscaper to have him install a planting bed behind the pool. When he delivered his proposal there was a 10% additional fee at the bottom for a referral fee.

When I asked him what that was he told me that he had signed an agreement with the Contractor stating that if he did any future work at our home he'd have to give the original contractor 10%.

I told him that there was no way I was paying an additional 10% - I didn't sign anything with the Contractor. He admitted that he signed it without thinking it through. I asked him if the agreement expired after a few years. Unfortunately he said that it wasn't specified. He could have hidden the referral cost in his overbid and I wouldn't have known. I thanked him but told him I was going to call someone else.

Kickbacks (and worse) are very common in the construction business and supporting suppliers. Large lumber yards, ready-mix concrete, building inspectors, and on and on. And dirty dealing has been endemic with contractors and the unions and trades for years in urban areas, especially cities of the North East but not just there.

AFAIC, no agreement, no payment. If they want to get paid for future referrals, they could make that agreement, however, the end contractor would then, IMO be at least morally obligated to advise the client that the referring contractor is charging them for the referral. This is an expense that would be passed to the end client since it's a cost of the job. To try to tack it on at the end is wrong in my book. And as an end client, should it happen to me, I'd never use the referrer again. Sleazy business practice. There's a lot of contractors out there.

I'd go to talk to my former employer, saying that there'd been no agreement, so I objected to the invoice, especially without prior notice ... but would be willing to offer him some consideration for the referral.

If I were in a good mood - if not, probably be somewhat more resistant.

ole joyful