Ethics Forum

Customer Incentives

An employer hired a sales representative on a salary basis. His job is to travel throughout the country purchasing wholesale merchandise, and selling the product retail. The employee salesman initially pays all travel expenses, but he is later reimbursed by his employer at the end of the month. This reimbursement is included in his paycheck.  The salesman purchases his gas and air fare on his mileage credit card, to accrue free miles for his own use.

The salesman would like to know whether he may keep the mileage. Do we say that since he is paying for the flight he deserves the air miles, or do we say that since the company is reimbursing him, the miles rightfully belongs to the company/employer?

Would the law be different if he would use company money to pay for the travel expenses initially, rather than being reimbursed later?

The Shulchan Aruch (Code of Jewish Law) Choshen Mishpat 183:6, states that if someone sends a messenger to purchase something for him, and gives him the money to do so, and the messenger generates a profit in some manner, either by receiving a discount or a gift, if this is an item that has a set price on the market, the sender and messenger should equally divide the profit. Most early commentaries explain that this law is based on a rabbinic injunction. On the one hand, if not for the efforts and ties of the messenger the sender would receive no profit, but on the other hand if not for the fact that the sender gave the messenger the funds with which to purchase the item, there would also be no profit. Therefore, our Rabbis have established that both sender and messenger should be considered partners in generating this profit, and it should be divided equally.

It seems clear from the above that this Rabbinic injunction only applies if the money used in the purchase had been provided by the sender. Only then can he be considered an “equal partner” in the profit generated. Similarly, this only applies if the profit would not have been generated by anyone other than this messenger, because of his business ties, power of persuasion, etc. The seller is awarding the profit to the purchaser of the merchandise, and in this case both the provider of the money and the person making the effort to receive the discount must be considered purchasers.

However, if the messenger would lay out the money for the purchase, even if he just put it on his credit card and the sender was going to make out a check directly to the credit card company, only the messenger is to be considered the purchaser, and the seller awards the profit to him. The seller really does not care that the messenger will be reimbursed for the purchase, he has received his money and there is no longer any risk involved in this transaction for him. As far as he is concerned, the purchase is complete, and any reimbursement given to the messenger by the sender is a separate transaction that he has nothing to do with.

Additionally, if anyone purchasing these items could receive this gift or discount, the messenger really did not contribute at all to generating this profit, and it would belong to the sender. This is only true if the messenger is paid to run such errands for the sender, as in the case discussed in our question. If the messenger could really have fulfilled his obligation to his employer just as well by purchasing the same item in a store in his community, but put in the effort and exertion to travel to a distant place to receive the discount or gift, although he deserves to be compensated for his efforts and expense on behalf of the employer, he is still not considered a partner in this profit. The profit is only being awarded by the seller because of the money which was provided for by the employer, and not because of the extra effort or ties with the employee.

  1. In our case, where the salesman is using his own money to pay for the travel expenses, any gifts, or other incentives (free fill ups, air travel mileage, etc.) belong to him.
  2. If an employer asks a worker to purchase something for him, and gives him the money to do so, and the employee received a special discount on the merchandise purchased, or received a free gift for purchasing these items, the law is as follows:
    1. If the discount or gift is available to anyone who purchases these things in this store, the money saved, and the gift belong to the employer.
    2. If the employee made a special effort to travel to this store where the discount was being offered, but he could have just as well purchased the item in a closer store that did not have the discount available, he has a right to expect some payment for his efforts to save the employer money, but the discount and gift still belong to the employer.
    3. If the seller gave the employee the discount only because of his personal relationship with him, but it is not available to the public, the employer and employee should equally divide the money saved or the gift.

Adapted from Mishpitei Hatorah