Workplace Romance: Legal Guidance for Business Owners
Legal Landscape
Workplace romances involving CEOs or management personnel present intricate legal challenges. When individuals in positions of authority become romantically involved with employees, addressing potential legal risks becomes paramount. Here’s a strategic approach tailored to CEOs, small business owners, and management figures to address such situations effectively:
Risk of Retaliation Claims
Should a romantic relationship involving a CEO or manager and an employee deteriorate, there’s a potential for retaliation claims. This could arise from scenarios like divorce proceedings while one remains employed or allegations of discrimination post-breakup.
Potential for Sexual Harassment Claims
Workplace romances may involve physical intimacy, potentially leading to allegations of coercion or power imbalances. Such claims can result in contentious lawsuits, tarnishing the CEO’s reputation and the company’s image.
Perception of Retaliation
Even emotional entanglements can give rise to perceptions of retaliation. Employees may allege unfavorable treatment in promotions or workplace dynamics due to their romantic association with a superior.
Mitigating Risks
1. Legal Counsel: Seek guidance from legal experts to navigate the complexities of workplace romances. Legal professionals can offer insights into best practices and assist in formulating strategies to address potential legal pitfalls.
2. Transparency and Communication: Foster open dialogue between romantically involved parties and management. Discuss the legal implications of the relationship and the rationale behind any necessary actions, such as reassignment to different departments.
3. Avoiding Discrimination: Exercise caution when considering actions like reassignment to mitigate direct reporting relationships. Such measures, if perceived as discriminatory, may invite legal scrutiny and should be approached with care.
4. Objective Decision-Making: Entrust performance evaluations, bonus allocations, disciplinary actions, and other managerial decisions to individuals not romantically involved with the concerned employee. This helps mitigate allegations of favoritism or unfair treatment.
5. Documentation: Maintain meticulous records of discussions, decisions, and actions related to workplace romances. Comprehensive documentation serves as evidence of adherence to proper procedures and provides invaluable protection in potential legal disputes.
6. Employment Practices Liability Insurance (EPLI): Consider securing EPLI coverage to shield the company from legal claims stemming from employment practices, including those arising from workplace relationships. EPLI can provide financial assistance in the event of lawsuits alleging wrongful termination, discrimination, or other misconduct.
Video Transcript
How do you handle a romance between a CEO or someone in management and an employee?
This is a tricky issue, and let’s face it, this comes up all the time. It is no surprise when there is some sort of romance that develops between people who work closely together, but there are some important legal issues here.
Risk Factors
And frankly, it is risky for a CEO to have a relationship with somebody else in the company. Why? Because if it goes wrong, you might have claims of retaliation or other types of claims. Now if it goes well, and let’s say you get married and live happily ever after, not a problem, but if you get married and then divorce while the person is still working in the company, or if the person leaves and feels discriminated against or retaliated against or that there was some sort of hostile work environment, now we have problems.
Another issue that often comes up is that a romance may include physical or sexual activity. And it is not uncommon. In other words, it is common for employees to claim later that they felt pressured, that there was a power differential, that the person in management initiated something, and they felt like they couldn’t say no, or if they did say no, it would affect their job or their promotional opportunities, or they just felt too uncomfortable, like they couldn’t say no.
These sorts of situations are often scandalous lawsuits, and so even if the employee doesn’t win, it is often the type of lawsuit that is so embarrassing to the reputation of the CEO and the company that the company is incentivized to pay some sort of settlement to the employee to stay quiet and avoid letting all of this stuff turn into gossip and possibly even get covered on in the media.
So whenever a relationship goes to that sort of behavior, there is a high risk that if the relationship breaks up at some point, there is going to be awkwardness, and you might have claims of some sort of misconduct, and that gets messy.
By the way, even without that, it can be messy. Because often, even if a person is just emotionally involved, they can claim retaliation. They can claim that they were held back from a promotion or that their relationship with the CEO or somebody in management negatively affected their workplace environment. So this is a fairly risky situation. Now, is it illegal? No, there is nothing illegal about a CEO or somebody in management having a romantic relationship with an employee, including somebody who may report directly to them.
Managing Risks
Now, even though it may not be illegal, it is not good practice. Now, what can you do if you find yourself as someone in management dealing with this? Maybe you are the CEO. Maybe you are on the board. Maybe you are the HR director or the attorney representing the company. Well, of course, get legal counsel on how to handle this, but here are some items to consider.
First, see about having that person moved. Now you can’t move the CEO typically, but you can have the other employee moved to another area. So they are not reporting directly to the person they have a romantic relationship with. That act alone can be seen as discriminatory. And so you want to be careful with that and have a conversation, typically between the two people who are romantically involved, about what the advice of legal counsel is and why legal counsel is recommending that person be moved to a different department.
The other idea is to have any decisions regarding that employee’s performance, reviews, bonuses, compensation, termination, discipline, et cetera. All those issues should be dealt with by somebody else. Maybe it is HR. Maybe it is their immediate supervisor. Maybe it is somebody else in management. But the idea is you want to have a process to exclude the romantic partner in management from the handling of management decisions related to that person. That at least can help somewhat isolate the manager from allegations of mistreatment or retaliation from the manager due to the relationship.
As you can see, this is kind of a hot potato. It is delicate for all involved, including the employee. Because, keep in mind, if things don’t work out well for the romantic relationship, the employee may not feel comfortable staying there. The employee may need to find a new employer. And frankly, that is often what happens. Often, if there is a breakup in a romantic relationship, if the parties can’t continue to work in the same environment and they are trying to be mature and handle this well, usually the employee will look for a job elsewhere, and there will be an amicable transition out. That allows the parties to then operate in a business environment where they don’t have to continue to deal with an ex-romantic partner.
So both parties need to know what they are in for here, whether you are in management, HR, or somebody else dealing with romantic relationships in the company, specifically between people who are not peers, but are at different levels. That is where it is really smart to get legal counsel involved and document what is being done so that if there are allegations of improper conduct later by the employee after a breakup, the company has documentation, which is evidence that handled this properly and that can provide valuable protection.
Conclusion
One other thing you might consider is getting employment practices liability insurance, sometimes abbreviated as EPLI. Employment practices liability insurance provides insurance coverage if there are claims from terminated employees who allege that there was some sort of improper conduct, wrongful termination, or discrimination of some sort. An EPLI policy is typically not too expensive, and it is a great way to mitigate risk for companies as their employee body grows.
I am Aaron Hall. I am an attorney for business owners and entrepreneurial companies. If you would like to avoid common legal pitfalls and problems faced by other companies, you can sign up for my free guide at AaronHall.com/free. And then you will also get some videos explaining how to avoid common legal problems so you can keep your legal trouble and legal costs to a minimum.