Many of our business-owning clients, especially farmers, employ family members (sometimes in-laws) to work in their business at one stage or another. In some cases, these ‘family-member’ employees can remain in the business for extended periods of time and come to hold senior positions of responsibility. For many, the distinction between ‘employment’ and ‘family’ relationships might only become important once a family member starts their own family and needs certainty about income, housing and their future, whereas for some, problems may never arise. In worst case scenarios, the employment-side of the relationship only becomes important if personal issues cause a rift between the parties or an in-law becomes an out-law.
When a relationship of this kind breaks-down, the last thing business owners want to be thinking about are the employment law implications of firing a close family member. Thankfully this consideration doesn’t need to be complicated so long as the groundwork is laid out early, and expectations are managed appropriately. This article is aimed to help you navigate the (legal) complexities of employing family, so that you can set clear expectations with your loved ones and maintain your most important relationships long into the future.
Employment Contracts
An ‘employee’ is an ‘employee’ whether they are related to the business owner or not. This means that every worker has certain entitlements, obligations, and rights which cannot be removed or altered without great difficulty. Some of these rights and entitlements can be implied by a court based on the way their personal services are deployed by the business unless a written employment contract indicates otherwise.
In our view, the key to protecting your personal relationships in business is to set expectations as early and clearly as possible. The best way to set those expectations is to make a comprehensive written agreement as to the terms of employment. Any good employment contract will cover all the important aspects of an employment relationship, including:
- Employee entitlements and obligations;
- Termination of the employment relationship;
- Role descriptions and KPIs;
- Confidentiality requirements; and
- Post-employment restraints (if necessary).
If a family member employed in your business underperforms, does the wrong thing, or otherwise causes problems, the employment contract is the easiest way to correct their trajectory or stop them from participating in the business altogether. It sets an objective standard of behaviour and clearly states the consequences of acting inconsistently with promoting the business’ interests. It imposes ‘distance’ between the family member, and the owner, on sensitive workplace matters.
When drafted clearly and with the employee’s input, an employment agreement can help both parties improve the situation while remaining on good personal terms. However, if a family employee engages in serious misconduct or the personal relationship with the business owner completely breaks down, it may be necessary to dismiss them.
Dismissal
Despite the real ‘personal’ aspects to family employment relationships, to the courts there is no difference between the rights afforded to family employees and regular employees.
This means that family employees are similarly entitled to sue you (the business owner) for ‘unfair dismissal’ or bring a ‘general protections’ claim against you if their treatment/termination by the business satisfies the legal requirements.
On our blog you can find articles dealing with dismissal, redundancy, and everything you need to know about employee claims. Ultimately, an employer should always follow the correct procedures when dismissing a family employee. These can be found in the applicable Award, the employment contract, and the Fair Work Act 2009 (Cth). If the factual circumstances are complicated, or the law is unclear in your given circumstances, we highly recommend seeking legal advice to ensure that the process is handled correctly.
In family employment relationships, the most important thing to our clients is to maintain their personal relationships to the best of their ability. Fighting against loved ones in Court is the best way to make this objective as difficult as possible to achieve. Therefore, it is important to set clear expectations from the beginning about employee conduct and take the ‘personal’ out of your decision-making.
If you are looking to terminate a family employee or want to put in place comprehensive employment contracts and policies, call us now on (02) 9199 8597 or email us to speak to one of our employment law experts.
The information contained in this post is current at the date of editing – 15 April 2024.
