07 Aug 2012

Divorce in Family Businesses

Divorce in Family Businesses

Neil Fraser, Partner, discusses an important question for both Employment and Family lawyers that was answered earlier this year in the case of Hawkins v Atex Group Ltd & Ors[1].

Neil Fraser, Partner, discusses an important question for both Employment and Family lawyers that was answered earlier this year in the case of Hawkins v Atex Group Ltd & Ors[1].

The case dealt with the prohibition against discriminating against someone based on their relationship status.  This is an area of law which was originally introduced by s.3 of the Sex Discrimination Act 1975 (the 1975 Act).  The original intent of the law was to protect young women from being dismissed on becoming married.

In the 1970's women gained the right to maternity leave, equal pay and the basic right not to be treated less favourably than men.  Unscrupulous employers, who wished to avoid paying maternity pay, and fully expecting recently married young women to become pregnant would have been able to dismiss such a young woman at the point of her marriage, had it not been for the prohibition against discrimination on the grounds of marriage.

At the present time the statutory protection is granted by s.8 of the Equality Act 2010.  It now extends to both married employees and employees who have entered into a civil partnership (although with the Scottish Government's recent announcement[2] the distinction between the two groups is likely to disappear).  It does not extend to cohabiting couples who, presumably, are not equally likely to start a family and take advantage of parental rights.

So what of the recent decision, and what does this branch of employment law have to do with Family Law?  The decision is most relevant to small sized family companies, where the family in question involves the breakdown of a marriage or civil partnership.  Classic examples would be the employee who married the boss's daughter, or the husband who employed his wife.  What would typically happen is that on the breakdown of that personal relationship, the employment would be terminated.  The husband would not want to work with his estranged wife, or the boss would not want to work with the estranged son-in-law.

The decision to dismiss could potentially be a fair reason if the employer could show that the personal relationship breakdown was substantial enough so as to justify the termination.  In very small family companies where the people involved would have to have a great deal of close contact, it is likely that such an argument could well be made out.

The danger, though, is that the dismissed employee could claim discrimination on the grounds of marriage, which would overcome the potentially fair reason.  The recent case effectively rules that that argument is not possible.

In the case, the wife of the Chief Executive of a company was given a job in the company despite a clear instruction to her husband not to employ any members of his family due to fears of accusations of nepotism.  When her employment was uncovered she was dismissed specifically because she was married to the Chief Executive.  She brought a claim to an Employment Tribunal, citing the protection given to her by, what was then s.3 of the 1975 Act.

Her case was rejected, ultimately by the Employment Appeal Tribunal, on the grounds that she was not dismissed because she was married, but because she was married to the Chief Executive.  The EAT effectively decided that she would have been dismissed even if she was not married to him, but simply in a long term relationship with him, or another member of his family.  This view may have been given support by the fact that his daughter, who had also been given a job, was dismissed at the same time for similar reasons.

So where does this leave employers in family businesses dealing with the stress of a family breakup?  If the nature of the workplace is such that it would be too damaging to the interests of the business for the employee to remain, it now seems settled that the employee can be dismissed because of their marriage to, or civil partnership with, a particular person without being able to claim discrimination.

[1] [2011] UKEAT 0302_11_1303

[2] http://www.scotland.gov.uk/News/Releases/2012/07/same-sex25072012

Neil Fraser, Partner

Disclaimer: This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice.

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