Relationships at work

By Scott Wilson, Partner and Josephine Toop, Solicitor

First published in the NBR, 8 February 2008

Personal relationships between employees in competing businesses or between staff in the same workplace can be tricky for the boss and inevitably carry elements of risk.

When it comes to relationships between workers in competing businesses, one of the main worries is that confidential information or trade secrets will be passed on. In fact, bosses may well be justified in sacking the employee, or removing them from a position that involves confidential information where there is a risk of disclosure of sensitive information.

Of course, there is quite a difference between those working at ground level, say as sales assistants in different retail outlets, and employees, who hold management/business strategy positions in competing companies.

Risk of disclosure is difficult to assess, but the courts have often allowed genuine employer concerns about either intentional or inadvertent disclosure as grounds for dismissal, provided such concerns are broadly reasonable. Naturally, the usual fair procedure for dismissals must be followed.

It is not all plain sailing as Madeleine Setchell's dismissal for conflict of interest demonstrates. Despite revealing her relationship with the National Party’s chief press secretary when applying for a communications job at the Ministry of Environment, she later lost the posting when the significance of that relationship was realised. This led to a State Services Commission investigationand a media storm about whether decisions around her employment were made properly.

Employees having relationships within the same workplace also present risks for employers. There may be administrative and staffing difficulties, particularly for small businesses (for instance, if the parties want to co-ordinate time off together) and possible negative effects on productivity.

If the workers are in a reporting relationship, issues relating to bias, performance assessment and equal treatment of other staff are possible. There may be conflict of interest issues, including accusations of favouritism from other workers, possible coercion by one of the employees, and if work or performance issues arise, it may be difficult for the more senior employee to address them.

The risks increase if the relationship breaks down, particularly if the employees find it difficult to work together, or, even worse, one behaves badly to the other in the workplace. This can prompt potential claims against the employer, for instance, relating to sexual harassment or an unjustifiable disadvantage claim.

Things can turn pretty nasty. Take the case a few years ago when one employee assaulted their former partner and shredded their documents (Lewis v Department of Corrections). This year’s Chief Executive of Unitec Institute of Technology v Henderson case also provides a chilling example. There, an affair between two employees, Ms Henderson and Mr Nummy, was discovered by Mr Nummy’s wife (who was also an employee of Unitec). Inevitably, the situation deteriorated.

Among other things, Mrs Nummy stood outside the window of Ms Henderson’s lectures glaring at her and spread rumours among staff. The matter culminated in Ms Henderson sending Mrs Nummy copies of 300 intimate emails written at work during the affair with her husband. The act of sending the emails was considered by the court to be serious misconduct, and enough to justify Ms Henderson’s dismissal (though there were procedural flaws).

What should employers do about relationships in the same workplace?

To minimise liability in sexual harassment proceedings, some US employers have tried to regulate employee behaviour through “love contracts,” or ban workplace relationships altogether. The idea behind “love contracts” is that the employees involved in the relationship sign a document setting out how they will behave at work, stating that they understand the employer’s sexual harassment policy, and specifyingthat the relationship is consensual. This means that in the US the employer is less likely to be liable for the “at-fault” employee’s conduct in harassment claims.

In New Zealand employers will have to take a different tack. Blanket bans seem unlikely to be enforceable and in light of our employment legislation it is probable that the right to be free from sexual harassment cannot be contracted out of in a “love contract.”

One option, therefore, is to do nothing and monitor the situation. Employers and employees are covered by obligations of good faith to one another. If an employee acts badly, this can be dealt with as with other breaches of good faith.

Another option is to institute an employment policy relating to relationships at work. This may help clarify the employer’s position and may help to justify a disciplinary action or dismissal connected with a personal relationship at work. However, it is debatable whether a policy will help you more than the general law.

Generally, a relationship policy cannot justify a dismissal where the law would not. Disapproving of a relationship within a workplace, or the existence of the relationship itself, will generally not be enough to justify dismissal. Substantive reasons like serious misconduct are necessary.

The policy should avoid interfering too much with your employees’ private lives, and employees should be consulted about the introduction and reasons for the policy before its implementation.

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