Office romances: what they can cost businesses


Personal relationships in the office can be expensive for employees and their employers in both a financial and reputational sense. In recent months there have been a series of highly publicised cases where big business has been hauled over the coals for its approach to the issue. But this can be just as costly for small and medium enterprises and start-ups – indeed, in smaller organisations there can be fewer places to hide and the consequences of a love affair gone sour can bring a business to its knees.

QBE recently took a strong stance after its Chief Executive was, in the company’s mind, too slow to disclose a relationship with his personal assistant. In response, the company cut the executive’s short term incentive by 20 per cent, stripping $550,000 from his take home pay.

The action by QBE follows the controversy at the Seven network, where chief executive Tim Worner was reportedly docked $100,000 over an affair with executive assistant Amber Harrison. Westpac became the latest company subject to sexual misconduct allegations following a number of complaints by two female staff about the behaviour of a senior executive at its wealth management division, BT Financial Group.

Naturally, media reports concentrate on the big end of town. But the impact on an SME or start -up of a love affair gone wrong can be just as profound. It is also important to note that whilst the traditional ‘picture’ of sexual harassment is a heterosexual one, this is of course not always the case. The allegations by James Ashby against MP Peter Slipper, are just one example of this. Employers should ensure that their own policies, procedures and training adequately deal with the issues of sexual harassment across the spectrum of sexual orientation.

Key considerations

So what are the legal and HR issues that all employers (irrespective of the size of their business) need to be across in order to protect themselves, their reputations and their bank balances?

  • Does the personal relationship create a conflict of interest?
  • Does the company have a conflicts policy that deals with interpersonal relationships in the office? Without such a policy, it may be difficult to allege that employees have any obligation to disclose a consensual relationship between adults.
  • What are the relevant HR considerations? How will a company handle disclosures of this kind? And why are such disclosures necessary from an HR perspective?
  • Does the business have policies and procedures in place to let employees know of the company’s expectations and the obligations owed by employees to the company and to each other?
  • Finally, at the executive and director level, are there additional obligations owed by each party to the other?

For start-ups, there are additional considerations: are the romantic partners also shareholders in the company? What happens if the affair goes sour – will it break the business? Can remedies be codified? Also, how do you deal with millennials? Their definition of a personal relationship might be vastly different to the company’s.

Policies and procedures

HR professionals and lawyers often advocate for companies to update their policies, procedures and training programs. In recent years, case law tells us that simply putting values down on paper is not enough. There is significant value placed on training, from a moral responsibility perspective but also in terms of a company’s liability.

The policies and procedures companies should be thinking about and providing training on are:

  • core values;
  • conflicts of interest;
  • appropriate workplace behaviours; and
  • social media, because in today’s technologically integrated society, personal relationships can not only proliferate into work, but also onto social media.

When looking at your policies, whether you are an SME, start up or multinational corporation, it is important to consider whether there is a nexus between employee behaviours and work. This involves a consideration of not only physical location and whether an employee is behaving in a certain manner at the office or another work-related location such as a client’s premises or a work conference, but also, whether and how the employee is using company property such as a laptop, phone or email system. It is also not as simple as drawing a line in the sand and saying, ‘We are only concerned with what happens during work hours’. Employers’ responsibilities and liability can and will extend beyond the confines of the office and office hours.

Culture

It is important for companies to think deeply about workplace culture and the atmosphere and working environment they want to create. For start-ups, there is a real opportunity to set the tone from the beginning. For SMEs, in circumstances where personal relationships in the office create a conflict of interest, there may not be the opportunity to change reporting lines or eliminate conflict altogether due to the size of the enterprise, which is why it is perhaps even more important in smaller organisations to set the tone clearly and to live by those standards.

If personal relationships that also have a workplace component either go pear-shaped or otherwise infiltrate into a workplace’s culture, there is a significant risk for companies from a brand perspective. For very obvious reasons, highly visible companies with a fiercely protected brand are concerned about what happens when personal relationships either deteriorate or become public property, as was the case with Channel 7 or, infamously, David Jones. Not only is the negative publicity unwelcome, but the longer term risk of reputational damage is significant.

At this point in the incident’s life cycle, companies might switch gears, from assessing conflicts of interest to monitoring and perhaps improving workplace behaviours. Companies must always ensure they are discharging their duties, both contractual and legislative, to all employees. Otherwise, a failure to take action in circumstances where the company is aware of inappropriate or unlawful behaviour may trigger a vicarious liability claim.

In industries and professions where branding and reputation are highly prized and heavily scrutinised, businesses may need to take a tough stance on office romances. Whilst historically, the cost of personal relationships in the office was measured by legal fees and settled claims, more recently, there is a trend by businesses to penalise employees for breaches of a company’s moral standards.


About the author

Kristy Peacock-Smith and Leila Moddel are partner and associate in the Sydney office of international law firm Bird & Bird.