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Labor and Employment Law

Nepotism Is Not Illegal

             I probably get at least one inquiry a week from someone absolutely sure that they've been a victim of nepotism. The boss is hiring family members or friends. A family member is promoted even though she's incompetent or inexperienced. Or even worse, they complained about the incompetent family member and were fired.

             The injustice of it all. Surely they can sue!

            Nope. Sorry. There is zero I can do about nepotism. Zip. Nada.

            Playing favorites is not illegal. Hiring relatives is not illegal. Not if you're in the private sector. Now, if you work for government, every state has some law about conflict of interest or hiring relatives at certain level. You'll have to check your state and local laws if you work for government and think something illegal is going on.

            But nepotism in the private sector? It's expected. It's mostly legal. Here's what might be illegal in a situation involving nepotism:

            Failure to disclose: Under Sarbanes-Oxley, management has to disclose potential conflicts of interest. So hiring of relatives, while probably legal even for publicly-held companies, can't be hidden from shareholders. The SEC can be called in to investigate allegations of undisclosed conflicts. If you object to this type of illegal behavior, you might be a protected whistleblower.

            Discrimination: If the favored few are all of the same race, religion, national origin, or other protected category, the company could be engaging in illegal discrimination.

            Sexual harassment: If the boss favors only individuals who have engaged in sexual relations with her, and you've turned her down, you might have a sexual harassment claim (although sexual favoritism is mostly legal).

Donna's tips:

a.       If your boss is the owner's niece, be nice. I don't care if she's incompetent. Deal with it.

b.      Don't write a long letter complaining about the incompetent friend or relative. It can and will get you fired.

c.       If you think the company has crossed the line into illegal discrimination, or you work for a publicly-held corporation and they are treating it like a family business, you might want to talk to an attorney about potentially blowing the whistle. Just be careful. Most Sarbanes-Oxley whistleblower cases are dismissed. They are difficult to bring and difficult to win.

d.      If you see that only friends and relatives have a future at your company, start looking. Get out on your timetable rather than waiting until you're forced to leave on their terms.

See more employment law posts on Donna Ballman's blog, Screw You Guys, I'm Going Home

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