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Friday, February 3, 2012

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.

19 comments:

  1. Donna, can you say more about discrimination in this context? If the owner is promoting all family members, they're going to all be the same race/national origin -- but it's not *because* of their race/national origin that they're being promoted, it's because they're family members. Would there be a discrimination issue there?

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  2. I love AAM question. Especially because there were cases involving Korean (I think?) janitors who were hiring from their own neighborhood--therefore, everyone was Korean. I don't remember how it turned out. Ha! Bad question from me.

    But thanks for the nepotism info. I get that question often as well. My answer is always "it's legal. Stupid, but legal."

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  3. Alison - I think a truly family-run business would skate on discrimination. The issue becomes stickier with friends, distant relatives, and friendly acquaintances. If you promote your friends, and all your friends happen to be of the same race/national origin, you might be crossing a line.

    Suzanne - I'm glad I'm covering an issue you hear about frequently. I get questions on this all the time. Thanks for letting me know it was helpful.

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  4. Does an employer have the right to make his employees work overtime day after day? "(The company pays for overtime). I am utterly exhausted, and I am a nurse who constantly drives to see patients. I think it is a safety issue, as well as a quality of life issue.

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  5. Unfortunately, Kaliki, I don't know of any general law limiting the amount of overtime employers can make you work. Some specific professions have safety limitations, and so do some union contracts. If you think it's a safety issue, you might speak to the entity that regulates nursing in your state to see if they have some limits.

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  6. Doesn't SOX only apply to public companies?

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  7. Pretty much Monica. Most employers aren't covered. Here's what OSHA's fact sheet says about SOX coverage:

    A company is covered by section 806 of the
    Sarbanes-Oxley Act of 2002 (SOX) if it has a class
    of securities registered under Section 12 of the
    Securities Exchange Act or is required to file
    reports under Section 15(d) of that Act. Its subsidiaries,
    contractors, subcontractors, or agents
    may also be covered.

    On July 21, 2010, the Sarbanes-Oxley Act was
    amended by the Dodd-Frank Wall Street Reform
    and Consumer Protection Act (Public Law 111-
    203) to extend coverage to “nationally recognized
    statistical rating organizations,…as defined in
    Section 3(a) of the Securities Exchange Act, and
    their contractors, subcontractors and agents.”

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  8. I have work at this company a little over a year but just transfer over to the shop area and the boss there hired his little brother just a few weeks before I got there and he gets whatever shift he wants and weekends off while I never had them off and already making him lead man when I wasn't given the option or anyone else then a month later he hires on his causen for a poison I didn't even know was open that pays a lot better then what I'm doing. So is there anything I can do to stop this?

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  9. Hi Doyle. Probably not, but if all the family members are of, say, a different national origin or race than you, you might want to talk to an employee-side employment lawyer in your state.

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  10. my husband was passed over for a job he was qualified for because of nepotism. This in law enforcement in Utah, and he has been passed over twice based on the fact that my brother already works for the department. So now is there anything he can do? Or does he just have to roll over and take it?

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    Replies
    1. Hi Ilse. An answer to your question will be up on August 2.

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  11. What about nepotism in a nonprofit nursing home where 99% or more of their income is from Medicare/Medicaid?

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    Replies
    1. Hi Steven. An answer to your question will be up on August 2.

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  12. I have a question regarding refusal to hire because of relation. I worked with my husband (when we were still dating) at his current employer. I submitted a resume because they stated I was not applying within the department so I was eligible. And I left on good terms. But now that my resume has been submitted, they say no because of the nepotism policy they have in effect. Can they deny my employment for this reason? AND if so, would they have been able to fire one of us after we got married while I was already employed there?

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    Replies
    1. Hi Ed. An answer to your question will be up on August 2.

      Delete
  13. Is it nepotism when my family member is my boss (my fathers sister) and has singled me out with hours being cut,suspensions being done and as well as many write ups.Also with the threat of being fired and saying I am a causing a hostile work environment for other coworkers. I have been an employee for 25 years and was recently recognized by corporate for my "outstanding service". In the recent year the family dynamics have changed,with death and other circumstances.There is really no need or desire to communicate to management on a personal level. This leads me to the question of nepotism. Thank you for your response in advance.

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  14. what about if The General Manager's wife works in a separate group within the company of which i am the manager for. How much can he intervene on work-related problems with her?

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  15. Is it discrimination if I was not hired solely due to my mother already being employed by a company to which I applied?

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    Replies
    1. Same question as above
      Except I was laid off as a result of my mother being hired as manager after I was /already/ employed

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