Nepotism: can you sack 'favoured' employees?

Q&A

Nepotism: can you sack 'favoured' employees?

Can you dismiss employees if it transpires they were employed because of 'family connections'? Paul Munro explains.

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Can you dismiss workers if its transpires were employed because of 'family connections'?

This question was recently sent to our Ask an Expert service.

Q Our company recently appointed a new CEO who has questioned the merits of several senior managers who are related to the previous CEO. 

Enquiries among staff have revealed a common view that the appointments were based on family connection, not merit. The CEO wants to dismiss each employee suspected of being employed on this basis and to change the company’s recruitment policy to prevent this situation from re-occurring. I am concerned about dismissing these employees as it may be viewed as discriminatory.
 
Can the company dismiss these employees on the grounds of gaining benefit from a family connection with the ex-CEO? And would a company policy that prohibits hiring people who are related to current employees be legal?
 
A Dismissing an employee on the grounds they were employed due to family favouritism would not be a valid reason for dismissal. Discrimination law and general protections provisions under the Fair Work Act would offer protection on the basis of ‘marital status’ if an employee was dismissed because they are a spouse or de facto partner of a current or ex-employee.

The employer should not be concentrating on how these employees got the job – but how they are performing in their job.

If an employee’s performance is unsatisfactory then procedural fairness principles under unfair dismissal law will need to be applied by the employer. This involves warnings regarding performance and an opportunity for the employee to respond.

Continued poor performance, with related warnings, would provide a defence for the employer in any subsequent unfair dismissal claim before the Fair Work Commission. The employees should be subject to the normal performance review that apply to all other employees.

Company policy


A policy banning the employment of a spouse or relative of a current employee may offend discrimination law in certain circumstances. A recruitment policy should treat each applicant on a case-by-case basis.

To avoid nepotism, implement a policy which states that any staff involved in interviewing job applicants must declare when there is a conflict of interest if a relative or spouse is an applicant for a position. The policy could also provide sanctions if no conflict of interest declaration is forthcoming in that circumstance.

The bottom line: While discrimination based on family connections won’t be illegal in every situation,  an employer should deal with each individual case on its merits, rather than have a specific company policy on this matter. For example, an employee dismissed on the grounds of marital status may make a general protections claim under the Fair Work Act or a claim of discrimination under the relevant Commonwealth, state or territory discrimination law.

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