damnedif

Sometimes business and family don’t mix well. Family business disputes can be particularly emotional. I’ve seen it all, brothers against brothers, sisters against brothers, sons against fathers, etc., etc. Jealousy and greed can bring out the worst in family relationships. A wise judge recently told me that (when it’s sibling against sibling) sometimes it all comes down to who got the better bicycle for Christmas when the parties were growing up. It’s not really that simple, but there is a kernel of truth there.

I’ve represented both employers and employees in family businesses. When things go bad in these situations, things can get really nasty. The adage that the ones you love can hurt you the most holds true here. I recently settled a case for a fired stockholder-employee for $1.4 million, who was fired by his elderly father after working for the company for thirty years. We alleged that his sister, also a long-term employee, manipulated the elderly father into turning against my client, who was a superstar salesman. This case was reported in Massachusetts Lawyers Weekly as one of the biggest settlements of 2011.

Son fired from family business after 30 years

Click to access LargestVS2011.pdf

It’s inevitable that if you have a private business, you will have to consider whether to have family members work there. Sometimes private businesses grow into a family; sometimes your family grows into your business. The more successful the business, the more pressure there will be to hire family members. You may have siblings who need a job. You may have adult children who you want to bring into the business and eventually take over for you when you retire. You may start a business with a son or parent or sibling. All of these things are very common. Things are always hunky dory at the beginning. Maybe even for years.

But, inevitably, personal feelings will get in the way of running the business. Your family members may feel that they are different than other employees. They may feel that the same rules do not apply to them. They may overvalue their worth to the company. They may think of themselves as an owner when they are not. They may be jealous of you as the owner. The opposite is true too. Sometimes the family-member employee is taken for granted. Sometimes other family members are jealous of the other family-member employee who is a superstar, as in my recent case.

If you make decide to hire a family member, here are some general guidelines to avoid some nasty problems:

– Treat your family members like other employees and hold them to the same standards.
– Similarly, try to separate personal feelings and issues with business issues.
– Consider carefully the issue of stock ownership (see my post on terminating stock-holder employees). There are a lot of issues here, such as buy-sell provisions, which are beyond the scope of this post.
– Have clear written employment agreements and comply with the law. Family members can and will sue you for violations of wage statutes, etc.
– Communicate frequently on expectations for salary and ownership potential for the future. Your adult child may think that you are retiring at sixty and giving her the business. You may plan to work until eighty and/or sell the business. These different expectations can lead to big problems.
– Similarly, don’t let issues and problems build for years. Family members can turn into Rogue Employees, too.
– Consider arbitration clauses. Although I’m not always a fan of arbitration, you may not want your family’s dirty laundry aired out in court.

If you are a private business owner or a stockholder in a close corporation, I can help you with these issues. Call me at 617.338.7000.

Adam P. Whitney.