October 22, 2018
Experts Corner

Family businesses could have employment-law advantages

Robert G. Brody
Katherine M. Bogard

Family businesses make up the fabric of America.

From an employment-law perspective, family businesses often face unique issues because of the family dynamic. For instance, upper management is totally Hispanic because it is a family owned operation. Is this a defense to certain discrimination claims?

The answer is yes. Being a family business can be good for an employment-law defense.

A good example of this advantage was highlighted in a 2010 case in Connecticut. The case involved a woman named Vivian Harris who was a long-time employee of a family owned lawn-care business, Long Hill Tree and Lawn Care Service Inc.

In 2006, Harris' mother died and she had trouble dealing with her loss. She routinely cried at work, which impacted her performance, according to the company. On two occasions she refused to perform her duties and was sent home both times. After returning to work following the second incident, she was discharged, the company said.

Harris, who was 61, filed a discrimination lawsuit arguing the company fired her because of her age. She also said the company lied about the real reason she was fired.

The court found in favor of the company.

Harris argued she was replaced by a younger employee, which was proof of age discrimination. The company argued the new employee was hired for a completely new job and Harris' tasks were actually distributed among numerous employees, including the owners. Interestingly, the owners were in their early 30s.

Under normal circumstances, the age of the employees who took over Harris' responsibilities would weigh in the court's decision, but the judge didn't give it weight in this case because the employees were actually the owners of a small family business. Such deference to owners who take over a departing employee's duties is not always given.

Even more damning to the company, two years before her firing, Harris heard the owners' father and founder of the business say Harris' health insurance was expensive. She argued this comment backed her claim that her firing was about age, not performance.

In essence, she argued she needed health insurance more than a younger employee would. Again, the court favored the family. The court did not give this statement weight because the founder was not involved in the decision to terminate Harris' employment.

When the second generation takes over a family business the founder often continues to come to work, but with a significantly reduced role. In most other businesses, the former owner would no longer be part of the business.

But reality in a family owned company is different. The court recognized this and accepted the company's defense. Most other small businesses would not have fared so well.

For family businesses and non-family businesses alike, best employment practices are key.

Here, the lawn-care company was lucky: They did not have documentation to support their position. When pressed by the court the company explained they had written disciplinary notices but withheld them for fear Harris would become more upset. Fortunately, the court bought this explanation.

Discipline is never pleasant, especially for close-knit family businesses. Despite this, all companies should document employee performance (both good and bad) in a timely fashion. It could save the company down the road and employees want to know where they stand.

While it is not automatic, family businesses often show more humanity at work and that can pay off. Here, Harris' mother had just passed away. Rather than immediately taking action, the company gave her a second chance.

This action may have helped convince the court that these are fair people who deserve the benefit of the doubt that other companies just may not have received.

Robert G. Brody is the founder and managing member of Connecticut law firm Brody and Associates LLC. Katherine M. Bogard is an associate at the firm.

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