Smithson: Think twice before hiring your spouse

Robert Smithson says existing employees can become very unhappy when the owner's spouse is hired to work for the business.

In smaller businesses, such as professional offices, achieving the right mix of boss and staff is critical. Losing that sometimes hard-won balance can have rather disastrous results.

Professionals – doctors, lawyers, and dentists for example – are particularly reliant upon their staff. They work closely together and many professionals would say that finding the right staff, and keeping them happy, is the most important factor in the success of the business.

Losing that happy state is never more likely to happen than when the owner suddenly decides his or her spouse should join the group.

It’s a fairly common occurrence in smaller, owner-operated businesses of this type that the owner’s spouse will join the mix. He or she will, due to the relationship with the owner, often join in a managerial capacity such as “office manager”.

From a family-income perspective, this all makes sense. If the owner can pay his or her spouse to be the office manager, rather than an outsider, more of the profits of the business stay within the family and this serves as a good income-splitting technique for tax purposes.

But, when the owner’s spouse is introduced to the business, the existing employees can be very, very unhappy with the situation. Aside from the likelihood that the other employees will perceive there to be favouritism at play, the actions of the spouse/manager are likely to cause other employees to take offence.

An example of how a spousal injection can be poisonous for the workplace atmosphere played out recently before the Ontario Superior Court of Justice.

Monique Drake was a long-serving medical secretary for Dr. Peter Blach. After 12 years of seemingly happy employment, the relationship was terminated in early 2011.

Drake sued for wrongful dismissal damages. Blach took the position that there was just cause for summary dismissal.

Drake’s evidence was that, in October of 2010 after Blach re-married, the work environment at the clinic changed for the worse, becoming “tense and poisonous”. Blach’s spouse became involved in the workings of the office and, according to Drake, treated both patients and staff poorly.

Very soon after the arrival of Blach’s spouse, Drake received a letter listing a series of complaints relating to her performance and conduct, imposing a variety of new procedures, and asserting that Drake was overpaid. A few months later, Blach’s spouse informed Drake that her pay was, due to an “error”, almost $15,000 too high and that this would be corrected.

Another letter, in March of 2011, cited additional complaints with Drake’s performance and her resistance to the unilateral reduction in her salary and provided her with working notice of termination. A particularly insensitive touch in the working notice letter was the two-sentence closing sequence, “[Y]our job will be closely checked and supervised and should you commit an act which would constitute cause for dismissal, your employment will be terminated immediately without further notice owed. We thank you for your service and wish you good luck in the future.”

It comes as no surprise that, due to the stress from this negative work environment, Drake was forced to take a medical leave during the working notice period and never returned to work for Blach.

The Court determined there was no written evidence of any disciplinary measures having been imposed on Drake prior to October of 2010 (when Blach’s spouse arrived on the scene). Blach had, to the contrary, given Drake salary increases during the course of her employment.

The Court accepted Drake’s evidence that the workplace environment “changed in October, 2010 when the defendant’s new wife took over running the office.” The Court commented, “It is ironic, that the defendant believed the plaintiff had been taking advantage of him when she was his only employee; and he now has his wife as office manager plus a medical secretary to do what [Drake] was doing alone.”

As there was, quite obviously, no just cause for summary dismissal, Drake was awarded damages reflecting a notice period of 9 months. Her damages were based on her salary at the time of the termination (not the unilaterally reduced salary).

The introduction of Blach’s new spouse as the de facto office manager cost his clinic a long-serving employee in Drake, produced a lawsuit and an award of damages for wrongful dismissal, and resulted in his staff contingent doubling from 1 to 2. That’s a classic example of why a business owner should think twice before hiring his or her spouse.

Robert Smithson is a labour and employment lawyer, and operates Smithson Employment Law in Kelowna. For more information about his practice, or to subscribe to You Work Here, visit www.smithsonlaw.ca. This subject matter is provided for general informational purposes only and is not intended as legal advice.

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