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Family Businesses Face Unique Labor and Employment Challenges

Family businesses are a part of the backbone of the United States economy. Their unique structure creates special opportunities and challenges for the family, from a labor, benefits and employment-law perspective.

A common phrase in business is “it’s not personal, it’s business:’ This is obviously not the case when the business is family-led and that is the crux of the challenge. Below is a list of challenges unique to family businesses and suggestions on how to manage them to the company’s advantage.

1. The Office Is No Place To Play Family Feud

While Family Feud may be an exciting TV show, it has no place in the office. Family disagreements are part of life but they become a serious problem when they carry over to the workplace. This type of hostility can cause a lack of productivity, poor judgment and can undermine the entire office culture.

The key to avoid family squabbles at work is boundaries. For instance, most non-family businesses have rules and structures in place to ensure the business runs smoothly. Family businesses often have the same structure but adherence for family members is lacking. These rules, however, ensure family members keep personal conflicts at home rather than in the boardroom and need to be followed. 

Another key check for family businesses is having a board of directors which includes non-family members. These outside voices can often help keep the peace and provide sound counsel when family dynamics are hindering business operations.

2. Retention of Non-Family Members Is Tough

Family businesses often struggle retaining top talent. From a non-family member’s perspective, upward growth is considered unlikely when you have the wrong last name. Unfortunately, this causes talent to leave the family-run company once they feel they have advanced as far as they can within the organization. The result is some of your best talent walks out the door.

To combat this brain drain, family businesses have an option; be transparent with employees about professional growth opportunities. If growth is possible and important to the candidate you hired, outline the growth path and stick to it. If there is no path for growth, include that in the hiring process.

3. Lack of Job Descriptions

In most businesses, employees tend to wear multiple hats no matter their job title. This is especially true in a family business. While you may be the CEO, you may also be the person who hires, fires, orders holiday gifts or cooks lunch for the family during the lunch hour. In a family business, it is easy to ask a family member to pitch in on any task needed.

However, this lack of job description may create unnecessary turmoil. If no one knows what their lane is, they obviously cannot stay in it. This breeds discontentment for some employees. Job descriptions are the answer. Besides helping employees understand the company’s expectation of the work, they also have added benefits under the employment laws. First, they help in analyzing what the essential functions of a job are when a request for reasonable accommodation is made under the Americans with Disabilities Act. Second, job descriptions are crucial when analyzing whether employees are exempt or non-exempt under the Fair Labor Standards Act and local wage and hour laws.

4. Lack of Appropriate Complaint-Reporting Mechanisms

In the wake of the #MeToo movement, many companies are reassessing their internal complaint procedures to determine effectiveness and lawfulness. Family businesses are not immune from harassment and discrimination complaints from employees.

Family businesses must have a reporting mechanism for employee complaints. Employees should be able to report complaints to any member of management, including at least one non-family member and the CEO. Employees, however, also have to have an avenue of reporting that goes around the alleged harasser and is not a family member, should the allegation be against a family member.

Once the alleged harassment or discrimination is reported, an investigation must follow. For family businesses, if the allegation is not against a family member, normal investigation protocols should be followed. But if a family member is accused, a non-family member must investigate. You could use your legal counsel (assuming he or she is adequately trained), it could be a human resource consultant. As long as the investigator is competent, the key is not who it is, but who it is not. If your investigation is ever challenged, it will be difficult for a jury to believe the company when the alleged harasser is related to the investigator. 

Originally published in New Haven Biz, November/December 2018