Small and medium business run much of New Zealand, with an overwhelming number of businesses falling within that category. It is also not uncommon for husbands and wives, or romantic partners to run a business.

There are risks associated with this sort of arrangement, especially when the personal relationship is recent and frail rather than strong and enduring.

A case heard earlier this year at the Employment Relations Authority is a real warning of the care that must be taken when romance and work intermingle.

The grievant claimed she was employed by her new friend in an administration role for 3 to 4 weeks. She claimed she was unjustifiably dismissed and that she was sexually harassed.

The business and its owner and sole director, referred to as “S” claimed that the grievant was not employed by S or his company.

The grievant accepted she was initially involved in a consensual personal relationship with S. That led to her being engaged as an employee, she claimed, in his small business.

S purchased a phone for her and said he would assist her financially to buy a motor vehicle that she could pay off through working for him.

The grievant said, for the initial three or four weeks in which she worked part-time, she was paid by S in cash and goods as requested. She was not provided with an employment agreement. She said she asked for one.

The grievant said she signalled the personal relationship would not continue while she continued working for S, but she had difficulty in persuading him to this viewpoint. Ultimately the grievant had a significant argument with S that led to him saying he wanted nothing further to do with her and that she should not return to the workplace.

S, however, had a different view of what occurred. S claimed that the grievant occasionally during the period in dispute visited the workplace, sometimes with her friend, to ‘hang out’ and that any money or goods he gave her were in the context of their personal relationship.

S conceded that the grievant had asked him “for a job” and that he told her he would consider this, but that it was unlikely he would employ her because he “considered her as a girlfriend only”.

The Employment Relations Authority pointed to the imbalance in bargaining power between the parties. S was a relatively mature and experienced businessman engaging in a personal relationship with a “young unemployed and vulnerable woman” to whom he was holding out the prospect of long-term employment. The Employment Relations Act requires that any imbalance in power be considered by the Authority.

The Authority determined that the grievant was an employee for a brief period of time “given S conceded he was contemplating formalising the relationship.” The Authority looked at how the employment relationship was formed.

No finding against S of sexual harassment was made. The relationship commenced as a consensual one which had preceded the employment period and spilled over into it. Reference is made to comments and touching which the grievant found uncomfortable. She told S she wished to de-escalate the relationship to one of friendship, however S did not take this well.

The Authority found that the romantic relationship and the employment ended because S wanted the grievant out of his life.

When you reflect on the facts you will anticipate problems arose around the dismissal. This was a romantic relationship that had come to an end. Emotions are always involved. Unsurprisingly there was no real process preceding the dismissal.

S gave insufficient attention to any procedural requirements before ending the grievant’s employment after their personal relationship ended. Accordingly, the dismissal was unjustified.

The grievant was awarded three months’ lost wages at the minimum wage for 30 hours a week, totalling just under $7000. She was also paid $18,000 for humiliation and distress relating to the unjustified dismissal.

As well as the risk of working with a romantic partner, the case is an important reminder that an employment relationship can arise even where there is no clear employment agreement. S’ argument was effectively that the grievant was a volunteer, but several cases have demonstrated that a business runs a dangerous line as soon as it rewards its ‘volunteers’ for their work. If the ‘volunteer’ also expected reward, then there is likely to be an employment relationship. Famously a bowl of salad at the end of trial shift was enough in one case.

The conclusion is that there are high risks in mixing a new romantic relationship with an employment one. Emotional rather than objective decisions are likely to be taken and the outcome is accordingly likely to be expensive for the employer, as was the case here.

Beware also of having friends as volunteers in your business, especially where you make promises or give them little rewards. They may end up with a very big reward at your expense.