“Family business” typically refers to a business owned by members of the same family, but it also often means that family members run the business. Many “family” businesses may need to take on some employees who are not family members, and these businesses should take care to treat family and non-family members of the business equally and fairly. This is important to a business’ continued competitiveness and success, but also for compliance with federal and state employment laws. A recent column written by business journalist Randy Myers and published in Entrepreneur discusses how family businesses can take care of their unrelated employees.
“Part of the Family”
The culture of a family business is probably the most important element in attracting and retaining employees, or as Myers puts it, family businesses should make all employees “feel like part of the family.” Family businesses can achieve this in any number of ways, from involving non-family employees in the central operations of the company, to offering benefits and other incentives that encourage employees to stay with the company. This keeps employees “energized,” according to Myers, and allows the business to maintain the culture that the family had created while benefitting from the knowledge and skills of others.
From Family-Owned Business to Small Business
The best course of action for some family businesses, depending on their circumstances, may be to leave the “family” aspect behind and offer equity interests to valued employees who happen to be from a different family. This might change the perception of the company’s management or governance, but it would not automatically change anything about the company’s legal status. The culture of a business does not necessarily depend on who owns the business, and bringing in new partners, shareholders, or members can help energize a company with new ideas or added leadership. When it comes to staying competitive in the marketplace, effective leadership is often more important than maintaining exclusive family ownership.
Legal Risks Regarding Non-Family Employees
Family businesses that want to keep ownership and control of the business in the family, so to speak, should take care to ensure that their employment practices comport with state and federal law. Laws like New Jersey’s Law Against Discrimination prohibit employers from discrimination, which can apply to many types of disparate treatment of employees, based on several categories. Family membership is not specifically included as a category in New Jersey’s law, but family businesses may inadvertently violate provisions of these laws related to discrimination based on gender, race, religion, or national origin by treating non-family employees different from family employees. Other laws dealing with employment discrimination include the New York State Human Rights Law, the New York City Human Rights Law, and Title VII of the federal Civil Rights Act of 1964.
Samuel C. Berger, PC’s business attorneys represent New York and New Jersey businesses and entrepreneurs in a wide range of legal issues. We offer fixed-fee packages of legal services to help businesses understand their rights and obligations and allow them to grow and run smoothly. To speak to a member of our skilled legal team, contact us today online or at (212) 380-8117.
More Blog Posts:
Federal Government Clarifies How Employers May Use Job Applicants’ Criminal Background Information, New York & New Jersey Business Lawyer Blog, May 25, 2012
Pregnancy and Childcare Discrimination: What New York and New Jersey Businesses Should Know, New York & New Jersey Business Lawyer Blog, April 27, 2012
Steps to Match Skills, Knowledge with Start-Up Business in New Jersey, New York & New Jersey Business Lawyer Blog, October 3, 2011
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