Dealing with personal relationships in the workplace

It has recently been reported in the press that John Neal, the CEO of the Australian headquartered insurance and reinsurance company QBE, had his annual bonus cut by twenty per cent (which equated to AU$550,000 or £340,000) for failing to disclose a personal relationship with his executive assistant. The decision to cut his bonus was taken despite what QBE described as a “commendable year [during which he] delivered a strong full year result”.  It has been reported that Mr Neal’s executive assistant was also executive assistant to the board.  QBE requires executives to disclose workplace relationships under its executive code of conduct.
Workplace relationships are common. Employees necessarily spend significant time together, and in many cases will have common interests.  Some employers view these relationships as a positive.  For example, one of the UK’s largest independent travel agencies is known to have produced well in excess of 100 marriages.  However, workplace relationships can be a distraction, can fuel gossip and can sometimes complicate decision making.  To be clear as to their expectations, employers should consider the circumstances in which workplace relationships may be inappropriate, and may wish to put in place a policy on them.  Any policy should strike a balance between an employee’s right to a private life, and the employer’s right to protect its business interests.  In most cases, this is likely to include a requirement that an employee discloses any workplace relationship that may give rise to a conflict of interest or a breach of confidentiality.  It should also be made clear to employees that they must not allow personal relationships to influence their conduct in the workplace.
Mr Neal’s case is an extreme example.  As CEO, he was clearly obliged under the executive code of conduct to disclose any personal relationship with a colleague.  Mr Neal has himself admitted that he did not do this, and that he could see that it might cause damage to the company’s reputation.  It is important to remember that the issue here was not the relationship itself so much as Mr Neal’s failure to abide by the code of conduct, and disclose it.  Whilst it has been reported that Mr Neal’s executive assistant has decided to leave QBE, it is understood that no action was taken against her, presumably because she was not subject to the code of conduct.  It is unlikely to be appropriate for employers to take steps to reduce bonuses, or take disciplinary action against an employee, simply for having a personal relationship with a colleague.  Such steps may be appropriate though, where an employer has a policy on workplace relationships which an employee deliberately disregards.  As always, when making a decision to reduce a bonus payment in any circumstances, an employer should consider whether the terms of the bonus scheme allow it to do this.  Failure to do so might lead to a claim for unlawful deduction from wages, or breach of contract.  The specific terms of the bonus scheme which applied to Mr Neal are not known.