Firing ex-wife costs husband $70,000

Friday 3 July, 2020

It is not uncommon during a relationship for a spouse or de facto partner to take a salary from a family business even though they don’t actually work in the business. If the couple separates, the spouse or de facto partner who owns the company may be able to stop the salary without breaching employment obligations, although there can be relationship property implications. However, if the spouse or de facto partner is an employee and working for the company, they cannot be dismissed just because the relationship has ended.

The Employment Relations Authority (ERA) recently awarded a wife over $70,000 in compensation and holiday pay, after she was dismissed from two companies owned by her ex-husband. The ERA had to decide whether she was employed by the companies, or just drawing a salary as part of a family and spousal relationship.

When there is a family connection, it is important not to find an employment relationship where neither party intends there to be one. When deciding whether there is an employment relationship, courts will look carefully at the facts and the context in order to find the true basis or real nature of the relationship.

The ERA decided that the real nature of the relationship in this case was an employment relationship because the wife had undertaken work for the companies that was more than just minimal. Her work was an integral part of the business, involving managing employee rosters, recruitment, payroll work, editing the website, answering phones and email, managing social media, and taking photos for the newspaper. While she had some freedom in when and how she carried out some of her work, there was still some supervision and control of her work. The ERA also placed weight on the fact that the wife was described as an employee in an application for paid parental leave.

The ERA concluded that the wife was an employee of the companies and was unjustifiably dismissed. She was awarded over $70,000 in compensation and holiday pay.

Conclusion

If your company pays a ‘salary’ to your spouse or partner, you should exercise caution about cancelling it following a separation or relationship breakdown. If there is an employment relationship between them and the company, ending it without following due process, could be an expensive mistake.

If you need advice on your separation and/or employment matters, our Employment and Family Teams can help.