Workplace romances: do you need love contracts & non-fraternisation policies?

Workplace romance

Workplace romances will occur regardless of steps taken by employers to quell them and employers need to consider what measures can and should be introduced to protect their business, writes Amy Zhang

According to Relationships Australia, 40 per cent of people in the 35 to 50 age group met their partner at work. Longer working hours in the office and a general blurring of the distinction between “work time” and “leisure time” could be factors behind the increased tendency of workers to look for that perfect someone and romance no further than down the office corridor.

While on one hand, office romances may be indicative of a positive and productive work environment, risks arise for businesses where relationships between colleagues develop or turn sour. With a heightened focus on sexual harassment in the wake of the #MeToo movement, it is more important than ever that employers have a plan in place to properly address dating in the workplace.

Non-fraternisation policies and love contracts
It can be difficult to find the right balance between a ‘live and let live’ approach and a blanket ‘no dating’ policy.

The acknowledgement of the risks to employees and businesses have led many workplaces to try to expressly regulate office romance. However, outright prohibition of employees having any kind of personal relationships will rarely stand up to scrutiny or be effective.

Prohibition policies, however, can be of three different types.

Type 1 is a strict non-fraternisation policy, a straight ban on any dating or personal relationship in the workplace. These policies are problematic.

Firstly, there would be significant doubts that such a policy would be upheld, at least in the Australian context, as it would rarely be within the concept of a reasonable and lawful direction. It could breach privacy laws and could itself be discriminatory (for example if the policy in practice favoured married couples against singles). Moreover, such a policy could have negative effects on the workforce, encouraging employees to be dishonest about their relationships, affecting morale generally, and causing employees who do develop relationships with a co-worker to simply leave the employer.

“Risks arise for businesses where relationships between colleagues develop or turn sour”

Type 2 policies, prohibiting supervisors from dating any employees, are less problematic, and more legally enforceable, but still suffer from some of the same concerns above.

Type 3 policies prevent supervisors from dating subordinate employees, and may be a useful policy to have, as it prevents power-imbalance issues. However, a blanket ban even on these forms of relationships can cause issues and cause morale and retention problems.

Another form of control that has been used by some US companies is the so-called “love contracts”, “dating contracts” or even “cupid contracts”, where employees who are starting a relationship are asked to enter into a contract that confirms that the relationship is consensual, will not result in favouritism, will not interfere with work, and in the event of breakdown, will not result in either party taking action against the employer.

Employees undertake that they will behave professionally, will not let their romance relationship interfere with work, and will not participate in decision making that could affect the other’s pay, performance, reviews, hours, career, or promotional activities. Again, such policies and contracts can breach privacy rights, and may not be effective in preventing harassment claims. These have not been widely used in Australia.

A novel approach was recently introduced at Facebook and Google. These companies now adopt a “one strike and you’re out” rule, which states that employees only have one opportunity to ask a co-worker out on a date. If the co-worker rejects their offer, that employee is not allowed to ask again. As per above, whether such a rule would be enforceable in practice is an interesting proposition.

Dismissal for ‘fraternisation’
In light of the risks of romance and office relationships, many US businesses have taken to enforcing ‘non-fraternisation’ policies and clauses, including type 1 policies discussed above.

In the US context, Courts appear to be more willing to uphold no fraternisation clauses and policies. In the case of Shumway v United Parcel Service Inc, it was considered legitimate to terminate the applicant’s employment for breaching UPS’ blanket non-fraternisation policy. Similarly, in Sanguinetti v United Parcel Service, it was said that termination was legitimate if taken on the sole basis of violation of the no-dating rule through a personal, sexual relationship with a subordinate. In this case, it was said that the burden of such a policy will weigh more heavily on managers and supervisors.

Such policies and clauses are less commonplace in Australia and have not been squarely considered. However, a recent Fair Work Commission decision did provide a glimpse into how more limited restrictions could operate.

“Employees only have one opportunity to ask a co-worker out on a date. If the co-worker rejects their offer, that employee is not allowed to ask again”

In Mihalopoulos v Westpac Banking Corporation, the Fair Work Commission said “employers cannot stop their employees forming romantic relationships”. Nevertheless, the existence (and breach) of a conflict of interest policy or contractual clause could have ramifications for the way that office relationships are conducted and treated in the Australian context, as made clear by this case.

In this case, Mr Mihalopoulos was a manager in an extramarital relationship with a subordinate. While Westpac policies did not specifically refer to office relationships, Mr Mihalopoulos’ employment contract did require that Mr Mihalopoulos avoid situations which could give rise to real or perceived conflict of interest.

Mr Mihalopoulos tried to argue that his relationship was a private matter. This argument was dismissed by Senior Deputy President Hamberger, who read such a relationship into the conflict of interest clause. He said that it was immaterial that the relevant clause did not refer to workplace relationships expressly, adding, “To be blunt it should be obvious to any reasonably intelligent person that for a manager … to form a romantic relationship with a direct subordinate creates the potential for a conflict of interest”.

The Commission added that it was “virtually impossible” for relationships between managers and subordinates not to create at least the perception that a conflict of interest may arise, in issues such as performance appraisals, the allocation of work, and promotion opportunities. As such, these relationships would always require disclosure to allow the conflict to be appropriately managed.

It was held that the failure to disclose the relationship, in circumstances where there was a clear conflict of interest, compounded by dishonesty on the part of Mr Mihalopoulos in lying about the relationship when questioned by Westpac, constituted a valid reason for dismissal.

While the above case did not deal specifically with no-dating policies or contractual clauses, and constituted a fairly uncontroversial consideration and application of standard no-conflict clauses, the above suggests that type 3 policies, which prevent supervisors from dating subordinate employees, could have some legs in the Australian context.

What to do?
Workplace romances will occur regardless of steps taken by employers to quell them. This makes it imperative for employers to be alive to the risks that can arise from workplace relationships and to appropriately manage them through adequate policies and systems. While some things may not work in the Australian context per the above, employers should at the very least consider what, if any, additional measures can and should be introduced to protect their business when it comes to romance in the workplace.