If you happen to own or run your own business, it may be tempting to hire your spouse as an employee. Various benefits may result such as pension, retirement, or insurance. However, it is important that your spouse is not hired unless he or she has the requisite qualifications for the intended position and can actually add value to the business. In addition to the potential for resentment that may result from other employees that may view the hiring as being nothing more than nepotism, you may also be setting yourself up for unexpected problems and issues in the event of a divorce.
For example, if your spouse is being paid a salary that is more than what might otherwise be deemed an appropriate market rate as compared to others performing similar tasks, it is unlikely that he or she will be able to earn a comparable salary with another employer if terminated from your business. As a result, you may very well find yourself having to pay your spouse a much larger than expected support obligation to supplement the inflated income that he or she was receiving as an employee of your business.
Accordingly, it is important that your spouse is hired in the manner that you would hire any other employee, so that, in the event of a divorce, you will be able to reach a reasonable accommodation concerning either the termination of the employee relationship, or the continuation of that relationship, should that be more appropriate.
Your spouse should be hired for a position within the business that is appropriate for and consistent with his or her capabilities, setting forth clear expectations concerning the work expected to be performed. Performance reviews should also be conducted consistent with those of other employees, with raises and promotions awarded when merited. In the event of a divorce, such an arrangement will help validate your spouse’s professional capabilities as to the possibility of obtaining other employment at a similar income or salary. Your spouse’s paycheck should be in line with what other employees are receiving in a similar position.
In the event of a divorce, you should also attempt to come to an agreement as to whether your spouse will continue working for your business. Before you make such a determination, however, you should be confident that such an arrangement will not be detrimental to a productive and healthy work environment, as any personal animosity that may exist may affect the other employees adversely, or worse, create a hostile work environment.
If termination is determined to be the best option, the process should be consistent with that which would be followed for any other employee. Prior to such a decision to terminate your spouse, an attorney experienced in divorce should be consulted as to how any decision would affect such matters as spousal support and equitable distribution of the marital assets.
In summary, the divorce process can be even more complicated when a divorcing spouse is also an employee of your business. Therefore, it is essential that an attorney experienced in such matters should be consulted before any actions are taken.
The Law Firm of DiOrio & Sereni, LLP is a full-service law firm in Media, Delaware County, Pennsylvania. We strive to help people, businesses and institutions throughout Southeastern Pennsylvania solve legal problems – and even prevent legal problems before they occur. To learn more about the full range of our specific practice areas, please visit www.dioriosereni.com or contact Robert B. George, Esquire at 610-565-5700 or at [email protected].
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