What happens when there is a family fallout?

Dismissing a member of the family

Running a family business brings different challenges and the blurring of lines between family and business is always present, particularly as the business matures and you move to the next generation.

With more people invested in the success of the business, there will be more opinions on the direction the business needs to go in and more people who want to ensure that they are maximising their opportunity to make money from the business. At some point, dispute or disagreement is inevitable.

We have previously blogged on the idea of a family charter, which in effect is a guidebook for all family members, setting out an agreed vision for the business and the parts that each family member will take, and it is worthwhile to take the time to work on such a document when the family are still on talking terms. We have seen too often businesses fracture when a family that didn’t think they would ever disagree actually disagrees.

If there is no family charter, then you will require to deal with the situation through your own internal procedures. In employment law, there are only a handful of potentially fair reasons for dismissal, such as capability, conduct, redundancy and so on, however there is a category of potentially fair dismissal for “Some Other Substantial Reason”.

Like any relationship, employment or family, there needs to be mutual trust and confidence. If you have a family member who is deliberately acting against you, just because they disagree with your vision, then it is clear that they do not have the trust and confidence in your leadership and equally you cannot trust them or have confidence in them to actually support you in front of the staff. That breakdown in the relationship would be regarded as Some Other Substantial Reason justifying dismissal.

When it comes to a dismissal, the quality of evidence is the key to success, therefore before you take any action, there needs to be a detailed audit trail showing the extent of the breakdown. That is why it is much better to ensure that all discussions are recorded. When I say recorded I don’t mean a recording of the actual conversation, but a follow up email confirming the discussion. That makes it much easier to show the pattern of behaviour and the actual breakdown of the relationship.

The more the evidence and the better the evidence, the easier it is to justify the dismissal, not just to the person being dismissed, but also to the rest of the family members who were not involved in that process.