Separating from a partner is never easy, but when that partner is also your business associate, the situation becomes significantly more complex. This is starkly illustrated in the recent case of Tyla Scott v. Scotts Brewing Limited, heard by the Employment Relations Authority (ERA). This case serves as a cautionary tale, highlighting the potential pitfalls of continuing to work together in a business post-separation, particularly where one partner is the owner.

A Brewing Storm: The Case of Scotts Brewing Limited

Tyla and Phillip Scott were the driving force behind Scotts Brewing Limited (SB), a successful brewing company they established in 2007.  The couple, who married in 2013, shared not only a personal life but also the responsibilities of running their business. Phillip held the majority shareholding (95%) and was the sole director, while Tyla held a 5% shareholding and was involved in the administrative and managerial aspects of the business.

The cracks began to appear in 2023 when the couple separated.  This personal breakdown spilled over into their professional lives, creating a tense and challenging work environment.  In November 2023, SB's CEO, Brooke Kofoed, requested both Scotts to take a step back from the business due to the impact their personal conflict was having on the company and its staff.

The situation escalated in 2024 when Tyla expressed her intention to return to her role in the business.  Shortly after, SB, under Phillip's direction, initiated a restructuring process that resulted in Tyla's position being made redundant. Tyla claimed her dismissal was unjustified and motivated by Phillip's desire to oust her from the business amidst their ongoing relationship property dispute.

The ERA's Determination: A Temporary Reprieve

The ERA, in its interim determination, found that Tyla had a strong case for unjustified dismissal.  The Authority noted that the timing of the redundancy, the lack of clarity regarding Tyla's role, and the absence of any consideration for alternative roles all pointed towards a potential ulterior motive.

While the ERA acknowledged the challenges of reinstating Tyla to her previous role given the acrimonious relationship between the Scotts, it ultimately ruled in favour of reinstating her to the payroll on an interim basis.  This decision aimed to provide Tyla with financial security while the substantive matters of her dismissal and the couple's relationship property dispute were being resolved.

Lessons Learned: The Perils of Mixing Business and Pleasure

The Scotts Brewing Limited case underscores the significant risks involved when couples continue to work together after a separation, especially in a business where one partner holds a controlling interest.  Here are some key takeaways:

• Blurred Lines:  The separation of personal and professional relationships can become extremely difficult, leading to emotional turmoil and impacting decision-making within the business.
• Power Imbalance: Where one partner owns the business, there's a risk of that power being used to the detriment of the other, particularly during relationship property proceedings.
• Impact on the Business: Conflict between former partners can create a toxic work environment, affecting employee morale, productivity, and ultimately, the business's bottom line.
• Legal Complications: Disputes over employment rights and relationship property can become intertwined, leading to complex and costly legal battles.

Mitigating the Risks: Practical Steps for Separated Couples in Business

While the Scotts Brewing Limited case paints a bleak picture, there are steps that couples can take to mitigate the risks of working together post-separation:

• Clear Communication: Maintain open and honest communication about expectations, roles, and responsibilities within the business.
• Professional Boundaries: Establish clear boundaries between personal and professional relationships, and seek professional mediation or counselling if necessary.
• Formal Agreements: Consider drawing up formal agreements that clearly define each partner's role, responsibilities, and ownership in the business. These agreements should also address how disputes will be resolved.
• Exit Strategies:  Develop a clear exit strategy in case the working relationship becomes untenable. This could include buy-out clauses or provisions for one partner to leave the business.

The Scotts Brewing Limited case serves as a stark reminder of the potential pitfalls of continuing to work with an ex-partner. By understanding the risks and taking proactive steps to mitigate them, couples can navigate this challenging situation and protect both their personal and professional interests.

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