Nepotism: What It Means for Employers

What it means in practice

What nepotism covers. Federal rules show how wide nepotism can reach. The Office of Special Counsel's prohibited personnel practices overview says nepotism goes beyond hiring and also concerns the benefits and advantages of employment, so completing a relative's annual performance rating or advocating for a relative to be given easier duties is covered too. For private employers, family favoritism in recruiting, promotion, pay, assignments or discipline creates legal exposure mainly through anti-discrimination law.

The federal workforce rule: 5 U.S.C. 3110. The statute covers Executive agencies, legislative and judicial branch offices and the District of Columbia government. A "public official" is any officer (including the President and a Member of Congress), member of the uniformed service or employee with authority to appoint, employ, promote or advance individuals, or to recommend them for those actions. A "relative" is a father, mother, son, daughter, brother, sister, uncle, aunt, first cousin, nephew, niece, husband, wife, father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, stepfather, stepmother, stepson, stepdaughter, stepbrother, stepsister, half brother or half sister (5 U.S.C. 3110(a)).

What section 3110 prohibits. A public official may not appoint, employ, promote, advance or advocate for a relative in or to a civilian position in the agency where the official serves or over which the official has jurisdiction or control. The rule also runs the other way: an individual may not be appointed, employed, promoted or advanced in an agency if a relative who is a public official there advocated for it (5 U.S.C. 3110(b)). An individual placed in violation is not entitled to pay, and money may not be paid from the Treasury as pay to that individual (5 U.S.C. 3110(c)). The Office of Personnel Management's rule at 5 CFR 310.102 allows a public official to employ relatives when necessary to meet urgent needs from an emergency posing an immediate threat to life or property, or a national emergency; those appointments may not exceed 30 days, with one additional 30-day extension if the need continues.

Nepotism as a prohibited personnel practice. Under 5 U.S.C. 2302(b)(7), an employee with personnel authority may not appoint, employ, promote, advance or advocate for a relative, as defined in section 3110, in the agency where the employee serves as a public official. OSC explains that relatives may work in the same agency, and even the same chain of command, as long as the official with personnel authority is not involved in any personnel action affecting the relative. OSC's example of a violation: an official in his spouse's chain of command directs the spouse's direct supervisor to give the spouse a bonus. If the Special Counsel decides disciplinary action is warranted, it presents a written complaint to the Merit Systems Protection Board, whose final order may impose removal, reduction in grade, debarment from federal employment for up to 5 years, suspension or reprimand, a civil penalty, or a combination (5 U.S.C. 1215).

Federal ethics: impartiality. The executive branch ethics rule at 5 CFR 2635.502 reaches beyond personnel actions. An employee has a "covered relationship" with a household member, a relative with whom the employee has a close personal relationship, and any person for whom the employee's spouse, parent or child serves or seeks to serve as an employee, officer, contractor or similar role. When such a person is a party to a particular matter involving specific parties and a reasonable person would question the employee's impartiality, the employee should not participate unless the agency designee authorizes it.

Private employers: no general federal ban. Outside government, no federal statute prohibits hiring or promoting relatives as such. Title VII of the Civil Rights Act of 1964 applies to employers with 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year (42 U.S.C. 2000e(b)), and it does not list family relationship or marital status as a protected basis. The legal risk arises when favoring relatives keeps people of a particular race, color, religion, sex or national origin out of jobs or promotions.

How nepotism can become disparate impact. The EEOC Compliance Manual Section 15: Race and Color Discrimination says word-of-mouth recruiting in a racially diverse workforce can promote diversity, but the same method in a non-diverse workforce is a barrier to equal employment opportunity if it does not create applicant pools that reflect the diversity of the qualified labor market. It adds that recruiting only from largely homogeneous sources violates Title VII if the practice has a racial purpose, or has a significant racial impact and cannot be justified as job related and consistent with business necessity, the statutory disparate impact standard (42 U.S.C. 2000e-2(k)). The EEOC's footnote cites a Fourth Circuit case affirming a disparate impact ruling where "practices of nepotism and word-of-mouth hiring" kept African Americans unaware of job openings. See our entries on adverse impact and business necessity.

How it can become disparate treatment. The same footnote contrasts a Seventh Circuit case holding that passive reliance on employee referrals could support a pattern-or-practice disparate treatment claim, though not a disparate impact claim without an affirmative act by the employer. The EEOC's plain-language prohibited employment policies and practices page gives its own example: reliance on word-of-mouth recruitment by a mostly Hispanic workforce may violate the law if almost all new hires are Hispanic. Section 15 also recommends making promotion criteria known and communicating job openings to all eligible employees.

Current federal enforcement status. Executive Order 14281 (April 23, 2025) directs all agencies to deprioritize enforcement of statutes to the extent they include disparate-impact liability, naming 42 U.S.C. 2000e-2. The order did not change the statute; section 2000e-2(k) remains in the U.S. Code, and EEOC Section 15 was still posted in October 2026.

No-spouse and anti-nepotism policies must be even-handed. Many employers put policies in the employee handbook barring relatives from supervising one another. The EEOC's sex discrimination guidelines state that a rule which forbids or restricts the employment of married women and is not applied to married men is sex discrimination under Title VII, and that so long as sex is a factor in applying the rule, it is discrimination based on sex (29 CFR 1604.4). A policy that, in practice, always moves or removes the wife when two employees marry raises that issue.

Marital status protection. For federal employees, 5 U.S.C. 2302(b)(1)(E) prohibits marital status discrimination, and OSC handles those complaints itself. For private employers, marital status is not a federal protected class, but some states protect it. As an example, the Minnesota Human Rights Act defines marital status as whether a person is single, married, remarried, divorced, separated or a surviving spouse and, in employment cases, includes protection against discrimination based on the identity, situation, actions or beliefs of a spouse or former spouse (Minn. Stat. 363A.03, subd. 24). Minnesota defines an employer as a person with one or more employees (subd. 16), lists marital status among the bases in its employer unfair employment practice section (Minn. Stat. 363A.08, subd. 2), and exempts from that section the employment of an individual by the individual's parent, grandparent, spouse, child or grandchild (Minn. Stat. 363A.20, subd. 1).

Where states differ: public-employee nepotism laws. Many states have their own nepotism statutes for state and local government. As an example, Texas Government Code Chapter 573 bars a public official, including state, county, city and school district officers, from appointing, confirming or voting for the appointment of a relative to a position paid directly or indirectly from public funds (section 573.041). It covers relatives within the third degree by consanguinity or the second degree by affinity (section 573.002). Third-degree blood relatives include parents, children, siblings, grandparents, grandchildren, great-grandparents, great-grandchildren, aunts, uncles, nephews and nieces (section 573.023(c)); a spouse is a first-degree relative by affinity (section 573.025). A relative already continuously employed before the official took office, for at least 30 days if the official is appointed, may stay, but the official may not take part in decisions affecting that relative alone (section 573.062). Violators must be removed, and a violation is a misdemeanor punishable by a fine of $100 to $1,000 (sections 573.081 and 573.084). Other states differ.

Example 1: counting degrees under the Texas statute. A county commissioner's nephew applies for a county job. The nephew is a child of the commissioner's sibling, a third-degree relative by consanguinity under section 573.023(c), so the commissioner may not appoint him or vote for his appointment. The commissioner's first cousin is not on the statute's list of relatives within the third degree. Under the federal statute the answer differs: 5 U.S.C. 3110(a)(3) names first cousins expressly.

Family members in a family business. The Fair Labor Standards Act's child labor minimum ages do not apply to a parent, or a person standing in place of a parent, employing the parent's own child, except in manufacturing, mining and occupations declared hazardous for 16- and 17-year-olds (29 CFR 570.2(a)(2)). The exemption applies only when the child is employed exclusively by the parent; a child helping a parent perform work for the parent's employer is not covered (29 CFR 570.126). See our Fair Labor Standards Act entry.

Payroll rules for family employees. The IRS family employees page and Publication 15 (2026) set special employment tax rules. Wages to a child under 18 working in a parent's trade or business are not subject to social security and Medicare taxes if the business is a sole proprietorship or a partnership in which each partner is a parent of the child, and wages to a child under 21 are not subject to FUTA. Income tax withholding generally still applies. Wages to a spouse working in the other spouse's trade or business are subject to income tax withholding and social security and Medicare taxes, but not FUTA. None of these exceptions apply when the employer is a corporation (even one the parent or spouse controls), an estate, or a partnership other than the parents-only kind. See FICA.

Example 2: a child on the family payroll in 2026. A sole proprietor pays her 16-year-old son $8,000 in 2026 for work in the business. Social security (6.2 percent) and Medicare (1.45 percent) would normally total 7.65 percent each for employer and employee, or $612 apiece on $8,000, but neither is due because the child is under 18 in a parent's sole proprietorship. FUTA (6.0 percent on the first $7,000 in 2026) is also not due because he is under 21. If the business were a corporation, all of those taxes would apply.

Recordkeeping. Employers covered by Title VII must preserve personnel records, including applications and records of hiring, promotion, demotion, transfer, layoff, termination and pay, for one year from the date the record was made or the action was taken, whichever is later, and must keep all relevant records until final disposition once a charge is filed (29 CFR 1602.14). Records of how an opening was posted and who was considered show whether a relative went through the same process as other candidates. See our talent acquisition entry.

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