Pre-nups and employment: the potential for a royal mess?

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While Prince Harry may not have entered into a prenuptial agreement with Meghan Markle, some employers are demanding that new hires do so as a pre-condition of employment. Aside from the complexities surrounding the enforceability of pre-nups, are employers running the risk of discrimination claims from candidates who aren’t willing to enter into one?

Employers such as hedge funds and private equity firms reward key employees and partners with a stake in their investments. These are often quite complex arrangements, that aren’t easily realised and/or take years to pay-out. What some fail to realise is that these assets could be the subject of divorce proceedings, and employers are understandably reluctant to be dragged into a dispute or face third party disclosure applications. Understandable, as both potentially affect the value of the fund or investment. For this reason, some hedge funds and private equity firms require employees to enter into a prenuptial agreement with their partner or spouse, to keep investments ring-fenced or otherwise protected. The intention isn’t to interfere with an employee’s personal affairs, but to reduce the risk of divorce proceedings affecting the employer’s assets.

However, employers who use a pre-nup as a condition of employment and/or participation in reward schemes run the risk of discrimination claims from candidates. There is a risk that such a requirement is a provision, criterion or practice which indirectly discriminates against a group or individual with a protected characteristic. For example, candidates may object because of their religion or belief. Some religions frown upon the concept of divorce, considering that marriage is the giving of spouses to God without condition. In light of such beliefs, a pre-nup could be seen as an affront to a religious belief. Another argument is that requiring a pre-nup may be discriminatory on the grounds of marital status. Whatever the circumstances, employers will need to have well-considered, sound justification for requiring a pre-nup if they want to avoid - and if necessary defend themselves against - complaints of indirect discrimination.

Employers who decide that pre-nups are needed to protect their business must ensure that they weigh-up the risks first.  How much will divorce proceedings affect their investments and profitability, compared to potentially losing out on talent? In the event of any such claims, how will they deal with public complaints that their practices are unlawful and discriminatory?  

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.