Often, people who work with a company and are in a position to influence the hiring of a new employee will lobby to have a family member hired. In some cases, companies will actively encourage this policy, on the theory that family members work well together. However, a company cannot violate state or federal laws regarding employment discrimination, even in the hiring of family members.
Most laws regarding the hiring of employees is made at the state level. In general, states give employers a lot of latitude in choosing who they hire. This means that there are few laws that prevent a company from hiring a person based on attributes that do not directly influence his ability to do the job, such as his blood relationship to a current employer.
There are few state laws that regulate nepotism in private companies. While some government agencies may have policies that forbid the hiring of relatives by current employees, private companies are generally left to decide whether they wish to encourage or discourage the hiring of family members. However, many companies make it a policy to forbid the hiring of relatives or else put in a system that ensures job candidates are judged based on their merits.
In the course of hiring, a company is not allowed to violate any federal or state laws related to discrimination. Federal law forbids companies from making employment decisions based on race, gender, or other special designations, except for in isolated instances. However, while a company cannot discriminate when hiring family members, this does not mean that the company cannot pick a family member over someone else, as this does not constitute discrimination.
Sometimes, companies avoid hiring family members because it can create bad blood in the company. In some cases, family members may carry personal conflicts into the workplace. Also, employees who are not members of a family may believe they have little chance for advancement. So, while nepotism may not violate any anti-discrimination statutes, many companies forbid it as a policy.