The Boss Is Dating an Employee. Now What? Any owner, CEO or manager needs to tread very carefully when becoming romantically involved with an employee.

Q: My business partner is dating one of his direct reports. To avoid the appearance of a conflict of interest, he wants her to report to me instead. He says that since both parties are single, and the relationship is consensual, it's a private matter. I told him I'd check with our attorney about potential legal issues, but I'm concerned that this is an ethics minefield. What do you think?

A: There are numerous ethical issues involved in an owner or CEO or, really, any manager dating an employee. You and your partner need to see your attorney as well as an HR expert, but first you need to have an owner-to-owner talk about leadership ethics.

This is no dating game—the relationship, whether or not they stay together, could wreak havoc on your culture and company. Playing musical chairs with direct reports does not solve the ethical issues that come with this interoffice romance. As owners, both of you are responsible for setting the tone for the organization and for modeling behavior expected of all employees. Your partner's expectation that you will now supervise his love interest isn't coming from a place of leadership or ethical awareness.

When a supervisor dates an employee it is never a private matter. And when romance blooms at the office—especially with the boss—it's disruptive to other employees, triggering questions about fairness, favoritism, transparency, credibility and accountability. The distraction can tear at even the most cohesive group.

First, you need to make sure the employee is truly in the relationship by choice—that she hasn't felt pressured. She needs to know that her interests will be protected.

It is possible that both will agree to stop dating in order to preserve their work relationship and maintain goodwill with the rest of the company staff. (Because, seriously, who would want to work on that team?)

If not, one way to try to create a win-win is to help the employee find a new job (if that is what she wants). Dating an owner can reduce a talented professional to being considered "the boss's girlfriend," which can inhibit her colleagues' trust and the flow of information, torpedoing work collaboration. If she agrees that it would be best for her to move on, ask people in your network if they know of an equivalent—or, ideally, better—position at another company. (But keep your clients and vendors off the list of prospects—that's just another ethical mess waiting to happen.)

Yes, your partner could take a leave of absence to pursue other professional options and remove himself from day-to-day business decisions, but that doesn't sound like a good long-term fix.

So, from both the business and ethical perspectives—to keep your staff from getting distracted by a soap opera and to give the employee involved an opportunity to leave a complicated situation and come out even (or ahead) professionally—you should focus on separating the work and romantic relationships.

Once you have this situation sorted out, I recommend taking a look at the larger issue of interoffice romances. Use the counsel of your attorney and HR expert to develop policies that reinforce the kind of work culture you are trying to sustain. When an owner dates an employee, it affects everyone and ratchets up the gossip mill—taking all eyes off the real business at hand.