Can favoritism amount to a ‘hostile’ work environment?
As if there weren't enough complications when co-workers are paramours, here's another: Those who aren't part of the love affair feel slighted when the bedded ones are promoted, and the slighted third parties end up suing.
That's what happened in a case before the California Supreme Court. A prison warden was having affairs with three female employees. All three received promotions and better pay at the expense of better-qualified female employees. The slighted employees filed suit, claiming a hostile work environment caused by sexual harassment.
The state claimed that the women filing the suit were never approached for sex, so they weren't harassed directly. Plus, it argued that male employees suffered equally, so no gender discrimination existed. As strange as it sounds, that defense worked at two lower court levels.
Depending on the Supreme Court's decision, however, the employer could still lose.
Advice: Ban relationships between supervisors and subordinates. At the very least, require supervisors to notify you if they become involved in such "power differentiated" relationships. That may precipitate moving the employee to work under a different supervisor.