I know this probably isn't illegal since I've heard of other companies with similar policies but I'm curious why this isn't considered discrimination. My boss handed the personnel policy out to the supervisors (myself included) to go over and see if we need any revisions. One of the first things in it is that we won't hire the spouses or close relatives of any current employee under any circumstances. Is this policy legal?

It is discrimination. The issue is that not all discrimination is illegal. The federal government and the states have laws which define illegal discrimination. To the best of my knowledge, no state has made nepotism policies illegal.

It may be discrimination, but it's not illegal discrimination, because being a family member is not a protected characteristic. And, it's not terribly good business sense either. Although it may happen that it doesn't cause a problem, those are the rarer of the cases.

Reading it further it even says if two employees decide to marry one of them must resign, if they can't make that decision management will for them. Is it legal to fire somebody for marrying somebody in these circumstances?

Yes. This kind of policy isn't as common as it used to be, but it's more common in situations where one party is supervising the other. What the company is often trying to do is eliminate the perception that the supervising spouse is giving preferential treatment to the their spouse-employee.

Thanks for the info.