How to reduce the risk of liability associated with holiday parties Featured

8:00pm EDT September 25, 2010

The holidays are a time for celebration, but company-sponsored holiday parties can lead to legal trouble. The combination of alcohol, dancing and games, along with the perception that the party is not work-related can create a dangerous environment in which the employer can be hit by several types of lawsuits.

“People generally focus on liability that can be created by alcohol and auto accidents because that grabs the headlines,” says Martin J. Saunders, partner with Jackson Lewis LLP. “However, there are a lot of other issues that may create more or potentially larger liability for the company than auto accidents.”

Smart Business spoke with Saunders about how employers can protect themselves and still allow employees to celebrate.

What are some of the legal issues that can arise from holiday parties?

In the discrimination area, there is potential for sexual harassment or inappropriate jokes that are sexual, religious or ethnic in nature. But there is also liability in the wage/hour area, because when people bring suits they don’t generally bring a suit on one particular issue — they lump in everything under the sun hoping that something sticks.

For example, you may send employees out to buy party supplies during their lunch hour. Generally, if you asked the employees if they expected to be paid for that time, they would not have thought it was a big deal. The employees were on their lunch break, the store was on the way, etc. But as a matter of law, if people are engaged in work, then they are supposed to be compensated. At a later time, when the situation between employer and employee has gone south, you end up with another claim.

Sexual harassment is one obvious issue that can come up when people are consuming alcohol and view themselves as being off work and, therefore, believe the company is not responsible for their conduct. The conduct of co-workers (especially if it is a supervisory and subordinate employee) can easily create offensive working conditions and conceivably create the perception of an ‘exchange’ — that sexual favors are expected in exchange for favorable treatment at work.

How can companies limit sexual harassment liability?

Employers should have and disseminate a strong policy prohibiting sexual harassment at work and at work-sponsored events, such as parties, picnics, etc. Employers should also remind employees prior to the event that sexual harassment is prohibited. Policy distribution and enforcement are essential.

In some instances of harassment, there will be an immediate reaction. That is actually quite rare. It’s more common that no reaction happens that day or the next, but down the road when something goes sour between the employee and the company or the supervisor, then what happened at the party becomes one of many instances that are thrown up as examples of a hostile work environment.

How can employers avoid religious discrimination when planning a party?

Although not necessarily unlawful, hosting an office Christmas party where attendance is implied to be mandatory may offend employees who do not celebrate Christmas. It could potentially lead to claims of religious discrimination or a religiously hostile work environment. An office Christmas party in and of itself generally will not support a claim for religious discrimination. However, it may be used as evidence to support a broader claim of religious discrimination. To limit exposure, keep celebrations secular.

What steps can companies take to limit general liability?

The easiest solution is to not have the party. However, if people want to celebrate and go out on their own, the company is still responsible if, for example, a supervisor makes an inappropriate request of another employee outside of the work environment.

Aside from not having a party at all, there are several things the company can do to limit its liability. First, make sure employees know your workplace substance abuse policy and that the policy addresses the consumption of alcoholic beverages in a work-related situation or office social functions. Use every communication vehicle to make sure your employees know the policy. Then, train your employees, both supervisory and rank and file, to make it clear to them that it is a company-sponsored function. The same rules that apply at work apply at the function. Even if alcohol is being served, the same decorum is expected.

What can be done at the party to limit liability?

Consider having the party off-site and have that establishment share responsibility (and potentially liability) for consumption of alcohol. If you do serve alcohol at an office event, consider hiring a professional bartender. The bartenders should have exclusive authority to pour drinks and cut people off if they have had too much to drink. Also, instruct the bartender to stop serving alcohol one or two hours before the party officially ends.

Avoid serving lots of salty, greasy or sweet foods, which tend to make people thirsty. Serve foods rich in starch and protein, which stay in the stomach longer and slow the absorption of alcohol in the bloodstream.

You can consider having someone act as a ‘designated driver’ or the company can reimburse employees for reasonable cab fare. Find somebody who would agree to chaperon the party and ensure things don’t get inappropriate.

Or, you could reinvent the office party concept. Why have the typical office party? Try something new, like an indoor carnival, group outing to an event or volunteer activity with a local charity.

Martin J. Saunders is a partner with Jackson Lewis LLP. Reach him at (412) 232-0404 or