The Legal Risks of Workplace Social Functions

By on November 7, 2018
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The holidays are a perfect time to gather your employees and celebrate the year’s successes. Many companies schedule their work parties between Christmas and New Year’s Eve when there is a lot of down time and everyone is in a festive mood. While you may not want to think about potential liabilities, they exist and it’s best to be prepared. Be sure you protect yourself and your business from potential lawsuits by employees or third parties by following these simple tips.

Prevent Sexual Harassment Claims

A festive atmosphere combined with alcohol consumption can potentially lead to inappropriate behavior. The following tips can help you prevent sexual harassment claims by employees and guests.

  • Update policies. Ensure human resource policies address appropriate conduct at company-sponsored social functions. The policy should include specific examples of appropriate behavior and dress code. Employees should be provided with the code of conduct prior to attending social events.
  • Keep holiday customs appropriate. Avoid hanging mistletoe or doing anything that could potentially create a romantic atmosphere.
  • Consider inviting spouses and significant others. Employees may be more reserved with their spouses or significant others present. While inviting more people raises costs, it may be worth it if it helps avoid problems.

Prevent Alcohol-Related Incidents

The potential liability from employees consuming alcohol at company-sponsored social functions varies from state to state. When claims are made, it’s often third parties injured by the actions of an intoxicated employee. Under the legal doctrine Respondeat Superior, a company can be liable for its employee’s acts if they were committed within course of employment. Here are some tips to keep in mind if you plan to have alcohol at a company-sponsored event.

  • Look for warning signs of intoxication. Stop serving employees who show visible signs of intoxication (slurred speech, red/watery eyes, poor coordination, reduced judgement or inhibitions, etc.).
  • Consider holding the event off work premises. Holding your event at a restaurant or bar where alcohol is served by professional bartenders is one way to protect yourself. Professionals can easily spot intoxicated people and know how to respond appropriately. Hire a contract bartender to work the company event if you prefer to have it on site.
  • Limit the amount of alcohol served at the party. You can issue tickets or limit the amount of “free” drinks provided. You can also have a cash bar. If people have to pay for their own drinks, they are likely to drink less.
  • Provide alternate transportation. Call cabs and arrange alternative transportation for employees who have been drinking and cannot drive home safely.
  • Encourage peer support. Encourage employees to look out for one another and notify management if someone is intoxicated and not fit to drive.
  • Purchase liability insurance. You can purchase liability insurance that covers “Dram shop”—an establishment where alcoholic beverages are sold— or liquor law liability if your event is on site and your current insurance does not cover it.

Another option is hosting an alcohol-free party. While it may not be a popular decision, you can potentially avoid problems by keeping alcohol out of the equation altogether.

Prevent Compensation Liability

If an employee is injured during a work function, they may be eligible for worker’s compensation benefits. The following tips can help you mitigate that risk.

  • Keep holiday/social functions separate from business. Make sure employees understand there is no business conducted at the social function and attendance is completely voluntary.
  • Host the party off work premises. It’s more difficult to make a worker’s comp case if the employee was not at work when the incident occurred. If you do host the party off premises, however, you should make sure the venue where you have you event is properly licensed to serve alcohol.

In general, worker’s compensation laws cover all work-related injuries regardless of fault. However, they do typically exclude injuries that are incurred at company-sponsored social events where attendance voluntary. Be sure you understand your state’s law around worker’s compensation and social functions.

Prevent Wage Claims

Employees can report you if they feel they are being made to work “off the clock”. Make sure employees know that your company-sponsored social function is not a business meeting and no business will take place at the event.

  • Make attendance voluntary. Ensure employees understand that attendance at the party is voluntary and their presence is not required for business purposes.
  • Schedule the party outside normal business hours. This is especially important if you have an event on site. If you do schedule a social function during business hours, ensure employees do not engage in business during that time.
  • Do not ask employees to perform specific functions. Do not ask employees to do any sort of job during social functions. Be sure your employees understand they are there to enjoy themselves and nothing more.

You must also be careful about inviting independent contractors and contractors employed by staffing agencies to company-sponsored social functions. You don’t want to give the IRS any reason to suspect there is an employer-employee relationship with contractors. While not ideal, you may want to exclude contractors from social functions. If you don’t want to exclude them, you can request the staffing agency pay a small fee for each contractor’s attendance, or you can invite a representative from the agency as well.

Safe and Fun Workplace Social Functions

We don’t mean to take all of the fun out holiday party planning, but these are important considerations that should be taken seriously. You don’t want to start a new year with a lawsuit caused by someone’s careless actions. Take some time to understand your organization’s needs and responsibilities and articulate that information into a formal policy. Do your best to control any alcohol consumption, require accountability, and limit your exposure. When in doubt about what is and is not within your rights and how to protect yourself and your business, consult an attorney.

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