It's common for employers to hold social functions these days — Friday afternoon get–togethers, open houses, retirement celebrations, birthday and holiday parties are all familiar parts of office life. Despite the festive intent of these parties, however, serious consequences can result, for which an employer may be held responsible. For example, if one of your employees drinks too much at such an event, then gets in a car and injures himself or another person, are you liable for the injury? "Perhaps," says Louis C. Rabaut, a partner and labor and employment law specialist with Warner Norcross & Judd LLP of Grand Rapids, Michigan. "Depending on your state's laws, you may have such a thing as host liability."
Social host liability, which is recognized by many courts across the country, means that the person or company sponsoring a social event is responsible for what happens during or as a result of the gathering. While your workers' compensation insurance policy may pay for any damage or injury, it's not without a cost to you. "You will pay one way or another," states Rabaut. Either you'll be involved in a potentially costly lawsuit, or your insurance will pay for the damages, but your premiums will be raised.
How can a business owner who is planning an office party attempt to limit the associated liability?
An important step in your party planning should be reviewing your business insurance policy. If you're going to be serving alcohol, the Independent Insurance Agents of America, Inc. (IIAA), based in Alexandria, Virginia, suggests checking your comprehensive general liability policy to be certain that it covers third–party liquor liability. If your policy does not, you should buy special event coverage or a liquor liability policy, according to the IIAA. Contact your insurance agent for details.
If there's no behavior–altering substance available to your employees, or if you limit their access to it, chances are employees will be calmer and more in control of their actions. In addition to averting injuries, limiting alcohol consumption could prevent other types of actionable activities, such as property damage and sexual harassment incidents. The presence of alcohol can make people do things they normally wouldn't, and after the party is over, claims for damage or harassment could be filed. "Sometimes, when the alcohol is flowing freely and everyone is feeling warm and fuzzy, harassment could occur," reminds Rabaut.
While having a cash bar instead of an open bar may limit drink consumption, be careful. Having your employees and guests pay for the alcohol they consume on your property does not automatically limit your liability if an alcohol–related accident should occur. According to the IIAA, if you're charging for alcohol, you'll need a liquor license and other liability protections.
If you decide to serve alcohol at your party, don't hold the party in your office. "Have the party off premises and make sure the servers have a liquor license. That way you transfer the obligation to the provider of the liquor," cautions Rabaut.
Plan a non–traditional get–together such as a group outing to a basketball or football game, and the focus will not be on drinking, but on the sporting event. Let the arena provide the alcohol, which employees can pay for themselves. Says Rabaut of such an event, "The company is not paying for the alcohol in this venue, and it is the arena's responsibility for monitoring consumption." Other alternative party ideas from the U.S. Department of Labor include an amusement park outing, or a volunteer activity, such as a 10K run or bake sale, with proceeds going to a local charity.
Make sure that your employees know your policy on substance abuse and that this policy covers any work situation, including an office party, suggests the U.S. Department of Labor. Post the policy in your employee handbook and on office bulletin boards, and send it out by email as a reminder before the party.
Rabaut suggests that one or more members of your management team stay "stone sober" to set an example for the rest of the employees. Employers should also have the clout to intervene when necessary. Rabaut says that employers must have the authority to tell their employees "you've had too much to drink... we'll get you a cab home."
Keep your employees from getting behind the wheel of a car if they've been drinking by providing alternative transportation, both to and from the party. Rabaut suggests having a free taxi service for any employee who requests it. This service must be "no questions asked" to ensure that it won't be held against the employee the next day.
According to the National Association of Catering Executives, you can be held responsible if a guest at your event becomes ill after eating food prepared by an unlicensed caterer. Licensed caterers are subject to health department inspections of their cooking facilities without notice, which ensures that the food they serve is prepared in sanitary conditions that are governed by law. In addition, licensed caterers are required to carry insurance, while unlicensed caterers are not.
Take the focus off the typical "sit and drink" party by inviting your employees' spouses and children to the gathering. Plan activities for the children; perhaps hire a musician or storyteller. For example, Rabaut's Grand Rapids, Michigan law firm rented a local children's museum this past February in lieu of holding a holiday party in December. All of the firm's employees and their families were invited. Hot dogs and pizza were served; alcohol was not. Not only did this limit Warner Norcross & Judd LLP's liability, but it put a new focus on their employees. Rabaut says, "This party recognized our employees' status as parents, not just employees." What better message could you send your workforce?