Holiday parties have become an annual tradition for many employers. Employers view such parties as a means of boosting employee morale, breaking hierarchical barriers between managers and the employees they supervise, and thanking employees for their dedication and hard work during the year. While holiday parties can and do achieve these positive goals, such social gatherings also can pose a legal risk for employers. Unfortunately, holiday parties have increasingly become the backdrop for sexual harassment complaints and drinking-related accidents that cause injury or death to employees or third parties. Employers need to be aware of the potential downside of holiday parties and how they can act to minimize the legal risks inherent in such gatherings.

Sexual Harassment Complaints

In January 2000, as in years past, there likely will be a slew of new sexual harassment lawsuits filed by employees against their employers which focus in whole or in part on inappropriate behavior that occurred during the annual holiday party. Indeed, holiday parties present the perfect setting for a sexual harassment complaint. Such gatherings, particularly when alcohol is served, create a friendly, fun-charged environment in which employees let down their professional guard and allow their usual office inhibitions to fade. Compliments may be uttered regarding an employee's dress or appearance, and social invitations to dance may be extended. While these types of behavior alone are not necessarily objectionable and would not, in and of themselves, constitute sexual harassment, inappropriate conduct may occur which could reasonably be perceived as harassment: the telling of crude or offensive jokes, unwelcome, offensive touching, or unwelcome sexual advances or propositions.

Employers can take some comfort in the standard applied by most courts. In order to constitute sexual harassment, the conduct at issue must be sufficiently "severe or pervasive" to alter the conditions of employment. Applying this standard, many courts have held that a one-time incident at a Christmas party, even if inappropriate, does not meet the "pervasive" test. See Cain v. Korum Ford (1996) 80 Wash. App. 877 (one unwelcome kiss at holiday party insufficient to establish a hostile work environment).

Of course, such protection is not available to the employer if inappropriate behavior during the holiday party is coupled with previous incidents of harassment. Thus, for example, in Marshall v. Cascade Utilities Inc., 1999 U.S. App. LEXIS 26280 (9th Cir. 1999), in reversing summary judgment for the employer in a co-worker sexual harassment suit, the Ninth Circuit found relevant the fact that plaintiff's co-worker grabbed plaintiff's buttocks during a Christmas party and had engaged in several previous incidents of standing too close to her or brushing against her. The Court held that a reasonable woman in the plaintiff's position might find such conduct sufficiently severe or pervasive to alter the terms of employment.

However, if the conduct at the holiday party is a one-time occurrence, but is "severe" enough, as in the case of an assault or battery, the courts may conclude that sexual harassment has occurred despite the fact that the conduct is not repeated or "pervasive." See Radke v. Everett, 56 FEP Cases (BNA) 923 (Mich. App. 1991) (single incident can be enough to support sexual harassment claim); see also Equal Employment Opportunity Commission Policy Guidance at E-5 which provides "that the unwelcome, intentional touching . . . of intimate body areas is sufficiently offensive to alter the conditions of the working environment."

What Can Employers Do?

Short of assuming the role of "Grinch" and canceling the holiday party, what can employers do to protect themselves from liability for sexual harassing conduct during holiday parties?

First, employers should make sure that they have a comprehensive, written sexual harassment policy in place, including sexual harassment training in the workplace. Employers might also re-circulate the sexual harassment policy prior to the holiday party, or send a memo to employees reminding employees to act responsibly at the party and expressing a zero tolerance for harassing behavior.

Second, if the budget permits, employers could invite employees to bring their spouse, significant other, or guest. Although such an invitation will not rule out incidents of sexual harassment, it may reduce the likelihood of such incidents occurring, as employees may tend to act more responsibly and in a less flirtatious manner towards each other if they bring a spouse or special friend to the party.

Third, employers should monitor closely any employees who have a history of harassing behavior, or who have been involved in complaints of sexual harassment. If such an employee is observed engaging in any inappropriate behavior, he or she should be asked to leave the party immediately, and the employer should apply appropriate discipline upon the employee's return to work.

Finally, employers receiving any complaints regarding inappropriate behavior at the holiday party should treat such complaints seriously and should take prompt, effective steps to address the complaints. This includes interviewing the alleged harasser and harassee, talking to potential witnesses, and administering appropriate discipline if inappropriate behavior is found to have occurred. By taking prompt, remedial action to address complaints of harassment, employers can reduce and in some cases altogether eliminate liability for sexual harassment.

Alcohol-Related Incidents Involving Employee or Third-Party Injury or Death

Employers hosting holiday parties during which alcoholic beverages are served should pay heed to potential liability arising from alcohol-related accidents and injuries to employees or third parties.

With respect to employee injuries stemming from alcohol-related incidents, the California Supreme Court has held that for purposes of workers' compensation recovery, employees who drink and become intoxicated at Company-sponsored events and then injure themselves driving home, can seek recovery under the workers' compensation system. McCarty v. Workmen's Comp. Appeals Bd. (1974) 12 Cal. 3d 677 (wife of deceased employee could seek workers' compensation for death of employee who attended his employer's Christmas party, became intoxicated, collided with a railroad signal pole on the way home, and was killed). However, the holding of the California Supreme Court in McCarty has been cast into some doubt by California Labor Code section 3600(a)(9) which was subsequently enacted and which excludes from liability for workers' compensation those injuries "arising out of voluntary participation in any off-duty recreational, social or athletic activity not constituting part of the employee's work-related duties, except where those duties are a reasonable expectancy of, or are expressly or impliedly required by, the employment."

With respect to injuries to third parties, the majority of courts have held that an employer cannot be held liable on a negligence theory for injuries or damages to the third party caused by an intoxicated employee. Such courts have followed the traditional common law rule that it is not a tort to either sell or provide intoxicating liquor to a person, and that no cause of action exists against one furnishing liquor in favor of a third person injured by the intoxication of the person so furnished. The reason for this rule is that it is the drinking of alcohol, not the furnishing of it, that is presumed to be the proximate cause of the third party's injury. Yet, despite this rule, some courts have imposed liability for third-party injuries on employers under a negligence theory where an employer serves alcohol to an employee who is visibly intoxicated or engages in conduct to encourage the drinking of alcohol by an employee. See Halligan v. Pupo (1984) 37 Wash App 84. Additionally, some courts have imposed liability on employers for negligence in situations where the employer escorts an intoxicated employee to his or her car and directs the employee to drive home. In these cases, the employer is viewed as having assumed control over the intoxicated employee, and consequently assumed a duty to third parties injured by the "controlled" employee. See Brockett v. Kitchen Boyd Motor Co. (1968) 264 Cal. App. 2d 69 (employer held liable for injuries to a third party where employer escorted obviously intoxicated employee to his car and instructed him to drive home).

Still other courts, including courts in California, have held that employers who furnish or permit the consumption of alcohol at a social function can be subject to vicarious liability to third parties under the theory of respondeat superior. Under the doctrine of respondeat superior, an employer is liable for the torts of his employees committed within the scope of their employment. Thus, if the injured third party can demonstrate that a sufficient nexus exists between the intoxicated employee's employment or the employer's Christmas party and the subsequent negligent act which caused injury to the third person, vicarious liability will attach against the employer. See Harris v. Trojan Fireworks Co. (1981) 120 Cal. App. 3d 157.

The Courts consider many factors in evaluating whether a sufficient nexus exists between an employer's Christmas party and the employee's subsequent negligent act. Specifically, courts look to (i) whether or not attendance at the party is required by the employer; (ii) whether the party occurs on the employer's premises or at some outside location; (iii) whether the party is held during working hours; (iv) whether employees are compensated for time spent at the party; (v) whether, in leaving the party and driving to another location, the employee is furthering a business purpose of the employer's; (vi) whether the purpose of the party or event is to further the employer's business interests, such as when clients are invited to attend; (vii) whether or not the employer pays for the employee's alcoholic beverages; and (viii) whether the employer encourages the drinking of alcohol by its employees. Id.; see also Mosko v. Raytheon Co. (1993), 416 Mass. 395 (no respondeat superior liability where employer offered a no host bar during a Christmas party that was held off premises and not during working time, and where attendance was strictly voluntary; fact that party was provided to boost employee morale was insufficient to transform a purely social occasion into an evening of work.).

What Can Employers Do?

Given these factors, what can employers do to decrease their risk of being held liable for third party injuries caused by intoxicated employees? As the above cases suggest, the most obvious solution is for employers not to provide alcohol to employees during the holiday party. If, however, employers intend to provide alcohol during the holiday party, other precautions should be considered.

First, employers could provide a no-host bar at the party, or alternatively, provide drink tickets in order to limit the amount of alcohol consumption. If the party includes a cocktail reception and dinner, employers may wish to supply a limited amount of alcohol during the dinner only. In no event should employers, their managers, or supervisors, encourage their employees to drink or provide additional drinks to an employee who is obviously intoxicated.

Second, employers should always make attendance at the holiday party strictly voluntary and should avoid making oral or written statements to employees "encouraging" attendance at the event.

Third, if possible, employers should hold the event off premises and outside of working hours, and should not compensate employees for time spent at the party.

Fourth, employers should not invite clients or customers to the party. If clients are invited, the party may assume a business purpose, and attendance by employees may therefore be considered more compulsory.

Fifth, employers could provide taxi vouchers for employees to use following the event, and encourage the use of designated drivers, perhaps by offering door prizes to those who assume the designated driver role.

Sixth, as with the sexual harassment policy, employers could send a memo to employees prior to the holiday party reminding employees to drink and act responsibly during the holiday party, and encouraging the pre-party assignment of designated drivers.

Finally, and simply, employers, like others, need to assume the role of friend to their employees by not letting an obviously intoxicated employee drive drunk.

The holiday season, while a time of joy, is also a stressful time for employers and employees. The holiday party is a definite morale booster for employees and a good respite from the pressures of the season. However, such events are not risk free. By taking these steps, employers can limit their own liability and prevent their holiday parties from becoming holiday tragedies.