Each year, thousands of American businesses host some type of holiday gathering for their employees. While the number of parties has been severely reduced in recent years, the (somewhat) recovering economy will likely see a parallel increase in seasonal celebrations. Whether it is a catered luncheon at the office, or a company-sponsored trip to Las Vegas, these get-togethers oftentimes create a recipe not just for holiday cheer, but for litigation and office scandal. Although many of these events take place outside of the office and business hours, most are considered to be within the scope of employment. Accordingly, it is important for business owners and HR professionals to be prepared to address any challenges that might arise.

When considering what can go wrong at a holiday party, most people immediately think of the type of examples that are often parodied on television, such as the over-eggnoged executive attempting to coax co-workers underneath the mistletoe. Although sexual harassment may statistically be the single greatest risk of liability during office holiday party season, there are a number of other potential pitfalls that employers should consider.

Discrimination/Retaliation Concerns

As discussed above, sexual harassment is likely the most significant risk that companies will face at the holiday party this year. The most obvious and effective measure to reduce the possibility of improper fraternization is to host an alcohol-free event, or at least to limit employees' access to drinks. If banning alcohol might lead to a mutiny, there are several steps that can be taken to minimize overindulgence. First, removing hard liquor from the menu goes a long way to reduce drunkenness. Second, drink tickets limit the number of beverages each employee may consume at the event (two is standard, but watch out for cheaters and ticket traders, because someone is going to try!). Finally, a fairly effective solution is to charge attendees for their beverages, even if at a subsidized, reduced rate.

In addition to checks on alcohol, supervisors and managerial employees must be reminded to maintain professional standards and serve as examples for their subordinates. Leave the mistletoe at home and avoid any activities which may lead to physical contact or inappropriate conversation ("Twister" and "Win, Lose, or Draw" may be fun, but do not evoke grown-up behavior in a work environment). Finally, monitor behavior and alcohol consumption and be ready to prevent risky situations from escalating. The incorrigible flirt, the dirty dancer, and the drunk can typically be spotted and corralled prior to doing any real damage.

Outside of the obvious risks of risqué behavior, employers should also comply with other EEO laws during company-sponsored functions. For example, the event or activity should be accessible to any employee with a disability. Religious themes should be avoided in order to respect the diverse beliefs of the attending individuals. Any gifts to employees should be appropriate and neutral - gift cards are the safest bet. Finally, in the event that any complaint or report of inappropriate behavior emerges, such concerns should be taken seriously, documented, investigated promptly, and remedial action taken, if necessary. Any employee who makes such a complaint must be treated fairly and protected against any action that could be viewed as retaliatory.

Independent Contractor Status

Sometimes unforeseen legal issues can be implicated by company holiday parties. For example, many companies are increasingly utilizing the services of temporary agencies and hiring other types of independent contractors to supplement their employee base as business increases. Many times, these workers will become part of the everyday workplace, and it is not uncommon for them to be invited and included in extracurricular activities such as holiday parties. To avoid creating evidence that the DOL, IRS, or other agency might use to argue that an employer-employee relationship exists, there are several proactive measures that can be implemented. First, employers may exclude temporary employees and other independent contractors from holiday functions. If exclusion is too harsh a penalty for being a non-employee, a company may work with the independent staffing agency that provided the temporary workers to have it provide some sort of involvement or benefit to more firmly establish its role as the true employer. For example, a staffing agency should be required to pay a small fee to subsidize each temporary worker's attendance, to send invitations through the agency, and to have an agency's representative on-site at the event.

Wage and Hour

Is employee attendance "required" at a company party, even if it is held after regular work hours? If so, hourly employees may be entitled to regular or even overtime compensation for the time spent attending the event. If the event is voluntary, be sure to advertise it as such in any e-mail or invitation to avoid potential liability under the FLSA or the equivalent state law.

Physical Injury

Recreational fuctions that serve alcohol always involve the possibility of accidental injury. Slip and falls, broken chairs, coffee burns, and automobile accidents are all-too-common occurrences at and after holiday parties. These types of injuries can bring potential liability to the employer under workers' compensation, negligence, premises liability statutes, and state laws targeted towards providers of alcohol.

Many states consider the typical office holiday party to be in the course and scope of employment and would award workers' compensation benefits to any employee who was injured. Such benefits are considered the "exclusive remedy" for the injury, thus preventing the employee from seeking any supplemental recovery from the employer. If the injury is considered to be outside of the scope of employment, employers would face potential liability if the act were caused by a dangerous condition that the company knew or should have known about, or if it were caused by the employer's actual or imputed negligence. For example, many states have "dram shop" laws that create a duty to hosts to ensure that guests are not given an excessive amount of alcohol. In such states, damages caused by a drunk employee who is involved in a car accident after the office party could be imputed to the employer.

Keep the company function safe, inclusive, and in good taste and be extremely cautious with the quantity of alcohol being served. Control any adversarial situation before it escalates; be sure managers and supervisors set a good example, and have a non-drinking HR representative on patrol.