Happy holidays! Tis the season for joy, warm thoughts, and a process server in your reception area? While undoubtedly unwelcome and surprising, holiday-related complaints, claims, and lawsuits are all too common amongst employers. Holidays tend to evoke emotions for many people; most of these emotions are positive and healthy. However, some emotions are negative, unhealthy, or unwanted by other employees.
This recipe for a litigious Christmas in the workplace is at its zenith at the holiday party. Sometimes too much holiday cheer can result in trouble for an employer. Incidents of unwanted sexual advances and physical confrontations continue to increase in relation to an employer's annual holiday party. No matter how well intentioned, holiday parties encourage abnormal behavior by your employees. Holiday events and celebrations sometimes bring with them the notion that reveling and holiday fun trump good judgment and common sense. This should never be the case.
Thus, as much as we enjoy them, the reality is that a company-sponsored holiday party for the unwary will create an increased risk of liability for employers. So, remain vigilant and consistent as you plan these events. And here are some fairly basic steps to undertake to reduce the risk of liability.
Preparing for the Party
Here are some recommendations for employers to take to reduce risks associated with a holiday party:
- Review Insurance Policy. Confirm that your insurance policies cover your holiday party.
- Code of Conduct Training. At some point prior to the holiday party, schedule your annual review of the company's Code of Conduct, Anti-Discrimination, and Anti-Harassment policies. Do not specifically tie the two together. However, make sure that the policies are fresh in the mind of your employees. It will ensure that your employees know ahead of time that what happens at the holiday party does not “stay” at the holiday party. Normal workplace rules about harassment and professionalism apply. Furthermore, it will ensure that you meet any training requirements your organization may have under California law (i.e. see AB 1825, AB 2053, etc.). This will also remind Supervisors of their responsibilities and what to do if they learn of or witness any potential violation of these policies during the holiday party.
- Attendance is Voluntary. Under California Labor Code section 3600, an employer is liable, under certain conditions, for any injuries arising in the course of employment. But an employer is not responsible when the injury arises out of voluntary participation in an off-duty social activity that is not part of the employee's duties. So, to minimize liability, make clear to their employees that attendance at parties is strictly voluntary. Furthermore, leave work-related topics off any agenda or schedule, and clients and consumers off the guest list.
- Invite the Family. If you invite your employees to bring their partner, spouse, children, and family, the employee will be more likely to keep themselves in check. However, make sure that your unmarried employees can bring a guest as well. Furthermore, the guest, partner, or spouse could, impliedly, serve as a designated driver for your employee.
- ADA Compliant. Make sure that the event location is accessible for those with disabilities.
- Have Transportation. Generally, California employers don't face criminal liability if an employee drinks too much at a company event then injures himself or someone else on the way home. However, some local municipalities have imposed "social host" laws on employers or other individuals who serve alcohol to guests who cause injury or damage after a party. So, to be cautious, have designated drivers, car service, or taxi cabs available. Or, ensure that your party is at a location at or near public transportation.
- Stay on Schedule. Let the guests know when the party starts and ends, leaving reasonable time for guests to make arrangements through your offered transportation. And when the party is over, make sure that the company communicates its good-bye and good-night, so that everyone knows that the event has ended. The company should not have an open-ended event, with the possibility that after-party events are imputed to the holiday party.
- Avoid Costume/Themed Parties. This just encourages employees to drift into a fantasy mindset, where good taste, decency, and general office decorum has been temporarily suspended. It might result in offensive or revealing clothing. Specifying Christmas over other religious holidays (i.e. Chanukah, Kwanza, etc.) should also be avoided. So, keep the decorations as secular as possible. Even something as inoccuous as an "Ugly Christmas Sweater" theme can devolve into a confrontation. Rather, stick to professional attire at the holiday party. And do not hang any mistletoe – at the office or at the party.
December traditionally is a month for giving. And companies are no different when it comes to giving to their employees – bonuses, gift cards, prizes, and parties. However, that "giving" cannot be done by the company without the IRS "expecting" some taxes in return. The general tax rule under Internal Revenue Code section 61 is that all forms of compensation are subject to income tax unless specifically excluded by the tax code. And there is nothing to differentiate any form of gift that comes as compensation.
Thus, any holiday bonus, prize, or gift – including gift card – may considered taxable income to the employer and employee. Also, make sure to properly distinguish any bonus from non-discretionary bonuses. It makes a difference for taxes and overtime pay. And a notice from Uncle Sam and his pals at the IRS and DOL.
Now, an exception to the rule that holiday gifts, prizes, and parties should be included in income can be found in code section 132(a)(4), which excludes certain de minimis fringe benefits from taxable income. Examples of de minimis fringe benefits include the following: traditional birthday and holiday gifts of property (not cash) with a low fair market value; occasional cocktail parties, group meals, picnics for employees or their guests; occasional theater or sporting event tickets; coffee, doughnuts, and soft drinks; flowers, fruit, books or similar property provided to employees under special circumstances (for example, on account of illness, outstanding performance, or family crisis).
When it comes to gift cards and gift certificates, the exceptions distinction is on the gifts specificity and value. A gift certificate that “allows an employee to receive a specific item of personal property that is minimal in value, provided infrequently, and is administratively impractical to account for, may be excludable as a de minimis benefit, depending on the facts and circumstances” may qualify. And the IRS has indicated in separate rulings that benefits as low as $100.00 does not qualify as de minimis.
Alcohol – Where Office Parties Frequently Go Wrong
The chances for unwanted sexual advances or physical confrontations to occur at your holiday party increase in proportion to the availability of alcohol at your event. Thus, the safest recommendation would be to leave alcohol off the guest list. However, your employers also expect to be treated as adults. And if you choose to pursue different paths to explain away the lack of alcohol (i.e. family-friendly Holiday party, etc.), you may be unwittingly turning-off some of your employees, when all you are trying to do is foster a positive workplace.
So, if you choose to permit alcohol to be served at a company sponsored event, here are ways to minimize your potential liability:
- Imply a Limited Alcohol Menu. For example, wine tasting only. While individuals can get intoxicated over any type of alcohol, by avoiding the service of spirits that tend to intoxicate people more rapidly, you minimize the risk.
- Not Just Booze. Ensure a wide variety of non-alcoholic drinks. Maybe something other than alcohol that has a holiday theme to it, like Egg Nog, Hot Chocolate, or Hot Cider.
- Use a Licensee. Retain outside service providers to handle all alcohol and bartending duties. This can be by having your event at a restaurant where a bar is present and alcohol on the menu, and you leave it to your guests to decide whether to imbibe (i.e. cash bar only). If you are hosting your own event, then still retain a licensed caterer to handle the alcohol. Confirm that caterer will be instructing bartenders to cut off service to employees who appear to be intoxicated. And never allow a company supervisor or manager to serve drinks to other employees.
- Serve Food. This should be food that is easy to eat, while also substantial enough to help reduce the impact alcohol would have on an empty stomach. Avoid salty foods and foods that encourage more drinking of alcohol. Dessert and coffee always serve as a hidden indicator that the party is ending and that people should be transitioning away from alcohol.
- Avoid Big Announcements. Try to avoid using the holiday party to make a big, company-related announcement – i.e. bonuses, raises, promotions, etc. This goes back to the first tip – nothing employment related should be occurring at the event. No matter how you time it in relation to the event (i.e. at the beginning, middle, or end, etc.) you are increasing nerves of the crowd and/or recipient. This will encourage some to drink more. Even an early announcement might encourage the staff to seek a release by turning to the spiked egg nog. So, leave your announcements for Boxing Day.
As indicated, regardless of the steps taken, there are occasions when employees may have “one too many” and believe that their inebriated state somehow excuses them from polite and acceptable behavior with their colleagues. And, unfortunately, there is really no way for employers to completely avoid any risk associated with hosting a holiday party. However, implementing some of the above suggestions may help an employer minimize potential liability and provide the room for the holiday spirit to grow amongst your staff.