As the year winds down, the party season winds up. For many of us, this time of year includes getting together with friends, family, and colleagues for holiday parties. Many businesses host holiday parties for employees near the end of each year, a tradition intended to reward workers in a relaxed, festive environment. As they plan holiday gatherings, however, employers should keep in mind these parties may have unintended consequences that increase an organization’s liability risks.
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Summary
- Risks from company parties include personal injury, property loss, and reputational damage.
- Inappropriate behavior by employees can lead to employment practices and other liability-related lawsuits.
- Mitigating company party risks is possible with careful planning, appropriate insurance, and risk management guidance.
In 2023, more than 64% of companies reported having in-person holiday parties.
That was the highest percentage since 2019, before the COVID-19 pandemic, when
75% of companies held holiday parties. Among the survey’s other findings for 2023 company parties:
- 58% hosted the party during the workday or near the end of the workday.
- 57% served alcohol at the party.
- 55% invited employees only to attend.
- 55% of employers used a caterer, event planner, or outside service.
- 35% held the party in the evening or on a weekend.
- 32% held the party on company premises.
What could go wrong?
Stories of public intoxication and embarrassing incidents at company parties have become so common that such behaviors are almost expected when alcohol is available.
A cursory internet search of “company party stories” turns up a litany of tales that are memorable for the wrong reasons. More than a few such stories include serious injuries
in addition to bruised egos. Some may also lead to lawsuits.
Bah Humbug! Holiday Harassment
- An employee witnessed a colleague's intoxicated misconduct at a company holiday party and promply reported it to HR.
- Afterwards, the employee was harassed by co-wokers for reporting the holiday party misconduct, which involved damage of physical property and violent threats.
- The employee reported the harassment to HR and local law enforcement. The company transferred the employee to a new location, and the employee left the company.
- The employee filed a lawsuit against the company alleging wrongful termination and hostile work environment in violation of the Fair Employment and Housing Act (FEHA).
Many employers host company parties to create a bonding experience for employees where they can have a good time and enjoy themselves. Unfortunately, some attendees overindulge and act inappropriately. Employers that intend to host a holiday party should consider risk scenarios that could arise during and after the event. Here are a few types of incidents that can lead to severe consequences for your company and/or your employees:
Party risk mitigation
The scenarios described are not the only risks employers might face when hosting
a holiday party. Careful planning that takes risks into account should be a focus for
all employers.
Too much holiday spirit
- A company hosted a holiday party for their employees at their office during work hours where food and alcohol were offered.
- An employee overindulged on alcohol and the employer took notice. They offered to call the employee's spouse, but the employee declined, saying they would make the call themselves.
- The employee left the company holiday party with colleagues and continued to consume alcohol at a local establishment.
- On their way home, the employee got into a car crash that resulted in injuries and damages assessed at $1.25 million.
- The employee sued the company and the local establishment for negligence.
The court found both liable, which resulted in the company paying $300,000
in damages.
To mitigate party risks, here are five steps businesses can take:
1. Limiting guests’ alcohol intake. To reduce alcohol consumption, employers could use professional bartenders who are trained to see signs of intoxication, offer lower-alcohol or alcohol-free beverages, and serve ample amounts of food.
2. Making attendance optional. Mandating attendance at a party may cause employees to view the event as a required work activity, which could increase the employer’s responsibility for injuries and other claims. By making attendance optional, employers can draw a line indicating the party is not part of an employee’s work duties.
3. Reviewing, updating, and communicating workplace policies. Employers should make all employees aware of company policies on conduct, harassment, and social media.
4. Arranging transportation for guests. An unsafe experience getting home can ruin the enjoyment of an otherwise positive company event and lead to liability. Encouraging employees to have designated drivers after the party is wise, but employers can further reduce these risks by providing transportation or vouchers for safe ride-sharing services or taxis.
5. Ensuring proper insurance protection. Employers should consult with their risk and insurance advisors to make sure the right insurance policies are in place to cover risks from company parties.
Coverages that employers should review include:
- Employment practices liability insurance (EPLI). EPLI can respond to claims that workers’ legal rights have been violated, such as through sexual harassment, discrimination, wrongful termination, and wrongful discipline or retaliation. EPLI coverage is available in package policies as well as on a standalone basis. Private company directors and officers liability (D&O) policies also can respond to EPLI claims.
- General liability (GL). GL policies can respond to premises liability arising from property damage or bodily injury. If an employer elects to host a party offsite, such as at a hotel or restaurant, it’s prudent to confirm the venue has GL insurance.
- Workers’ compensation. In most states, employers are required to have workers’ compensation insurance, which provides for medical care and indemnity for lost wages when workers are injured or become ill as a result of their work. Employers should ask caterers, bartenders, and other service businesses contracted for company events to provide evidence of workers’ comp protection.
- Host event and/or liquor liability. These types of additional liability insurance policies can protect employers for the duration of a specific event and when alcohol is served to guests. They can help cover claims of bodily injury and property damage during the event.
Remember when reviewing insurance coverage for vendors or venues, proof of insurance coverage should come directly from the insurer.
Partner with us
Mitigating liability risks in the workplace and at company-sponsored events is complex and calls for specialized expertise. Marsh McLennan Agency Private Client Services (MMA PCS) is a trusted advisor in risk management and employer/employee liability insurance. Our team has deep experience serving a broad range of industries and is here to help.
Schedule an insurance review with a Personal Risk Advisor
to ensure you have proper insurance protection before your
next holiday party.
Additional background/data: https://www.shrm.org/topics-tools/employment-law-compliance/4-holiday-party-considerations-limiting-employer-liability https://www.foley.com/insights/publications/2022/12/employer-liability-issues-office-holiday-parties/ https://www.mcbrayerfirm.com/blogs-legal-insight-and-litigation,holiday-party-liability https://myhrcounsel.com/2018-11-29-holiday-parties-what-employers-need-to-know/ https://www.iii.org/article/what-employment-practices-liability-insurance-epli
