Holidays are a time for celebration, with employers often hosting annual holiday parties, catering office luncheons, or distributing end-of-year gifts and bonuses. However, these times of celebration can often become potential liabilities if employers are not careful.

Office Parties

Office holiday parties are often some of the most looked forward to events of the year by employees, but if organized incorrectly, they raise the most concerns for potential employer liability.

Attendance

Employers should state in writing, well in advance, that event attendance is voluntary to avoid potential wage and hour liability under the Fair Labor Standards Act (“FLSA”) or any applicable state or local wage and hour laws. If attendance is mandatory, employers must pay employees for their time, including overtime, as mandatory attendance at such a function is considered to be work time. Management should be instructed not to pressure employees who decline invitations.

Alcohol

Service and Control

Alcohol increases the risk of misconduct. While prohibiting alcohol is the safest option, employers can mitigate risk by: (i) removing hard liquor from the menu; (ii) limiting drinks via a ticket system or implementing a cash bar; and (iii) providing a wide array of non-alcoholic beverages for all guests, including those with medical or religious restrictions.

Staffing and Compliance

Instruct caterers and bartenders to track consumption, avoid overserving, and cut off service to intoxicated employees and their guests. Due to potential “dram shop” laws, which impose host liability in many states, consider hiring professional bartenders trained to manage service levels and identify signs of over-consumption.

Behavioral Risks and Response

Alcohol consumption heightens the risk of harassment, discrimination, and other inappropriate conduct. Should any incident occur: (i) treat all complaints and reports of misconduct seriously; (ii) investigate the claims; and (iii) take remedial action, if necessary.

DUI and Transportation Liability

DUI incidents pose a serious liability risk, as employers can be held responsible under social host liability laws if an employee consumes alcohol at a company event and then crashes. To prevent arrests and accidents, arrange taxi services or encourage the use of rideshares (Lyft/Uber) to ensure all employees consuming alcohol have safe transportation home.

Professional Conduct

Remind all employees, especially supervisors and managers, to maintain professionalism and avoid excessive consumption or intoxication at company-sponsored events.

Safety

Holiday parties introduce liability risks under workers’ compensation and premises liability laws. In many states, these events are considered within the ‘scope of employment,’ meaning workers’ compensation is the exclusive remedy for injuries. However, employers may still be liable for negligence or known hazards even if the event falls outside that scope. To reduce risk, conduct a pre-event inspection to address dangerous conditions. A Human Resources representative should be designated to monitor the event and intervene regarding safety, alcohol, or behavioral issues.

Inclusivity

To ensure compliance with Equal Employment Opportunity laws and promote inclusion, employers should avoid hosting any religious-themed events to respect diverse beliefs. Ensure the venue and activities are accessible to employees with disabilities. If serving food, accommodate special dietary needs, including those based on medical conditions, religion, or personal preferences, and whenever possible, label food items with known allergens to mitigate health risks.

Gift Exchanges

Gift or food exchanges, such as Secret Santa or White Elephant, pose potential liability risks if not managed. Participation in these events must be voluntary, as employers cannot mandate that employees spend personal wages on a work-related exchange. If an exchange is held, employers  should establish a clear, written policy detailing a set budget, the exchange method, and explicit guidelines requiring neutral and appropriate gifts to prevent claims of harassment or inappropriate behavior. Ultimately, the safest approach to mitigate all associated liability is to prohibit gift exchanges.

Independent Contractors and Temporary Employees

When including independent contractors or temporary employees in holiday events, employers must take proactive steps to avoid creating evidence of an employer-employee relationship, which could lead to misclassification claims. The safest approach is to prohibit attendance. If the employer includes temporary employees provided by a staffing agency, the employer must involve the agency to establish its role as the true employer.

Awards, Bonuses and Gifts

When an employer gives prizes, awards, or bonuses to non-exempt employees, the type of compensation affects overtime pay calculations. Nondiscretionary bonuses (those based on factors like hours worked, performance, or productivity) must be included in the employees’ regular rate of pay. As a result, any overtime worked in the workweeks it may be said the bonus was earned must be recalculated to reflect the newly calculated regular rate. However, discretionary bonuses are excluded from the regular rate calculation, provided the bonuses are given at the employer’s discretion and the employee had no prior expectation of payment through a contract, agreement, or promise.

Charitable Activities: For Volunteers Only

While holiday volunteering is commendable, employers and employees must adhere to wage and hour laws. Private-sector employees may generally donate their time to non-profit organizations without compensation, but they cannot volunteer for their own employer. To be excluded from FLSA requirements, volunteering must be voluntary and without expectation of pay.

Family and Medical Leave and the Holidays

When a company holiday coincides with an employee’s Family and Medical Leave Act (FMLA) leave, the use of FMLA entitlement is not affected unless the employee was scheduled to work that holiday. If the employee was scheduled to work the holiday, the full day must be counted against the employee’s FMLA entitlement. However, if the employee was not expected to work the holiday, that holiday does not count against their FMLA entitlement.

If you have any questions about any of the issues discussed in this alert, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.