Nov 29, 2023

‘Tis the Season: Annual Party Pooper’s Guide to the Holidays

Notebook and pencil with a list of guidelines

‘Tis the season for celebration. For employers, that may mean hosting an annual holiday party, catering an office luncheon, or distributing end-of-year gifts and bonuses. However, with the holiday season comes potential liability.

Office Parties
Many companies host a holiday party or special gathering for their employees. Employers hosting holiday parties or other festive events should ensure that it is clear to employees that attendance at said event is voluntary, unless the company intends to pay hourly employees for the time spent at the function. Employers may run afoul of the Fair Labor Standards Act (“FLSA”) or equivalent state law if attendance at a holiday event is mandatory and employees are not provided with the proper regular or overtime compensation. Invitations or written communications to employees regarding upcoming events are an effective way to convey the voluntary nature of participation in same.

One of the most common risks of an office party is the potential for harassment. Conduct that occurs in a work-related context outside an employee’s regular workplace, such as during an off-site holiday party or gathering, can contribute to a hostile work environment if inappropriate conduct occurs.

Supervisors and managers should maintain professional standards to serve as examples for their subordinates, including limiting their alcohol consumption, and be on the lookout for improper fraternization that could make an employee uncomfortable. It is vital that the company control any potential adversarial situation before it escalates and document any employee complaints. The company should designate a Human Resources representative to patrol the party and help alleviate any uncomfortable situations as needed.

Finally, to maintain compliance with equal employment opportunity laws, employers should: (1) avoid religiously-themed events, in order to respect the diverse beliefs of the attendees; (2) ensure that the party’s location and activities are accessible to employees with disabilities, (3) consider any special dietary needs of employees (such as providing a kosher option) and (4) only give appropriate and neutral gifts to employees, such as gift cards.

In the event a report of inappropriate behavior emerges in conjunction with the holiday party, the complaint should be taken seriously, investigated promptly, and remedial action taken as necessary, consistent with the company’s written policies. Any employee who reports misconduct should be treated fairly and protected against any action that could be viewed as retaliatory.

Prevention of Physical Injury
Recreational functions always involve the possibility of injury, especially when alcohol is involved. Slip and falls, broken chairs and automobile accidents are all-too-common occurrences surrounding holiday parties. Employers may be liable for an employee’s injuries pursuant to workers’ compensation laws, premises liability statutes, and state laws targeted towards providers of alcohol.

Many states’ workers’ compensation laws consider a company’s holiday party to be within the scope of employment and award workers’ compensation benefits to an injured employee. 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 determined to be outside of the scope of the employment, employers would face potential liability if the act was caused by the employers actual or imputed negligence, or if the injury was the result of a dangerous condition about which the employer knew or should have known. Many states have “dram shop” laws that impose a duty upon hosts to ensure that guests are not overserved alcohol. In these states, damages caused by an intoxicated employee who is involved in a car accident leaving a holiday event could be imputed to the employer. Therefore, employers could consider arranging a ride sharing service for their employees who have indulged in excess to ensure they arrive home without injuring themselves or others.

Employers should keep the company function safe, inclusive, in good taste and be extremely cautious with the quantity of alcohol being served. Companies may want to consider limiting employees’ access to drinks by providing a set number of drink tickets per person, only serving beer and wine rather than hard liquor, or opting for a cash bar. An open bar event is a recipe for disaster and highly discouraged. Also, if alcoholic beverages are offered, non-alcoholic beverages should be offered as well to encourage safe imbibing and to be inclusive to those not wishing to drink alcohol.

Independent Contractors
Companies that utilize independent contractors and temporary employees should be mindful of how they are treated during the holiday season and take proactive measures to avoid creating evidence that an employer-employee relationship exists. Employers could consider prohibiting independent contractors from participating in the company’s holiday functions. In the alternative, if the company utilizes temporary employees through an independent staffing company and wishes to include those temporary employees, the company should involve the independent staffing company in the event by requesting that the staffing agency contribute to the cost of the temporary employees’ attendance, sending invitations through the agency, or having any agency representative present at the event in order to solidify the agency’s role as the true employer of the temporary employees.

Many employers get in the holiday spirit by giving non-exempt employees prizes, awards, nondiscretionary bonuses, and incentive payments. If these payments are based on the quality, quantity, or efficiency of production or hours worked, then the value of such payments must be calculated into the employee’s average hourly rate for the purpose of overtime pay. This means that any overtime worked in the pay period during which the bonus was received would need to be recalculated to adjust for the value of the prize, award, nondiscretionary bonus or incentive pay. If the prize is merchandise, the amount to be allocated is the actual cost of the prize to the employer. Employers may exclude a bonus from the regular hourly rate only if the bonus was discretionary. A bonus is discretionary and, therefore, excluded from the overtime rate of pay, if the allocation and amount of the bonus are left to the employer’s sole discretion and the payment was not made pursuant to any prior contract, agreement, or promise that would lead the employee to expect the payment.

Volunteers for Charitable Activities
Employers and employees alike may be interested in volunteering in philanthropic pursuits during the holiday season, and the Fair Labor Standards Act permits individuals to donate their time as non-employees for humanitarian, religious, charitable, or other public-service reasons. Volunteering for a charitable activity must be conducted by an employee on a purely voluntary basis without the contemplation of pay. Employees may not volunteer services to for-profit private sector employers. Additionally, public sector employees may not volunteer services to a public sector employer without additional compensation where the employee is performing the same work for which he or she is employed. Similarly, the U.S. Department of Labor mandates compensation to public sector employees who provide services for a charity at the employer’s request, under the employer’s discretion or control, or during the employee’s regular work hours. Private sector employees can volunteer their services to public agencies without limitation.

Family and Medical Leave and the Holidays
What if a company holiday coincides with leave an employee takes under the Family and Medical Leave Act (“FMLA”)? The amount of the employee’s FMLA leave entitlement is not affected by a holiday that falls during their workweek if the employee works for part of that week and takes FMLA leave for part of that week, unless they were scheduled to work on that holiday. Therefore, if the employee was not expected or scheduled to work on the holiday, the amount of FMLA leave taken (which would not include the holiday) divided by the complete workweek (which would include the holiday) would represent the portion of the workweek of FMLA leave used.

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.

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