If your company plans to serve or allow alcohol at a company function, such as a holiday party or summer picnic, use caution. In some situations, an employer might be legally responsible for the consequences of employee drinking, such as inappropriate sexual behavior, accidents, and injuries. Read on to learn your company’s obligations when serving alcohol to employees and how to minimize the legal risks involved.

Legal Claims Based on Employee Alcohol Use

If an employee is injured or injures someone after drinking on your company premises or at an offsite company event, the company could be held liable under several legal theories.

Respondeat Superior

Employers are generally legally responsible for the actions its employees take during the course and scope of employment. Under this legal theory, called “respondeat superior,” employers are responsible for the costs of doing business, including the consequences of employee carelessness. Although your company won’t be liable when an employee acts independently or for personal reasons, it will be liable for harm that employees cause while on the job.

If, for example, your company holds a holiday lunch at a nearby restaurant during work hours, and lets employees drive back to work after they have been drinking, it would likely be liable if an intoxicated employee hits a pedestrian on the way. On the other hand, if a group of coworkers got together as friends after work at a local bar, the company would almost certainly not be liable for an accident one of them caused while driving home.

When it comes to company parties, the best way to avoid this kind of liability is by limiting alcohol intake and providing safe ways to get home. You might also limit liability by holding the event offsite, outside of work hours, and making attendance entirely voluntary.

Workers’ Compensation Claims

Workers’ compensation is an insurance system that compensates injured employees for medical treatment and some of their wage loss when they suffer work-related injuries. For example, if an employee breaks his collarbone playing softball at company picnic where attendance is mandatory, workers’ compensation would likely cover the employee’s treatment and any necessary time off work. (For more on this topic, see our FAQ on workers’ compensation basics.)

If an employee is injured while drinking at a company event, workers’ compensation might cover the injury. In most states, an employee will be disqualified from receiving workers’ compensation benefits if the employee’s own intoxication caused his or her injuries. However, if the intoxicated employee injures another employee at a company event, the injured employee might have a workers’ comp claim.

Sexual Harassment Claims

When drinking is on the rise, inhibitions are lowered. Perhaps that’s why the company holiday party seems to feature heavily in many workplace harassment claims. Unwanted sexual attention and comments are all too common when employees and alcohol mix, which can result in sexual harassment claims against your company.

Sexual harassment is unwelcome sexual conduct, advances, comments, or innuendos that are either severe or frequent enough to create a hostile work environment or that result in an adverse employment action (such as being disciplined, denied a promotion, or fired). Lawsuits tell us that alcohol abuse at company parties can lead to unwelcome sexual comments, groping, and even sexual assault. Just like at the workplace, your company has a duty to prevent sexual harassment from occurring at company-sponsored events. To learn more about your company’s obligations, see Sexual Harassment in the Workplace.

Steps You Can Take to Minimize Problems

Does this mean your company should never allow any drinking at company parties and other events? While that would be the safest course of action, given our cultural expectations around alcohol, it would also be quite unpopular with employees. The next best solution is to make every effort to limit employee drinking—and to take immediate action to keep employees safe if they overindulge. For example, your company can:

• Make attendance at the event optional. This allows employees who are clean and sober, or who simply don’t like drinking, to stay home if they wish. It also gives your company an argument that an overindulging employee’s actions were not in the course and scope of employment, as it was not a required work event.
• Before the event, ask employees not to drink to excess and to arrange for a designated driver if they will be drinking. Explain that all company policies apply to social events, including prohibitions on harassment and inappropriate behavior.
• Make sure that no one under 21 is served alcohol.
• Host the event at a restaurant or bar licensed to serve alcohol and make it a cash bar. Employees are less likely to drink excessively when they are buying their own drinks, and the bartender can keep an eye on alcohol consumption and cut off anyone who has had too much.
• Use drink tickets or tokens to limit employee intake. For example, you might give each employee two drink tickets for the evening.
• Serve plenty of food to absorb the alcohol.
• Provide transportation home (by taxi or ride-sharing service) for any employee who needs or asks for it.

A little preparation and thought beforehand can make your business social event less "eventful,” ensure that employees will have a safe night, and protect your company from lawsuits.