It’s hard to believe, but the year is closing and the holidays are approaching, which, in addition to closing the books and a few final deals, for many company means planning the annual holiday party. This is not as simple as it seems. When employees cut loose at company-sponsored functions, the results can lead to sexual harassment charges and other liability issues.

Poor employee behavior at holiday parties can exacerbate existing problems. Or too much liquor can bring out the worst in people who normally act professionally. About half of companies with holiday parties planned to serve alcohol last year, which can lead to multiple issues, according to a survey by outplacement firm Challenger, Gray & Christmas, Inc. “In addition to the added cost, serving alcohol adds a level of risk that most companies should strive to avoid,” said CEO John A. Challenger in a press release.

While holiday parties entail expenses and potential risk, the survey found that about 70 percent of respondents planned to throw one last year. Employers who view holiday parties as a well-earned reward, an untouchable tradition, or a way to improve morale need to understand what steps to take to make sure the after-party doesn’t consist of a lawsuit.

Laws Against Sexual Harassment

Sexual harassment is illegal under Title VII of the Civil Rights Act of 1964. According to the U.S. Equal Employment Opportunity Commission (EEOC), “Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitutes sexual harassment when submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance or creates an intimidating, hostile or offensive work environment.”

The EEOC highlights several different circumstances that constitute sexual harassment, including:

• Either the victim or harasser can be a man or a woman, and they may be the same gender.

• Someone who is a supervisor, agent of the employer, a supervisor in another area, a colleague, or someone who is not an employee can commit sexual harassment.

• Anyone who is “affected” by the situation can claim sexual harassment, even if they aren’t the person being harassed.

• Victims don’t have to be financially harmed or fired to claim sexual harassment.

• The victim must find the behavior unwelcome.

Along with the federal law, local and state sexual harassment laws can create additional burdens, timelines and liabilities.

When Holiday Joy Leads to Lawsuits

Employers who may be vigilant about maintaining a harassment-free environment in the office could be liable for what happens at an offsite holiday party or other company-sponsored event. While it’s unlikely that a single, isolated event could lead to a successful sexual harassment lawsuit, even the threat of one can be disruptive and expensive.

In one case, an employee was awarded more than $150,000 in damages for sexual harassment. Employee behavior at holiday parties contributed to the lawsuit and damages. In that case, Monthei v. Morton Bldgs., a female employee was subjected to gender-specific derogatory remarks and obscenities by a coworker during office hours and at the parties. Eventually, the employee quit and filed a lawsuit, saying her complaints were not being taken seriously.

In another lawsuit, Carver v. Waste Connections of Tennessee, Inc., the plaintiff pointed to items exchanged at a holiday party as part of a pattern of sexual harassment that began in the workplace. The gifts included edible underwear and a blow-up doll.

At another office party, the EEOC became involved after a manager grabbed a female employee’s rear end and told her she looked good. Then, he removed her nametag and dropped it down the front of her shirt. She was fired after complaining about the incident and was told she “did not fit in.”

How to Keep the Party Fun for Everyone

In order to avoid potential problems, some employers ditch the entire tradition. Nearly a third do not hold holiday parties, according to the Christmas Gray survey. However, most employers will choose to have a party. Luckily, there are several ways they can limit liability and potential claims.

• Before calling caterers, talk to attorneys and HR. Case law evolves and enforcement priorities for regulatory agencies can shift. In order to understand the company’s vulnerabilities at every office and site, it’s important to involve HR, the legal department and outside attorneys in preparations for holiday shindigs.

• Host an end-of-year refresher on company policy.Lecturing employees about liability and sexual harassment won’t do much to get them excited about attending the holiday party. However, companies should provide regular training on corporate policies, and the end of the year can be a good time to remind employees about sexual harassment in particular.

December may not be an ideal time for training at organizations that are busy with seasonal work or wrapping up end-of-the-year matters. If that’s the case, the company should still explicitly describe appropriate and expected behavior at the party. That should include a dress code, if the event is held offsite and after hours. If sexual harassment policies don’t mention company-sponsored events, those policies need to be updated to include them.

At a minimum, supervisors and managers should receive some reminders about policies and procedures, so they know what type of behavior to watch out for and how to respond if an employee comes to them after the party with a concern or complaint.

• Throw an alcohol-free event.By eliminating alcohol, companies not only minimize liability on a variety of issues, they can also save money. The lack of alcohol may be less noticeable if the company hosts a luncheon in the break room rather than a fancy dinner at a local restaurant after work.

• Bring in pros. If the company decides to serve alcohol, hire someone with experience and the necessary insurance and permits to serve the liquor. Professional bartenders should have a sense of when guests are becoming intoxicated and can cut off inebriated partygoers. Never let employees behind the bar to act as bartenders.

Not everyone drinks, so be sure to provide many non-alcoholic alternatives, such as soft drinks. It may add to the fun if the venue or bartenders create a customized “mocktail,” which doesn’t include alcohol.

• Make last call earlier, rather than later. An open bar doesn’t have to mean a non-stop flow of liquor for hours on end. Employers can limit the number of drinks employees can have, either by handing out drink tickets or closing the bar an hour before the end of the event.

• Have food along with the drinks.Food soaks up alcohol, so employers should serve dinner or heavy hors d’oeuvres along with drinks.

• Give guests something else to do. Consider an activity-based event or something that includes entertainment, in order to give guests something to do besides stand around and drink.

• Rethink the gift exchange.Some companies encourage or tolerate gift exchanges as part of the festivities, but this is an area where employees may decide to give out inappropriate gifts that could leave the recipient feeling harassed. What may be funny to one person may be insulting to someone else. Rather than trying to micromanage the gift exchange, it may be easier to eliminate it entirely.

• Expand the guest list.Consider inviting spouses or significant others. Allowing employees to bring dates will increase costs, but it could also minimize the chances that employees may engage in behavior that they regret the next morning.

• Provide transportation home.By providing free taxi rides or a bus service, and if reasonable even a limousine service, companies reduce the risk of employees drinking and driving. They also reduce the chances that tipsy employees get a ride home with a colleague, which could lead to sexual harassment or behavior that someone may regret in the morning.

• Set a good example.Employers may want to designate several high-ranking people to be on the lookout for those who have been drinking excessively and steer them away from trouble. Those at the top should set the best example. An employee who receives a compliment from someone in accounting may interpret an identical comment from an executive very differently.

No one wants to be the Grinch, but sexual harassment claims can ruin the holidays. Some common sense, proactive steps can ward off potential claims and ensure that everyone has a jolly time.