It’s the holiday season, and while that means different things for different people, for employers it almost universally presents certain enhanced liability risks. Yes, we’re talking about your annual holiday party. Executives, managers, and individual contributors commingle; they let their guard down; and, inevitably, something goes wrong.

According to a study conducted by Alcohol.org, more than half of employers that throw holiday parties either allow or serve alcohol. The study also found that slightly less than half of employers that allow or serve alcohol (47 percent) regulate the amount their employees can consume. So, if your company throws an annual holiday party at which employees are permitted to drink, it certainly is not alone.

But, this does not mean that you can throw caution to the wind. While employees who are of legal drinking age are generally responsible for their own decisions, employers can face liability for their employees’ alcohol-induced behavior under a number of different scenarios. One of the most common issues we see is claims of sexual harassment perpetrated by inebriated employees.

Responding to Sexual Harassment Allegations Arising from a Holiday Party

Let’s say your company threw a holiday party at which alcohol was served, and the next morning an employee went straight to your human resources office and filed a claim for sexual harassment. What should you do?

Fundamentally, responding to complaints arising from a holiday party is no different from responding to a sexual harassment claim arising under any other scenario. In broad strokes, this means that your company should:

>Take the allegation seriously. First and foremost, all sexual harassment allegations need to be taken seriously. They should not be dismissed out of hand, and there should be no suggestion or implication that the claimed victim is somehow responsible for what may or may not have happened. Take the report, tell the employee that your company takes all allegations of sexual harassment very seriously, and then proceed with the next steps.

>Conduct a prompt investigation. Sexual harassment allegations need to be investigated promptly; however, care needs to be taken to avoid exposing the claimant and the alleged perpetrator to unwarranted consequences. Information about the investigation should be shared on a need-to-know basis, and any employees who are questioned in connection with the investigation should be notified of the investigation’s sensitive nature. When questioning employees, it is also important to stress that the investigation is ongoing and that no determinations have been made.

>Consult with legal counsel. While we put this step in the middle, ideally companies should consult with their employment counsel prior to conducting an investigation. This will help you plan the investigation and ensure that appropriate protocols are followed. Your company’s employment law counsel should be able to help you take action promptly while also advising you to help ensure that any potential liability exposure is contained.

>Impose appropriate discipline (if the allegations are substantiated). If an investigation substantiates the claimant’s allegations of sexual harassment, then appropriate disciplinary action should also be taken promptly. What is “appropriate” will depend on the specific circumstances involved; and, while termination may seem like the obvious choice, this may or may not be necessary. Once again, companies should work with their legal counsel to decide what measures are required.

>Take appropriate measures to mitigate liability. Dealing with the bad actor is an important step; and, in some cases, this can be enough to assuage the claimant. However, when faced with allegations of sexual harassment, companies also need to address the very real risk of facing civil liability. Employers may be vicariously liable for the acts of their supervisory employees; and, although this generally excludes off-hours conduct and conduct precipitated by excessive alcohol consumption, holiday parties present a unique set of circumstances.

Mitigating Risk and Defending Against Claims of Sexual Harassment Perpetrated by Drunk Employees

Whether you are preparing to throw a company holiday party or you are dealing with the aftermath, there are steps you can take to mitigate your company’s potential exposure. While it is important to rely on legal advice from your company’s employment law counsel, some general tips for mitigating risk – and some potential defenses to liability – include:

>Holding the party off-site and/or hire a professional bartender. Holding your company’s holiday party at a venue that regularly serves alcohol or hiring a professional bartender can both reduce the risk of your employees being over-served and establish a line of defense in the event of legal claims.

>Emphasizing personal responsibility. Before the party, let your employees know that alcohol will be served, and remind them to drink responsibly. Do this in writing (i.e. in a company-wide email), and make clear that drinking to excess is not permitted and could lead to disciplinary action.

>Having company leadership lead by example. Make sure your company’s executives and supervisors don’t get drunk. Have them lead by example, and make sure they are not putting themselves (and the company) in the position of being forced to defend against allegations that they acted inappropriately while under the influence of alcohol at a company-sponsored event.

>Not offering an open bar. Yes, it’s a great perk, and yes, it will get more employees to show up. But, offering an open bar significantly increases the likelihood that employees will have too much to drink. Paying for employees’ drinks also significantly increases the likelihood that your company will be accused of playing a role in alleged sexual harassment or other incidents that may occur.

>Making sure your company has adequate insurance coverage. Finally, in the event that your company faces a sexual harassment lawsuit, having adequate insurance coverage will be key. Make sure your company’s commercial general liability (CGL) policy provides coverage for potential exposure arising from sexual harassment claims, and make sure it applies to claims arising out of holiday parties (this may or may not be the case).

Speak with a South Carolina Employment Lawyer at Gignilliat, Savitz & Bettis, LLP

Is your company preparing for its annual holiday party? Has an employee filed a sexual harassment claim against your company? If you need employment law advice or representation in South Carolina, give us a call at 803-799-9311 or inquire online today.