Major news outlets like Time Magazine and the Chicago Tribune have recently reported that one of the fall outs of the recent sexual harassment scandals is that many companies have decided to forego their annual holiday parties.  At the very least, some companies are cutting out the free flow of alcohol at their annual festivities since alcohol is thought to be a risk factor for inappropriate behavior.

Before you cancel your group’s restaurant reservation or caterer and officially kill the holiday spirit for your employees, consider the employer’s legal obligations for employee misconduct at office functions and some suggestions for how to ensure your employees can safely and appropriately celebrate the holidays with their colleagues.

California’s Fair Employment and Housing Act imposes two standards of liability for sexual harassment, depending on whether the alleged harasser is a co-worker or a supervisor.  An employer is liable for harassment by a non-supervisory employee if the employer knew or should have known of the harassing conduct and failed to take immediate and appropriate corrective action.  (California Government Code section 12940, subdivision (j)(1).)  If a supervisor engages in sexual harassment, however, an employer is strictly liable for his or her conduct, which means liability does not rest on whether the employer was negligent. The employer can only avoid absolute liability if the harassment by the supervisor resulted from a completely private relationship unconnected with the employment.

So, does conduct that would constitute sexual harassment at the office still qualify while your employees are engaged in an ornament exchange after hours at the company holiday party? The answer is yes.  Harassing conduct need not occur in the workplace itself, but it must occur in a work-related context.  It is likely that the official nature of a company party makes sexual harassment at the party a risk created by the employment.

Has Manager John committed sexual harassment by bringing a sexually explicit white elephant gift to exchange with his subordinates at the company party? To be legally actionable, the harassment must be sufficiently severe or pervasive to alter the conditions of employment and create a hostile or abusive work environment.  Manager John’s inappropriate gift may not in and of itself create employer liability but combined with other behavior on his part or by others at the party or elsewhere, the conduct could unreasonably interfere with an employee’s workplace and rise to the level of unlawful harassment.  Either way, what Manager John may think is funny has no place at the company’s holiday party.

But instead of ditching the holiday traditions and foregoing a celebration that shows appreciation for employees and fosters a more cohesive working environment, employers should instead:

• Make sure your company has a written sexual harassment policy in place;
• Remind employees of the company’s sexual harassment policy before the party;
• Train your managers and supervisors about appropriate behavior at company sanctioned events;
• Do not overdo the alcohol – everyone likes to have a good time but common sense says shots of Patron may not be a good thing to serve at the company party;
• Ensure you have a reporting system in place for employees to report inappropriate conduct and take appropriate action on any reports – how you address any problems that arise this year will help foster a more comfortable environment for employees at any future company events; and
• Lastly, lead by example – as a business owner or a high level manager, treat employees with dignity and respect and make sure your subordinates know that you expect them to do the same.

It would be a shame if the inappropriate conduct that has been highlighted in the news over the last few months causes employers to stop the tradition of gathering with employees over the holidays to celebrate their accomplishments and thank them for their efforts.  But rest assured, you and your employees can still break out your ugly Christmas sweaters and sip some eggnog, just make sure everyone is doing so responsibly.