From the December 1996 issue of Entrepreneur

If you're hoping to boost employee morale with a bit of holiday cheer by throwing a company Christmas party, here's a sobering thought: If one of your employees imbibes too much and crashes into another car on the way home, you and your business can be held liable.

Many states have laws that hold taverns and liquor stores liable for accidents caused by drunken patrons, and some states extend that liability to any social host who keeps serving alcohol to someone who appears intoxicated if that person will likely be driving home.

Even without such a statute, if the injured party can convince a court that attending the party that led to the accident was part of the drunk driver's job, a legal theory called "respondeat superior" may apply. Under this theory, the employer is liable for the employee's negligence, whether the employer was negligent or not.

"There's a trend toward holding hosts liable," says John D. Madden, an attorney in Raleigh, North Carolina, who recently defended a business in such a suit. More people are suing the employer when the drunk driver has come from a work-related party.

In this climate, the traditional, anything-goes company Christmas party is a lawsuit waiting to happen. A few years ago, a North Carolina manufacturer sponsored a pre-Christmas party during work hours. To be paid for the day, employees had to clock in by 8 a.m. for the party. Someone spiked the punch bowl in the machine shop and carried in bottles of whiskey. One employee spent a couple of hours drinking, then headed out in his car. He ran a red light and hit another car, killing two women.

When the families sued, the employer denied having furnished alcohol or allowing it on the premises. A district court dismissed the case, ruling the employer clearly wasn't responsible. The U.S. Court of Appeals overturned the dismissal and sent the case to trial, noting that security guards admitted having stopped six other employees from driving away drunk. Since the party was at the plant, on company time, and designed to advance the purposes of the business, the company could be held responsible for its employees' negligent behavior.

A Case In Point

Businesses are wising up. "[They've] gotten very skittish in recent years," Madden says. "Some don't serve alcohol, and some don't have parties at all." After all, drunken employees are also more inclined to engage in sexual harassment or say things they shouldn't. Employers who decide to serve alcohol at parties are being far more careful about how they serve it.

Consider a case decided last year, also in North Carolina, where the employer won. A newspaper publisher invited 300 guests to a retirement party for the editor. The catered party was held in the publisher's backyard, with hired bartenders and a parking company to shuttle guests from remote parking spots. One reporter, who drank three or four gin and tonics at the party, later crashed his Toyota into another car. The other car's driver was in a coma for nine months before his death.

The driver's family sued the employee who caused the accident, as well as the publisher who hosted the party and the publishing company. The family claimed the publisher and the company had negligently served unlimited amounts of intoxicating beverages when they knew or should have known employees would get drunk. They also claimed attending the party was within the "course and scope" of the reporter's employment, so the company should be liable no matter how careful the hosts were.

The district court dismissed the lawsuit against the host and the company. When the family appealed, the Court of Appeals affirmed that decision. Eventually, the North Carolina Supreme Court reviewed the case and agreed with the lower courts.

Why did the employer win? The publishing company was off the hook because the party was clearly not part of the reporter's job. It wasn't at the place of business, was held during off-hours, and employees were not required to attend. Employees were not paid for attending or required to work if they didn't go, and the reporter did no reporting while there.

The host was off the hook because the plaintiffs couldn't show that those responsible for the party knew or should have known the reporter was getting drunk. Numerous witnesses said they talked to him, and he appeared sober. "The court ruled that all you can go on is how the person appears and whether the host had safeguards in place," says Madden, who represented the publishing company. It's unreasonable to expect the host to have a Breathalyzer at the door, Madden notes. In this case, there were trained bartenders serving and observing guests, plus shuttle drivers who had another chance to observe them before they hit the road.

Tips On Taps

The lesson? "The only way to be totally protected is not to serve alcohol," Madden says. If you do, put safeguards in place to keep guests from driving under the influence and to show a court you did your best. Some tips:


  • Make sure you're adequately insured, whether through your regular policy, a single-event policy or the caterer's policy.


  • Don't offer open beer taps, and don't put out bottles so guests can mix their own drinks. Hire a professional bartender with enough experience to know when someone's getting drunk and mention it to the host.


  • Don't have servers offering drinks from trays. Guests should have to come to the bar so the bartender can see how they're acting. Tell the bartender not to serve guests who've had too much.


  • Consider offering one or two drink tickets per guest, with more available on a cash basis. People drink less if they have to pay for it.


  • Serve lots of food, soft drinks and coffee.


  • Have someone keep an eye on guests--especially those who have drinks brought to them--and point out any problems to the host.


  • Watch everyone on the way out. Find out who's driving and whether the driver is sober. As your holiday gift to the community, have vans or taxis available to take home those not in shape to drive.

Contact Sources

John D. Madden, c/o Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, P.O. Box 2611, Raleigh, NC 27602, (919) 821-1220.