Ground Rules

Beyond Workers' Comp

For employers, the advantage of workers' comp is that it limits the compensation for employee injuries to medical expenses and disability, thereby protecting the employer from civil judgments. But workers' comp laws won't help if a third party gets injured as a result of a company sporting event. The standards, however, are similar. The employer's degree of participation and level of control determine whether the employer is liable.

"The most serious risks are [present when] alcohol is involved," says Peter Bennett, an employment law attorney in Portland, Maine. Suppose the company allows beer at a softball game, and a fight breaks out over a referee's call. "If the company's name is emblazoned on the uniform, the company becomes a target," Bennett says. The same is true if an employee who's had too much to drink causes an auto accident on the way home.

The trend in the past four years, according to Bennett, is for employers to prohibit alcohol at company-sponsored events. That's a good policy, he says, because without alcohol, there's little risk of civil liability. There are other scenarios, however, that may be risky. Suppose, says Bennett, a supervisor makes sexual advances toward a subordinate at a company-sponsored golf tournament. Even though it's not during working hours and not on company premises, the business could be liable for sexual harassment if a higher-ranking employee directed the subordinate worker to be there.

Or suppose Company A, wanting to get in the good graces of its major client, Company B, has its employees participate in a sports league in hopes of encouraging a business relationship with Company B. If an employee of Company A gets in a car accident on the way to the game, since the employee was going to the game for the employer's benefit, that's enough to trigger both workers' comp and third-party liability.

If you want to minimize the chance you'll be held liable for game-related injuries, follow these guidelines:

  • Avoid holding sporting events on your company's premises or on company time.
  • Make sure employees know their participation is strictly voluntary and that they're playing at their own risk. Consider having employees sign a waiver to that effect.
  • Limit company participation to publicity and paying the bills. Let team members handle such matters as scheduling and equipment purchases.
  • Don't let employees think they're being paid to play.

What's the bottom line? Be aware that there's no ironclad guarantee that you'll avoid liability, especially under workers' compensation laws. In particular, a court may not recognize a waiver. A bit of risk may be the price for the benefits of having a company team.

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This article was originally published in the September 1998 print edition of Entrepreneur with the headline: Ground Rules.

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