Holiday Cheer?

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.

This article was originally published in the December 1996 print edition of Entrepreneur with the headline: Holiday Cheer?.