United States: Employer Liability Arising From Company Hosted Functions

Office holiday parties are a good opportunity to give thanks, to celebrate the team’s hard work and achievements, and to build morale for the upcoming year. Yet holiday parties also present their own risks. We all know that people act differently outside of the structured norms of the workplace, especially after consuming alcoholic beverages. To what extent are employers liable for the misconduct of their employees immediately before, during, or after these functions?

Two types of liability apply to the employer. The first type of liability arises from the employer’s own negligence.

Unlike many other states, Washington has no statutory cause of action against social hosts serving intoxicating liquor to individuals who subsequently injure others. The Dram Shop Act historically addressed the liability arising from furnishing alcohol. However, the Washington Legislature repealed this Act in 1955. In 1969, Washington courts adopted the general common law rule of nonliability for furnishing intoxicants to able-bodied persons. This rule is premised on the notion that the furnishing of the alcohol is not the cause of the injury; rather, the cause of the injury is the able-bodied individual negligently drinking. Under this reasoning, the liability therefore remains with the individual consuming intoxicants. However, an exception exists which imposes liability on individuals furnishing liquor to persons who are not able-bodied under certain circumstances, i.e. they are obviously intoxicated, helpless, or in a special relationship to the furnisher. Young v. Caravan Corp., 99 Wn.2d 655, 660-61, 663 P.2d 834 (1983).

In Dickinson v. Edwards, 105 Wn.2d 457, 466, 716 P.2d 814 (1986), plaintiff, William Dickinson, was severely injured when a car traveling the wrong direction on a freeway off ramp collided with his motorcycle. Prior to the collision, the driver of the vehicle, Ersel Edwards, had been drinking at a Kaiser Aluminum and Chemical Corporation ("Kaiser") banquet held at the Spokane Red Lion Motor Inn. Edwards was on his way to the Kaiser plant to begin working the night shift. Kaiser hosted the banquet to celebrate some of its long time employees and sponsored the event by paying for the rental space, food, and beverages. Kaiser deducted all related expenses from the evening on its tax return for that year. During his deposition, Edwards admitted that he consumed between 15 and 20 drinks in a three and one half hour period while at the function. An affidavit from the reporting officer indicated he saw Edwards five minutes after the collision. At that time, Edwards was unsteady on his feet, had bloodshot eyes and a flushed face, smelled of alcohol, and was unable to successfully complete field sobriety tests.

In determining whether Kaiser could be held liable for Edwards’ misconduct, the court examined the evidence to determine if a finder of fact could reasonably infer 1) that Edwards appeared intoxicated at the banquet, and if so; 2) did Kaiser have the authority to deny further service of alcohol to Edwards. Upon finding sufficient evidence to answer both these inquiries in the affirmative, the appellate court concluded that a reasonable trier of fact could find Kaiser liable and returned the case to the trial court for further proceedings.

Other causes of action which might apply to an employer sponsored holiday function include negligent hiring, retention, or supervision. Under these theories, an employer can be held liable for the torts committed by the employee, even if outside the scope of employment, if the employer acted negligently in hiring, retaining, or supervising the employee. With respect to misconduct occurring at holiday functions, an employer may be liable for either physical or emotional injuries committed by such employees where it knew, or should have known, of the employee’s violent or harassing character. Scott v. Blanchet High School, 50 Wn. App. 37, 747 P.2d 1124 (1987). The focus of the inquiry should be on the process the employer took to investigate the background of the employee. Carlsen v. Wackenhut Corp., 73 Wn. App. 247, 868 P.2d 882 (1994).

Respondeat Superior - Vicarious Liability

The second type of liability affecting employers is respondeat superior ("let the master answer"), also known as vicarious liability. To impute an employee’s breach of duty of care to the employer, the plaintiff must prove: 1) the existence of an employer-employee relationship and 2) the tort was committed "within the scope of . . . employment and in furtherance of the master’s business." Kuehn v. White, 24 Wn. App. 274, 277, 600 P.2d 679 (1979). Vicarious liability may be costly to an employer because, if proven, liability is joint and several, meaning the plaintiff may recover in full from either the employer or the employee. Orwick v. Fox , 65 Wn. App. 71, 828 P.2d 12 (1992). Consistent with the reasoning that the employer’s liability flows from the act(s) of the employee, the failure to establish a claim against an employee generally precludes recovery against the employer. Id.

Many vicarious liability cases are litigated on the issue of whether the employee was acting within the scope of his or her employment when the negligence or misconduct occurred. Last month, Division I of the Washington Court of Appeals decided a case on this issue worth bringing to your attention. While the facts of the case involve employer sponsored vehicles instead of employer hosted holiday functions, the case illustrates a court’s reasoning in imputing liability to an employer under this doctrine.

In Michael v. Laponsey, 2004 Wn. App. LEXIS 2435 (Wash. Ct. App. Nov. 1, 2004), the appellate court reviewed a King County trial court’s pre-trial dismissal of employer defendant, Cascade Contractors, where it was sued after its salesman, Christian Laponsey, negligently drove into another vehicle on his way to work. The trial court began its examination of the case by applying the doctrine of respondeat superior, noting "an employer may be held liable for employee negligence that injures third persons, if the employee acted within the scope of his employment at the time of the occurrence." However, the trial court found respondeat superior did not apply because "an employee is not, under ordinary circumstances, in the course of employment while going to or coming from his employer’s place of business." Id. This conclusion was determinative and the court dismissed plaintiff’s claim against the employer.

Jodi Michael, the injured driver, appealed the trial court’s dismissal, arguing that the coming and going exception to "scope of employment" does not apply since Cascade Contractors subsidized the vehicle involved in the collision by providing a monthly vehicle allowance of $400 in addition to Laponsey’s salary. Id. at *3. Michael contended that this vehicle allowance was for the mutual benefit of Cascade Contractors and Laponsey since it enabled Laponsey to use the care to visit job sites, solicit sales, and occasionally make deliveries. Id. at *5-*6. Cascade Contractors countered by arguing that the vehicle reimbursement was a "gratuitous perk or fringe benefit and does not abrogate the coming and going exception." The appellate court rejected this contention and agreed with Michael, finding that the evidence (when viewed in a light most favorable to the plaintiff) supported a finding that Laponsey was acting within the scope of his employment when he rear-ended the plaintiff’s car. Id. at *6. The appellate court reversed the dismissal by the trial court and sent the case back for trial.

While the holding of this case certainly has important ramifications for the employer providing vehicle subsidies to its employees, it may also be indicative of the court’s inclination to broaden the scope of employment umbrella rather than restrict it.

Similarly, the Dickinson court postulated in dicta that an employer could be held vicariously liable for a DUI related collision and injuries occurring after an employer hosted gathering if the following criteria are met:

1. The employee must have consumed alcohol at a party hosted by the employer which was held to further the employer’s interest in some way and at which the employee’s presence was requested or impliedly or expressly required by the employer.
2. The employee negligently consumed alcohol to the point of intoxication when he knew or should have known he would need to operate a vehicle on some public highway upon leaving the party.
3. The employee caused an accident while driving from the party.
4. The proximate cause of the accident, the intoxication, occurred at the time the employee negligently consumed the alcohol.

Dickinson, 105 Wn.2d at 468-69.

What can Washington employers do to minimize direct and indirect liability in the employment context, particularly in the context of company-sponsored holiday parties? Here are some suggestions:

• Review insurance policies so you are aware of coverage and exclusions.

• Hold the party during the day.

• Do not require employee attendance.

• Keep focus from alcohol by providing entertainment or planned activities.

• Keep plenty of non-alcoholic beverages and food available.

• Avoid serving foods that encourage drinking, i.e. chips, peanuts, pretzels, etc.

• Hold the event at an establishment employing professional bartenders.

• Confirm that servers are familiar with Washington laws and direct them not to serve attendees appearing intoxicated.

• Consider requiring employees to purchase alcohol from establishment.

• Provide designated drivers or cab fare.

• Post gatekeepers to monitor attendees as they exit.

• Provide employees with sexual harassment training.

• Emphasize to employees company policies on drug and alcohol abuse.

• Establish a plan with supervisors for how to handle employees who act inappropriately or become intoxicated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.