Thought Leadership

Key Points:

• A company may be liable for injuries sustained during a recreational or social activity event if the injured worker can prove he or she was compelled to attend, and that the event provided some benefit to the company other than morale or employee health.
• Be aware of your guest list for company events. Including clients and/or vendors may move an event into the area of “benefitting the company.”
• Invite employees, but do not make attendance mandatory if you want to avoid potential liability.

With the world moving toward a return to normalcy, including company holiday parties, it is useful for employers to remain mindful of how a judge might consider a work injury when dealing with recreational or social activity work incidents. In a recent unpublished decision, a New Jersey appellate court addressed whether an injury that occurred when an employee was involved in a motor vehicle accident following a company holiday party was compensable. In Regalado v. F&B Garage Door, 2021 WL 2325311 (N.J. Super. App. Div. June 8, 2021), the New Jersey Superior Court, Appellate Division, held that the holiday party was a recreational/social activity that produced no benefit to the respondent/employer, beyond its effect on employee morale, and denied the petitioner’s/employee’s request for worker’s compensation benefits.

Under the New Jersey workers’ compensation statute, an employer must compensate an employee for accidental injuries “arising out of and in the course of employment.” N.J.S.A. 34:15-7. The statute excludes, however, any injuries that are sustained during “recreational or social activities.” An injured worker can overcome that barrier by proving that the activity is a “regular incident of employment” and “produces a benefit to the employer beyond improvement in employee health and morale.” If the petitioner fails to prove both of these, benefits are denied.

In Regalado, the petitioner worked for the employer as an office manager. The company held its annual holiday party at a restaurant on December 23, 2016. Only the company’s employees and their guests were invited; there were no clients, business associates or vendors. Because neither the petitioner nor her guest drove, the company’s owner agreed to provide transportation to and from the event. The petitioner was not paid to attend and was not compensated for her travel time.

After the party, the petitioner and her guest were being driven home by the company’s owner when they were involved in a motor vehicle accident—the car struck a parked car and flipped over. The petitioner was treated in the emergency room and discharged the next day; she was not admitted to the hospital. As a result of her injuries, the petitioner required surgical procedures to her neck and jaw, and had difficulty carrying anything more than ten pounds.

The petitioner later filed a claim for workers’ compensation benefits, which was denied. She argued that attendance at the holiday party was required in order to receive her end-of-year bonus. She also testified that attendance at the party was mandatory and that an absence would have negatively affected her employment or standing with the company. The company owner and another fact witness testified that the bonuses were paid in the days prior to the holiday party and that attendance was not mandatory for employees.

The appellate judges held that if an employer has required or compelled participation in a recreational or social activity, the Workers’ Compensation Judge should consider the activity as it would any other compensable work-related assignment. Further, when an employer directly commands an employee to engage in an activity, it is understood that the employee has been compelled. However, when a petitioner alleges she was compelled to attend, the injured employee must establish that she engaged in the activity based on an objectively reasonable belief that participation was required. Factors the court applies in determining this are: whether the employer directly solicits the employee’s participation in the activity; whether the activity occurs on the employer’s premises, during work hours and in the presence of supervisors, executives, clients or the like; and whether the employee’s refusal to attend or participate exposes the employee to the risk of reduced wages or loss of employment. An employee’s subjective impression of compulsion alone is not sufficient.

Here, the court held that the invitation did not carry any implied expectations or threats of reprisal if the petitioner did not attend. The court also commented that, because the party was held off site, after work hours, and away from client and vendors, the petitioner could not have reasonably felt compelled to attend. The court pointed to those factors as support that the petitioner’s attendance at the holiday party did not provide any benefit to the employer, and that she was not expected to further any professional relationship or provide some other benefit to her employer.

Keep this in mind in the upcoming months and as we enter the holiday season. The important takeaways are that, if the employee is compelled to attend a function and that function provides some benefit to the employer, other than company morale, any injury that occurs during that function could cause the company to be liable for workers’ compensation benefits. However, if employees are invited but are not obligated to attend, with no repercussions, and the company is not benefiting from the employee’s attendance at the event, then any incident that occurs will likely not result in the company being liable for workers’ compensation benefits.

_{Defense Digest, Vol. 27, No. 4, September 2021 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2021 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}