How to minimize the business risk of employer-sponsored sports teams

Sponsoring an employee sports team or event can be a great way to promote camaraderie, team building, and exercise. Yet, there are potential liabilities, including liability for a Workers' Comp claim and liability for injuries of a third party caused by an employee, and it pays to mitigate the risks.

While Workers' Comp laws vary by state, the relationship of the company to the activity plays a key role in assessing liability. In general, if the injury is deemed to arise out of and in the course of employment then it is compensable. Some states, such as Pennsylvania, have also long held that a determining factor for liability is whether an employee is furthering an employer's business when injured.

Here are some guidelines that will help minimize risk:

• Make attendance optional. Simply stating that the activity is optional is not enough. Managers and supervisors need to take a "hands-off" approach. Employees should not feel that they are "expected" to participate. Compensation decisions often hinge on whether the activity is truly voluntary.

• When possible plan events away from company premises and off company time. Do not compensate the employee for time spent at the activity. While the company may pay the bills, it's important for the company to distant itself as much as possible from the activity. Let team members handle team formation, scheduling, equipment purchases, awards and so on. The activity should be considered social and not work-related.

• Make sure the employee handbook is up to date and details company policy about social events and athletic activities.

• Have legal counsel design a general release stating that the activity is voluntary, that the company will exercise no supervision of the event, that the employee assumes the risk of any injury and that the employee releases the company from any liability for injury sustained during the activity.

• Be cautious about what events you ask employees to attend. The employer need not "host" the event for liability to exist. If an employer asks its employees to attend an event sponsored by a customer or a charity, Workers' Compensation liability exists because the employer has required the employee to attend and will benefit from the goodwill generated.

• Carefully word job descriptions relating to entertaining clients. If the job description includes entertaining clients, a reasonable assumption is that employer derives a direct business benefit from the activity. Refining the definition can help mitigate exposure.