Don't let employer-sponsored sports and events become "forced fun"

While many employers understand the risks of a compensable injury arising from a company-sponsored event involving physical or social activities, some get caught up in the morale-building and all-inclusive aspects and unnecessarily expose themselves to claims that affect their work comp costs. Consider a recent case in Minnesota, Shire v. Rosemount, Inc.

Under Minnesota law, any employee who is injured during "voluntary recreational programs" is exempt from workers' comp coverage. The company held an annual employee-recognition event during work hours. Employees had to attend the event or use limited vacation time or take unpaid leave. The event included dinner followed by bowling, then a game of laser tag. During the game of laser tag, an employee injured his ankle and was unable to perform his normal work duties for more than one year.

This case went all the way to the Minnesota Supreme Court with the employer arguing the event was a voluntary recreational program because employees had the option of requesting paid vacation or unpaid leave time instead of attending. The employee argued the event was not voluntary because attendance was the only option under which he would get paid without using vacation time. The court agreed the injury was compensable because of the financial consequences to the employee - loss of pay or loss of vacation time.

The company further argued that even if attendance at the event wasn't voluntary, participation in laser tag was voluntary, but the court also rejected this argument. It said the law addressed entire recreational programs or events, not individual activities within the events. By paying all of its employees or holding the event after working hours and not paying those attending, the company may have avoided responsibility for the claim.

Christopher J. Boggs, Vice President of Education for Insurance Journal's Academy of Insurance, notes that the "course and scope of employment" doctrine that determines the compensability of an occupational injury extends to recreational activities while on the employer's premises or at the employer's "direction." He notes that four tests are applied to the facts surrounding the injury to determine compensability of "Forced Fun":

1. Did the accident occur on the employer's premises? An affirmative response does not guarantee compensability. Making recreational facilities available does not make the employer liable. But neither is it required that the injury occur on the employer's premises to be compensable.
2. Was the event or team organized by the employer? Company-organized softball teams competing in "industrial leagues" may qualify under this provision. However, several employees deciding to form a team is wholly different from a team organized by the employer, encouraging "good" ballplayers to participate.
3. Did the employer pay for the activity? It is unclear if this refers to the total cost or a subsidy on behalf of the team.
4. Did the employer benefit? Advertising in the community (team shirts), improved employee morale or better team work; an employer can "benefit" from these activities in more ways than tangible outputs.

Boggs advises "Make any and all social or recreational activities expressly voluntary. Any hint of requirement or employer benefit could cause a problem."

There is no one rule that fits all and each case will be decided on its merits. States vary on when an activity might be considered forced and even the established rules have exceptions and do change. Before planning an event, it's best to discuss your exposure with your broker.

Related article: 14 ways to minimize the business risk of employer-sponsored sports and events (WorkComp Advisory May 2015)