Mistletoe, Mirth and Misconduct: employer liability for bad behaviour at work functions

End-of-year work functions are a perennial risk for employers; unmanaged intoxication and revelry can quickly escalate into sexual-harassment claims, personal injury claims, unfair-dismissal disputes and, in extreme cases, vicarious liability for very serious criminal conduct. It is essential for employers to plan and act deliberately to reduce these risks when hosting end-of-year functions.

The regulatory framework

Work functions that are authorised by, or reasonably connected to, the employer can fall within the employer’s legal responsibilities:

• Under Australia’s federal model WHS law and the corresponding State legislation, a person conducting a business or undertaking (‘PCBU’) remains responsible for worker health and safety at work-related events, including social events where the employer organises or endorses attendance. 
• Employers may be vicariously liable for employees’ unlawful conduct (including sexual harassment or assault) where there is a sufficient connection between the wrong and the employment. Australian authorities have recognised that a private incident following a work event can still “arise out of” the employment if it is connected to an employment context or is the culmination of workplace conduct. 
• Employment law and unfair-dismissal frameworks require procedural fairness for disciplinary action arising from conduct at work functions. Australia’s workplace tribunal, the Fair Work Commission (‘FWC’), will often examine whether the alleged misconduct was sufficiently related to employment and whether the employer followed a fair process before dismissal. The FWC has repeatedly emphasised careful investigation and proportionate responses. 

What can happen after a work-function incident

Where an employee engages in unlawful action or misconduct, they may face criminal charges and civil remedies. However, even where the employee is found to be at fault, there are also possible consequences for the employer:

• If an employer dismisses the employee, the worker may lodge an unfair-dismissal application where the dismissal may be set aside or lead to compensation if the employer’s process or grounds were deficient. 
• Civil claims against the employer (vicarious liability) may arise where misconduct is sufficiently connected to the employment; damages awards in serious harassment/assault cases can be significant. 
• Regulatory and WHS exposure: if the event involves foreseeable risks (e.g., heavy alcohol consumption, inadequate supervision, hazardous transport arrangements), regulators can investigate and penalties may follow under WHS laws. 
• Reputational and insurance consequences (workers’ compensation, public liability, employment practices liability) — insurers may dispute claims where employers failed to take reasonable steps to manage risk.

Practical do's and don'ts for employers

Final observations — the law is unforgiving of complacency

End-of-year functions are predictable pressure points; the legal tests focus on foreseeability, connection to employment and fairness of process. Employers that prepare, supervise and investigate properly will substantially reduce litigation and regulatory exposure. Employers that cut corners — or that rush to punish without proper evidence and process — risk costly litigation, large remedies and reputational damage.

Clyde & Co’s Corporate Advisory team is working with global clients to align contracts, policies, and operational practices to ensure a safe and compliant festive season.

For further advice, contact the team at Clyde & Co.