Employers Must Keep Company Picnics and Team-Building Activities Voluntary

When Fun ‘n Games at Work Take a Bad Turn

Phyllis Young and her co-worker and friend, Sarah Bales, won the hula-hoop contest and the balloon toss, making them the favorites to also win the three-legged sack race.

Young and Bales didn’t win the sack race because, unfortunately, Young fell during the competition and injured her shoulder. Young’s injury occurred in September 2002 during a picnic sponsored by her employer. Following her injury, Young was out of work for four months. She continued to have trouble with her shoulder and eventually underwent surgery in December 2003.

Young thought she was entitled to workers’ compensation benefits even though she went to the picnic voluntarily. She said she was encouraged to run in the race both by the picnic’s disc jockey and by the offer of a $50 prize for first place. Also, her employer paid for the picnic and approved the games and activities.

Although a lower court agreed with her, Young eventually lost her argument. The Tennessee Supreme Court had the final say and ruled her injury was not compensable because she undertook the games voluntarily. The voluntary nature of the activity carried more weight than the fact the employer sponsored it. Nobody forced her to have fun.

Young may have had better luck in another state. This is one of the gray areas in workers’ compensation. States vary in how lenient or strict they are about recognizing injuries from work-related recreational, social or athletic activities such as company picnics, softball games, sack races, boat cruises, dinners or more serious team-building events involving rock climbing or similar physical challenges.

All states use language that makes workers’ compensation applicable to any injury arising out of and in the course and scope of employment, according to expert Christopher Boggs, author of “The Insurance Professional’s Practical Guide to Workers’ Compensation: From History through Audit” published by Insurance Journal, and associate editor of the industry Web site, MyNewMarkets.com.

Larson’s Workers’ Compensation Law is often used as a general guide in such cases, notes Boggs. The “Larson test” provides that recreational or social activities are within the course of employment and should be covered under workers’ compensation when they occur:

• On the premises during a lunch or recreational period as a regular incident of the employment;
• Or the employer expressly or impliedly requires participation;
• Or by making the activity part of the services of the employee, brings the activity within the orbit of the employment;
• Or the employer derives substantial direct benefit from the activity beyond the intangible value of improvement in employee health and morale. (Boggs offers further guidance in the accompanying article, Four Tests on Employee Recreational Injuries, on page N15)

Decisions very often hinge on whether the activity is truly voluntary, whether employees feel free to excuse themselves or worry they might be penalized in some way if they fail to participate. In short, the issue is whether the fun is more “forced” or voluntary on the employee’s part.

State Differences

States vary on when an activity might be considered forced and even the established rules have exceptions.

California, Michigan, New York, Texas, Oregon and Colorado are among states that specify that injuries arising out of voluntary recreational activities are not compensable — unless the employer directly or indirectly requires participation and stands to gain substantially from the activity.

Other states, including, Connecticut, Illinois, Maine, Massachusetts, Montana, New Jersey, North Dakota and Virginia, say a social or recreational activity is not employment-related just because the employer pays some of the costs.

State laws not only vary, but they also change. In June, Tennessee amended its workers’ compensation law to limit the employers’ liability in response to the state Supreme Court’s 2007 decision in Gooden v. Coors Technical Ceramic Co. In this case, the death of an employee who suffered a fatal heart attack while playing basketball on company premises during a break was covered. The court said that the voluntary nature of the activity, while an important condition, was just one factor to consider in determining whether the activity occurs during the course of employment. The court also considered the acquiescence of the employer to the basketball games, which were played regularly.

The new Tennessee law might have prevented the ruling in Gooden and it does give employers additional protection but as with most state laws it still leaves wiggle room. It says workers’ compensation does not cover a recreational injury or death — except in cases where the activity was expressly or implicitly required by the employer; or produced a direct benefit to the employer; or was held during employee’s work hours and was part of the employee’s work-related duties; or the injury happened because of an unsafe condition that the employer knew about but failed to fix.

A 2004 New Jersey Supreme Court ruling established one of the brightest lines between voluntary and forced fun activities. A mason contractor who was injured when he took an after-work hours spin on a go-cart at his employer’s insistence was found to be entitled to benefits. The ruling let New Jersey employers know that they will almost always be on the hook for an injury if they, in any way, require attendance at a social or recreational function, or direct an employee to participate in an activity. This could be any employer-compelled conduct, whether related to the job or not. The New Jersey court said that among the factors that can contribute to turning an activity into a required one are whether the employer directly solicits the employees’ participation; whether the activity occurs on the employer’s premises, during work hours, and in the presence of other employees or clients; and whether refusal to participate could cost employees any wages or their job.

Even though some states have attempted to draw bright lines, this can still be a murky area. It can be really tricky for employers operating in multiple states. Whether workers’ compensation is triggered often comes down to the particular facts of individual cases. There is a lengthy record of state decisions on “forced” fun recreational injuries.

A New York State appellate court this year upheld benefits for a man who suffered a spinal cord injury while circuit training at a fitness center during work hours. The judges concluded that Frank Torre’s injury arose out of and in the course of his employment. Torre had been encouraged by his employer to have a gym membership. Also, Torre’s position required him to develop contacts with clients, and both he and the employer’s president agreed that circuit class furthered this function. According to this court, that was enough evidence of employer sponsorship to support Torre’s claim for benefits.

Similarly, a California police officer who was injured training for a Beverly Hills SWAT team physical fitness test while on vacation was entitled to workers’ compensation benefits, according to the California Court of Appeal. The court said that for the officer to stop training while on vacation would be inconsistent with the Beverly Hills Police Department’s own requirement that the officer remain fit enough to pass the physical fitness test.

In Illinois in 2006, William Gooden, an employee for Allstate, participated in football, an egg toss and volleyball at a company-sponsored picnic. He fell twice while playing volleyball and then noticed tightness in his back muscles. He had to get treatment from a doctor but his claim was denied. The Illinois Supreme Court agreed with the denial of benefits because Gooden voluntarily attended the company-sponsored annual picnic. Prior to the picnic, Allstate gave Gooden a choice: he could attend the picnic for half the day and work the other half, or he could forego the picnic and work his regular job all day. He chose to attend the company picnic. He was not forced to do so. Employees who worked rather than attend the picnic faced no punishment or repercussion.

In 2006, an Arkansas woman injured during a “team bonding” retreat with co-workers was entitled to workers’ compensation. “The purpose of the offsite meeting was for employees to bond, refresh, set new goals and have fun,” the court wrote. “As long as the participants were advancing the purpose of the meeting, they were furthering the interest of their employer.”

A Wyoming advertising agent — who was trying to get a client to continue advertising with her radio station — agreed to horseback ride with him on a weekend. Although she was injured when mounting the horse, her claim for the injury was denied. The court concluded that the injury was related to her work, but not closely enough to qualify for workers’ compensation coverage.

The death of a Pennsylvania worker who drowned when he and some co-workers went swimming after being told by a customer their services would not be needed that day was covered under workers’ compensation. The court said the activity, while voluntary, was still within the course of his employment.

Out of the Headlines

Injury awards from company outings or events are sure bets to garner headlines when they are decided by courts or appeal boards. But of course, not all such claims end up in dispute. In fact, they are more often routinely processed by brokers and their carriers.

Insurance agent Carolyn Rzewski knows firsthand what it’s like to handle such a claim; she had to do it for her own employer, Rogers & Gray Insurance Agency, a leading agency in Massachusetts employing close to 100 people in several branches on Cape Cod. A few years ago during the company’s annual picnic, an employee slipped and fell while playing volleyball and broke his leg. The middle-aged man was rushed to the hospital. “He was in a lot of pain,” said Rzweski.

Rzewski, who manages all of the agency’s own insurance, filed the claim with OneBeacon. “There was no question about it being a claim,” she said, noting that the agency had sponsored the event, given employees time-off to attend it and, although attendance at the picnic was not mandatory, any employees who did not go had to stay at their office and work.

More than the agency’s experience modification factor suffered as a result; the tradition of an annual picnic with games or physical activities also came to an end. Today, the employees go on boat cruises or railroad rides where they enjoy a special dinner, sitting down.

Rzewski says the agency learned another lesson, too. The agency started the picnics years ago when more of the employees were physically fit. “All of us are getting older,” said Rzweski, who plans on retiring within the next year or so.

Before Jim Holinka joined wholesale broker AmWINS Brokerage of Illinois in Chicago, where he is an assistant vice president, he handled workers’ compensation claims for Liberty Mutual. Holinka remembers a claim by a high-level executive who broke his wrist in a soccer game during a company picnic and required surgery.

The picnic wasn’t exactly mandatory, but employees who did not show were not paid for the day. Thus Liberty Mutual saw it as a legitimate claim. “It was cut-and-dried,” said Holinka, “There were no curveballs with this one.” Neither the employer nor the insurer balked at the claim. What’s more, the claimant himself was so cooperative that he refused the monetary settlement he was entitled to. “He told us to just pay the medical expenses,” Holinka recalls.

Holinka said such claims, while not common, did occur often enough that Liberty Mutual’s training for adjusters took note of them.

Janet Warren, claims manager for Beecher Carlson in Atlanta, has also had experience with such claims. She remembers one agency she worked for prior to Beecher Carlson wanted to sponsor a hot air balloon ride for employees. But there had been news reports of accidents involving balloons so the employer got cold feet and cancelled.

She also remembers a risk manager for a client who sprained an ankle climbing Georgia’s Stone Mountain; a senior executive who sustained a severe head injury during a horseback ride gone awry; and workers boarding a cruise boat that were sent into the drink and hurt when the dock collapsed.

Warren believes most employers today know what they are getting into when they hold an event involving physical or social activity. “Most of our clients understand the risk,” she told Insurance Journal, and most are not surprised that an injury arising from such an event will be compensable.

One reason they are not surprised is that in many cases the broker has been brought into the event planning and has advised them on the risks and what safety steps to take, even down to knowing enough to have players stretch before a baseball game.

“So they go into the events with their eyes wide open and make an informed decision,” Warren says.

According to Warren, agents and brokers should be proactive in helping clients plan their events with accident prevention in mind. “The lesson is to use the broker as a consultant,” she says.

When it comes to fielding a claim from company outing, she cautions that there is no one rule fits all. “Every state literally addresses each one differently. Never assume one way or the other,” she advises, stressing the importance of brokers knowing the most current workers’ compensation information from each state on such injuries.

MyNewmarkets.com’s Boggs seconds Warren’s advice and adds his own: “Make any and all social or recreational activities expressly voluntary. Any hint of requirement or employer benefit could cause a problem.”

Warren says employers appear to believe such events have value in spite of the risks. “I don’t see companies refraining from activities.”

Topics California Agencies Claims Workers' Compensation Commercial Lines Business Insurance New Jersey Illinois Training Development Tennessee