The lead up to Christmas is traditionally the time for employers to show appreciation for their staff by organising an office knees-up. However, in order to ensure a hangover-free Christmas, all employers should be aware of the need to create a party environment which is free of discrimination, harassment and aggression.

Staff drunkenness, even of the high-spirited kind, can pose a host of problems ranging from health and safety issues to outbreaks of serious misconduct. Employers can be legally liable for acts of harassment at work-related functions, so managers should familiarise themselves with the risks in order to limit the potential damage.

Typical staff misconduct at these events involves making inappropriate, offensive or threatening remarks to colleagues, or engaging in physically aggressive behaviour. It is therefore essential to understand the employment legislation that is in place specifically to protect workers from harrassment as well as racial, sexual or disability discrimination.

Sue Nickson, a Partner working in the employment law department at Hammond Suddards Edge pinpoints the problem: “The difficulty is that employers want to give their staff a good time, but letting their hair down can lead to behaviour that may trigger discrimination legislation.”

However, the degree of offence caused by other people's behaviour is highly subjective, and there are no hard and fast rules for judging the appropriateness of colleagues' conduct. This is especially true in an informal setting where most people have been drinking.

“The level of the offence is hard to measure. It can range from as little as an inappropriate joke to a member of staff making a serious sexual advance on another. The key for employers is to show that they have taken all possible steps to avoid such situations,” continues Nickson.

It is important to strike a balance at the annual bash; employers should of course avoid a sterile atmosphere, but they should also try to contain any potentially dangerous situations. Providing a free flowing bar with no food, for instance, may not be such a good idea.

Some companies draw up rotas among managerial staff to keep an eye on other employees in an attempt to curb bad behaviour. Law firms, unsurprisingly, suggest sending out a newsletter reminding the staff about the company's harassment policy.

Diane Sinclair, lead adviser public policy at the Chartered Institute of Personnel and Development makes the point that this should not be done heavy handedly.

“Employers should weigh up the pros and cons of employee relations. Employment relationships are socially negotiated and should be based on trust and respect. The whole point of the Christmas party is to thank the staff, and sending out a heavy-handed letter may detract from this,” she says.

“A lot also depends on the culture of the company – some are more wildly inclined than others. Employers should weigh up the likelihood of a potential claim. However, it is important to let employees know that action will be taken if something that is regarded as harassment occurs,” Sinclair adds.

Unfortunately, in some cases employers will be forced to take disciplinary action which may lead to sacking a member of staff. Alternatively, if an employee makes a claim against another the company can become liable. In either case, employer and employee may well find themselves explaining it all in front of an employment tribunal sometime in the new year.

The employer must then be able to prove that he or she has taken all reasonable steps to avoid such behaviour. “The tribunal will weigh up all the evidence to see if in any way the employer is at fault. In the case of a complaint everything should be investigated thoroughly internally – details and notes of the investigation should be kept. No complaint should be dismissed no matter what the apparent severity of the incident is. Both sides of the story should be heard,” explains Sue Nickson.

“Harassment policy should be made clear to all members of staff. Often more inexperienced members of staff find it very difficult to report if a senior member of staff acts offensively. It is essential that they realise that this will be investigated,” she adds.