By Kenneth D. Stein and Judith A. Moldover, Ford & Harrison

An old television commercial touted "gifts that keep on giving." Like so many other things in today's workplace, holiday gifting holds the potential for legal headaches that may "keep on giving" long after the last decoration has been removed. Gifts given to or from clients and vendors, as well as between employees, raise legal, and even criminal, issues. An appropriate company policy helps to reduce those risks.

Employee Gifts

While federal law forbids federal government employees from accepting a gift from any lower-paid employee, and also forbids subordinates from giving gifts to superiors (excepting special occasions such as retirement), there is no corresponding federal law regulating private employers. (State laws may vary.)

Many companies, however, have voluntarily adopted gift-receiving rules in the interests of good employee relations. It is particularly useful for companies to set guidelines for appropriate gifts, both in type and in amount, thereby limiting the expectations of both the givers and the recipients. Failure to do so can damage employee relations and invite complaints, legal and otherwise.

Such companies seek to avoid the unseemly prospect of employees feeling compelled to give their supervisor a "best" gift, whether to curry favor, to "keep up with the Jones'," or merely not to offend. Without such rules, the credibility of both the company and the supervisor may be undermined as competing employees may question whether a subsequent plum assignment or promotion for the "best" gift-giver was made purely on the merits.

Another risk of holiday gifting--the inappropriate gift--is more insidious, as such gifts may give rise to, or support, a hostile environment claim. Employees should understand that certain gifts, e.g., sex-related toys, intimate apparel, or one that addresses (or ridicules) an employee's age, national origin, race, disability, sexual orientation, or religion, are inappropriate. This is so even if the recipient doesn't take offense, because other employees who see or hear about the gift may not be similarly amused.

Likewise, as with other aspects of holiday celebrations, employees who do not celebrate the same holidays should neither be (or feel) compelled to participate, nor should they be excluded. Indeed, some companies hold a "year-end" employee appreciation event, rather than one dedicated to a particular holiday, to encourage participation by all employees regardless of religion.

Client/Vendor Gifts

Vendors, in the name of the holiday, often seek to promote good will (and future sales) by giving gifts--large and small--to employees with whom they have worked or to those with whom they would like to curry favor. Such gifts, especially costly ones, e.g., dinners at posh restaurants, cruises and spa weekends, may taint the relationship by creating a sense of obligation in the recipient. Furthermore, other employees who are not recipients may come to resent the employee-recipients as well as the vendors.

Thus, it may make sense to have uniform rules limiting the value of gifts that may be received to prevent even the appearance of impropriety. For example, federal government employees may not accept "anything of value" from any entity doing business with, or regulated by, that employee's department, unless permitted by the departmental ethics office. This includes gifts with an aggregate market value of more than $20 on any one occasion, with an annual limit of $50 from any one company or its employees.

The converse is also true. Companies need to be sensitive to the gift rules of their clients and customers for the very same reasons. Federal contractors, in particular, should be aware of these limitations so as not to embarrass (or tempt) government employees with whom they do business. In addition, gifts to federal employees so lavish that undue influence is intended may run afoul of federal criminal law. State and local government contractors may be subject to similar laws.

While there is no federal law (again, state laws may vary) prohibiting gifts to employees of non-government entities, there are various forms of private regulation. NASD rules prohibit member companies from giving gifts worth more than $100 to employees of other companies. Many companies have voluntarily adopted a code of conduct which prohibits giving or accepting lavish gifts.

Conclusion

While every company, subject to the limitation of law (such as those noted above), is free to decide what limitations, if any, it should impose on the giving and receiving of gifts by employees, it would be prudent for companies to explore the ramifications of gift giving and to consider the development of a written policy that would both explain the rationale and permit uniform enforcement. Such a policy should address:

(a) limits on the monetary value of gifts
(b) propriety of accepting gifts from vendors
(c) giving gifts to clients
(d) giving gifts to, or receiving gifts from, subordinates
(e) adherence to the company's fair employment practices policy.

Kenneth D. Stein (212-453-5900; kstein@fordharrison.com), Managing Partner of Ford & Harrison's New York office, represents management exclusively in all aspects of labor relations and fair employment practices law. Judith A. Moldover (212-453-5923; jmoldover@fordharrison.com) is Of Counsel to the firm.