Article / 25 Oct 2021

When client hospitality goes too far

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Gateley Legal

After the long hiatus to client entertainment brought on by the COVID-19 pandemic, many businesses are naturally looking forward to using the run up to Christmas to reconnect in person with old clients and introduce themselves to new ones.

But in all the excitement it’s important to remember that even corporate hospitality can bring legal risks, as a recent decision in the Employment Appeals Tribunal (EAT) helps demonstrate.

What happened?

In the case of Mr D Thompson v Informatica Software Ltd, the EAT considered whether a manager had been fairly dismissed for authorising one of his sales team to take a former customer from Highways England for a stay at the Pebbles Beach Golf Club in California, which eventually racked up $5,400 in expenses.  The EAT found that despite a previously clean record and not having deliberately breached policy, the manager could fairly be dismissed for gross misconduct for having overlooked or not sufficiently considered the company’s client hospitality rules.

The key risks associated with corporate hospitality

This case helps highlight two key risks for managers and employers:

  • Firstly, as ever ignorance is no excuse and managers with responsibilities for authorising expenses should always consider whether proposals are in line with company policy and remember to reassess if the costs start rising.
  • Secondly, excessive hospitality spending (especially where public officials are involved) can open the door to the risk of prosecution under the Bribery Act 2010.  The legislation covers situations where corporate hospitality spending amounts to improper influence and can lead to prison sentences for the employees involved, as well as unlimited fines for their employers.  

How to manage the risks associated with corporate hospitality

To help mitigate these risks, managers with responsibilities for authorising expenses should make sure they are up to speed with their company’s policies for corporate hospitality.  Particular care should be given when authorising significant expenses relating to public officials or key decisions makers. 

Similarly, businesses should ensure that their anti-bribery and corruption policies are up to date and circulated amongst the appropriate staff.  It can be a defence to offences under the Bribery Act 2010 for businesses to show that they had adequate procedures in place, which can include written polices as well as ensuring staff are given appropriate training and information.

Client hospitality is a normal and often perfectly legitimate part of commercial activities.  But given that the long pause for the pandemic and the natural desire to make an impression and use up those untapped budgets, employers and employees can both benefit from a refresher on the rules and procedures that help manage the related risks.

Would you like more information regarding anti-bribery law and anti-corruption policy?

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