Phyllis Young with 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 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.

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.

States vary on when an activity might be considered forced but 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 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 last month 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 a 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.

Following

Each state, as has been seen in the above paragraphs, applies its own view of "arising out of and in the course and scope of employment" as it relates to employer-sponsored or required recreational activities. The next post recounts several agents and brokers experiences in handling such gray-area workers' compensation claims.