Halloween costumes in the workplace have the potential to get ugly this year in the midst of a tense political climate and a sagging economy, warns Steve Miller, a partner with the employment law firm of Fisher & Phillips. Costumes that are sexually provocative, carry a political or social message, or are otherwise inappropriate for interacting with colleagues and clientele could lead to liability.

Miller advises employers to take following steps:

1. Clearly communicate costume guidelines in advance. If employers opt to allow costumes on Halloween, they should send an e-mail or memo beforehand reminding employees that they are permitted to do so, but must use good taste and judgment.
2. Don't overreact, but be sensitive to the issues. In this litigious era, employers need to be careful. With female vice president and African-American presidential candidates, so-called “humorous” costumes can be widely misinterpreted. Also, some employees use Halloween as an excuse to dress in a manner that would never conform to most workplace dress codes.
3. Rewind the clock to last Halloween. Think about any feedback the company received from employees or customers last year. If the majority of the staff opted out of dressing up, perhaps the company should re-evaluate whether costumes are a fit for the company culture. If the holiday went smoothly and most people participated, it may be a positive celebration for the company.
4. Offer alternative celebrations. Companies should create a program that works for everyone. Rather than a policy of "We're dressing up in costumes and you don't have to participate if you don't want to,” host a company potluck or luncheon where staff can still celebrate Halloween with something fun.
5. Don't underestimate the subtleties. Employees should have a work environment free of obvious and not-so-obvious harassment. Keep in mind that some people might take offense to things that years ago bothered few.
6. Be prepared to discipline if necessary. Employees who appear in inappropriate costumes, in spite of direction by the employer, should be disciplined.

Source: Fisher & Phillips; http://www.laborlawyers.com.