Across the country, sports fans are gearing up for their favorite seasonal competition: the NCAA “March Madness” tournament. Those with winning brackets can earn prizes ranging from neighborhood bragging rights, up to a million dollars per year, for life (if you are one of Warren Buffet’s employees). Competition prizes and popularity notwithstanding, should employers be wary about hosting the office pool?  When does friendly competition run afoul and become illegal gambling?

Most forms of sports betting are illegal, with few exceptions.

The majority of sports gambling activities are illegal in all states, except for Oregon, Delaware, Nevada and Montana. The federal government has enacted a multitude of rules and regulations to preclude sports betting, including the Professional and Amateur Sports Protection Act of 1992 (“PASPA”), the Instate Wire Act of 1961 and more recently, the Unlawful Internet Gambling Enforcement Act of 2006 (“UIGEA”).  The latter two Acts even preclude wagering or placing bets over the internet.

There are some exceptions to these anti-gambling statutes. For example, the UIGEA does not stop individuals from participating in free games or contests, nor does it prohibit participation in fantasy sports leagues, so long as that league establishes the prizes in advance of the game and the outcomes reflect the knowledge and skill of those who actually participate.

Some states also make exceptions for “social gambling,” which is gambling that occurs in a strictly social context, where no profit is made by the person organizing the event (i.e. betting on a co-worker’s pregnancy due date). Pennsylvania and California, for example, permit individuals to play the State Lottery, as well as certain forms of bingo, pari-mutuel betting on horse races, and small “games of chance” (as identified by the applicable statute).

Assess the risks involved in sports betting: Is joining the office pool worth the gamble?

Given the popularity and scale of the NCAA March Madness movement, it would be nearly impossible for state or federal law enforcement to amass the time and resources necessary to crack down on all PASPA violators. Nonetheless, a law enforcement officer who suspects that individuals have engaged in illegal gambling activities would have the right to investigate those activities as part of his or her official duties.  For instance, a New Jersey resident was arrested and later incarcerated on charges of money laundering and promoting gambling after a simple office pool grew to an international enterprise involving 8,000 entries and a cash pool of over $800,000 in 2009.  Accordingly, if you choose to gamble on March Madness, it is best to look into how your state enforces the PASPA because you may be gambling away more than just your entry fee.

Employers or employees associated with organizing or participating in an office bracket pool may also be exposed to other potential legal actions. As stated by our 2014 HR Legalist article, an employer may be exposed to a potential hostile work environment claim if an employee does not participate in gambling activities due to religious beliefs, but receives pressure to do so from other co-workers. An employee may claim that he or she was purposefully excluded from participating in a gambling activity because of his or her membership in a protected class.  If that employee can demonstrate that similarly situated employees outside his or her protected class were included in the gambling activity, the employer may be subject to liability.

Keep your employees in the zone and focused on the end game (great work).

The easiest and simplest way to avoid any legal issues is to refrain from hosting or participating in any form of workplace gambling. That being said, as many employees are likely to create at least one March Madness bracket this season, employers should consider the following practices to mitigate risk and keep employees focused on the task at hand:

• Develop a clear office gambling policy that requires approval from human resources prior to engaging in lawful gambling activities at the workplace;
• Ensure that every employee receives the same set of policies and rules of the game;
• Establish well-defined parameters for those engaged in lawful gambling activities, as well as specific consequences for those who violate the policy;
• Instruct employees that these activities cannot interfere with work and remind employees about absenteeism policies;
• Be conscious of office culture and ensure that no employee is forced to participate in any non-work-related activities (i.e. be sensitive to those who may have religious objections to gambling, undisclosed gambling addiction issues, social anxiety, depression, etc.);
• Implement a complaint reporting procedure;
• Ensure that all entry fees are accounted for and paid out to the participants; and
• Preclude any employee from accepting compensation in exchange for facilitating any game or contest.

If you would like more information on employment policies related to March Madness gambling or other workplace activities, HR Legalist recommends consulting an experienced employment law attorney.