With the dust from Super Bowl and fantasy football pools barely settled, many employees throughout the Golden State will soon turn to their March Madness brackets.  With all the chances to bet on sporting events, on the due date for a colleague’s baby, or on presidential primary results, one might think that friendly workplace wagers are as American, and as legal, as Apple Pie.  But think again.  Employers should consider a number of issues before allowing office pools.

Potential Issues

Criminal Liability. To put it bluntly, workplace gambling remains illegal.  The California Penal Code was amended in 2009 so that pools and wagers with $2,500 or less at stake would be treated as infractions, punishable by a $250 fine.  But larger pools can still result in more serious criminal liability.  A first-time offender who makes or participates in a betting pool can be charged with a misdemeanor, punishable by up to one year in jail and a $2,500 fine.  Repeat offenders face stiffer potential penalties: their conduct may be charged as a misdemeanor or felony, punishable by up to three years in jail and $15,000.  And employers take note: criminal liability extends to the “owner, lessee or occupant” of the premises where the wagers occur or where the records of wagers are kept.  An employer tolerating an office pool runs the risk that some day a constable will enter and utter, “I am shocked, shocked to find that gambling is going on here!

While office pools are not law enforcement’s top priority, prosecutions are not completely unheard of.  In 2002, a middle manager with a technology company was arrested and charged in New York with “promoting gambling” and faced up to five years in prison after he organized an office football pool and took a 10% cut of the action amounting to almost $3,000.  And in 2010, the owner of a bar in Staten Island pleaded guilty to federal charges of tax-evasion after failing to report income generated by sports pools.  The bar owner narrowly avoided jail time and was ordered to pay more than $27,000 in taxes and fines.

And even if the cops aren’t setting up a sting to take down your office March Madness pool, there are other reasons for employers to be wary.

Employee Morale.  While many employers consider office pools a harmless way to increase employee morale and camaraderie, employees who do not participate may feel left out.  Some may even grow annoyed with the time their colleagues expend on activities related to the pools.

An employee who feels especially ostracized might pursue a hostile work environment claim.  For example, an employee who objects to gambling for religious reasons could be offended if co-workers deride him or her for abstaining from the pool.  This concern would be heightened where a supervisor encourages or otherwise endorses the office pool.

Whistleblowers.  California law prohibits employers from retaliating against any employee who reports potentially illegal activity—which includes gambling. Any employee subject to such retaliation may bring a private civil action against the employer and may recover economic, emotional, and, in some cases, punitive damages—not to mention attorney’s fees.  Additionally, where the employer is a corporation or limited liability company, California’s whistleblower law imposes a civil penalty of $10,000 for each violation.

Productivity Concerns.  Employees who participate too avidly in various pools may lose focus on their productivity.  And employees who use their employer’s Internet connection to stream games or other videos may slow the network and affect the work of co-workers.

Compulsive Gamblers.  Office pools may be particularly dangerous for compulsive gamblers.  Although California law excludes gambling addition from being a protected class for purposes of discrimination claims, gambling addiction can lead to other conditions that may be protected under state or federal discrimination laws, such as depression and other mental illness.

Workforce Solutions

Cautious employers would do well to avoid participating in or encouraging any workplace gambling. Employers should address any employee complaints about workplace wagering and determine if they need to react to productivity, morale, or other concerns.  Employers can prohibit all forms of gambling during work time; they can also prohibit employees from using work resources to gamble.  At the same time, employers should refrain from restricting employees’ use of their own time and property during breaks or outside the workplace.