The NCAA men’s basketball tournament, a/k/a March Madness, kicks off Sunday, March 15 with Selection Sunday, then rolls on Tuesday, March 18 with a couple of play-in games and then on to the actual tournament, which begins Thursday, March 20. The brackets, the gambling, the office conference rooms dedicated to the games, the continual online streaming of games, the excitement…it’s all here! And with Warren Buffet recently announcing he will give $1 billion to anyone who can pick a perfect bracket, the stakes just got higher! While the Billion-Dollar Bracket may be new this year, March Madness, Super Bowl betting and Fantasy Football pools have long been ingrained in the American workplace, and with managers, supervisors and human resources professionals alike participating in the action, the slew of workplace issues associated with these events keeps increasing.

There is no question these events cause major distractions in many workplaces and gambling pools associated with these events create a wide range of risks for employers, like productivity loss, discrimination, whistleblower issues, disability issues and even criminal penalties. These risks are often overlooked because no one wants to be Debby Downer, but before burying their heads in the sand, employers should be familiar with some of the risks and some helpful solutions:

Is Workplace Gambling Legal?

The most obvious issue: Workplace gambling. But the real question: Is it even legal? On a federal level, probably not. If an office NCAA bracket pool crosses state lines or is conducted online (as many of them now are), it may violate the Interstate Wire Act of 1961. This act prohibits those “engaged in the business of betting or wagering [who] knowingly use a wire communication facility for the transmission in interstate or foreign commerce” to place bets on sporting events or contest. Because the Internet is a “wire communication facility”, an online pool seemingly violates this Act if its participants pay entry fees as a wager to win a bigger prize – yet we all know that such pools are readily available from mainstream internet sites, e.g. ESPN. There is a fantasy sports exception, but bracket pools do not seem to fit within this exemption because they require individuals to bet on the outcomes of the games.

The next federal law is the Professional and Amateur Sports Protection Act, which makes it illegal for anyone to operate “a lottery, sweepstakes, or other betting, gambling, or wagering scheme…in which amateur or professional athletes participate.” The Act grandfathered in previously authorized sports gambling in four states (Nevada, Delaware, Oregon, and Montana), but March Madness bracket pools were not included in the grandfathering.

Lastly, the Uniform Internet Gambling Enforcement Act (“UIGEA”) provides, “no person engaged in the business of betting or wagering may knowingly accept” funds “in connection with the participation of another person in unlawful Internet gambling.” The UIGEA has an exception that permit fantasy sports if: (1) the value of the prizes is not determined by the number of participants or the amount of fees paid and the prize is made known to participants before the contest begins; (2) all winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individual athletes in multiple real-world sporting or other events; and, (3) the fantasy game’s result is not based on the final scores or point-spread of any single real-world game and not solely on any single athletes’ performance in a single event. March Madness bracket pools fail the second and third prongs.

On a state level, whether the tournament is illegal or not depends on the state. Although most states ban gambling, state gaming laws typically provide exceptions for “social” or “recreational” gambling, but to qualify for these exceptions (in most instances) the following must occur: (1) all of the money in a pool must go to a winner or a charitable organization, i.e. the “house” cannot receive any of the proceeds; (2) there must be a maximum amount a person can wager (like a $20 entry fee); and, (3) the pool must be limited to a certain number of people with pre-existing relationships (like co-workers). So, in some states, NCAA bracket pools that meet these requirements may be permissible. Ohio’s Constitution bans gambling, except lotteries, charitable bingo, casinos and racinos.

While law enforcement is probably not concerned with workplace bracket tournaments, employers should be aware that if they choose to sponsor a pool, theoretically at least, they risk fines and criminal penalties.

Controlling Gambling in the Workplace

Based on the information above, there are sound arguments that March Madness bracket gambling is likely prohibited by law, including in Ohio; however, this legal/illegal minor detail has never seemed to stop the gambling tradition. As such, employers need to figure out how to deal with these issues as they creep into their workplaces over the next few weeks and when fantasy football season comes around in the fall.

The safest and easiest approach for employers is to prohibit gambling, including NCAA bracket pools, in the workplace and describe acceptable and prohibited behaviors, e.g., using company-owned computers and servers for gambling purposes and identify work areas (e.g., offices, cafeterias and parking lots) where gambling is prohibited.

Recognizing that many, if not most, employers will not want to interfere, employers who choose to allow workplace gambling should consider implementing a workplace gambling policy, or update their current one, to include the following:

  • The policy should describe the type of gambling that is allowed. If gambling is limited to March Madness brackets, the policy should expressly say so. If, however, an employer wishes to allow for fantasy leagues, OSCAR polls, Super Bowl polls, etc., the employer should take the time to make sure all allowed workplace gambling is included in the policy;
  • The policy should require that the specific type of gambling being done in the workplace be approved by human resources to ensure it fits within the legal requirements set forth above;
  • The policy should define if and how the employer’s property can be used to engage in the workplace gambling. For example, if workplace televisions, copiers, computers, email, etc. are not allowed to be used for such activities, the policy should expressly say so. If they are, the policy should clearly communicate policies regarding employee breaks, email and Internet use so employees know what is acceptable;
  • The policy should inform employees that the gambling activities cannot interfere with production or work;
  • The policy should outline the employer’s complaint procedure in the event there is an issue; and
  • The policy should outline the discipline that may be lodged against an employee in the event of a policy violation.

As a bonus, with respect to NCAA bracket pools, the policy should require employees: (1) complete NCAA brackets on paper, instead of participating through online forums; (2) prohibit employees from participating in offices located across multiple states; (3) prohibit employees from using company equipment, including email or copiers, to operate the pool; (4) limit entry fees, e.g., to $20 or less; and, (5) ensure winnings go to the winner or a charitable organization. Another option is to allow employees to participate in a bracket pool for free, with the winner getting a prize instead of a monetary award.

Discrimination from Workplace Gambling

Although most sources report that bracket competitions or office pools are good for employee morale, there are still those employees who may not want to participate and claim discrimination. Employees who do not participate in bracket pools may become frustrated by the distraction it causes, they may feel those participating have decreased productivity, or they may simply feel left out. This may also be true for those employees who choose not to participate because of moral or religious objections to gambling or those that have to refrain because of gambling addictions. These hurt feelings or feeling left out may result in legal liability. For example, an employee who objects to or refuses to gamble may bring a hostile work environment claim if co-workers or supervisors harass or ridicule the employee for the employee’s position. Employees who are left out of an employer-sponsored competition may claim they are being treated differently.

The next potential cause for concern is with pathological gamblers and problem gamblers. Although the Americans with Disabilities Act specifically exempts gambling addiction from coverage, an employee who suffers from gambling addiction may suffer from other medical conditions that may be covered under the ADA, like depression or other mental illness that may qualify them as “disabled” for purposes of the ADA. As such, employers should be cognizant of these issues, stay away from encouraging employees to participate in these types of events and certainly not treat any employee differently for choosing not to participate.

Whistleblower Lawsuits

Because gambling is mostly illegal, employers should watch out for employees who “blow the whistle” on such activities and then claim retaliation. For example, under Ohio’s whistleblower law employers are prohibited from disciplining or taking retaliatory actions against an employee who makes a report authorized by Ohio’s whistleblower law, which includes reports for workplace conduct the employee believes violates criminal law. In states where gambling is illegal employees may use the employer’s betting pool as the basis for a whistleblower suit.

It’s Called “Work” Because You Are Supposed to Work – Issues with Productivity

March Madness is an event – and a long one at that. Millions of people watch the NCAA tournament games, and because many of the games occur during the day, there is no doubt that many people are watching these games while at work. While many employers could deter this activity by limiting employee’s accessibility to televisions and blocking access from work computers, these strategies less viable options now that mobile applications allow employees to watch games and update scores easily. (In fact, the NCAA’s March Madness Live App will roll out soon). With more viewing outlets, the chance that employees will be keeping score rather than working has increased. Distracted employees can reduce productivity, cause workplace accidents and potentially impact the bottom line. Further, just a few employees streaming games on work computers can significantly slow the transmission of workplace communications. As such, employers should take steps ahead of time to get proper procedures in place to address these issues head on.

Takeaways: March Madness is fun. But with most “fun” things that occur in the workplace, March Madness is not headache free in light of the potential discrimination, retaliation and/or whistleblower issues. But, once you have all your pre-game workplace policies under control, sit back — somewhere away from the workplace, please — download a bracket, and enjoy the next few weeks. If you want some more help managing your bracket or participating in the fun, there’s an app for that. Here is a list of apps that were available after Selection Sunday last year. No doubt, there will be a host of others available this year that will likely include 2014 versions of some of the ones on last year’s list, which included Bracket Picker Madness, an app that automatically generated a bracket based on stats and criteria the user selected; ESPN Bracket Breaker 2013, which allowed a user to create and track up to 10 brackets; and March Brackets, which would automatically update a user’s brackets to real-time scores.