NCAA Tourney Pools - Morale Builder or Company-Sponsored Criminality?
A practical (not legal) look at March Madness in the office
It’s that time of year
again - March Madness. Employees across
the country are preparing bracket sheets, usually on company time and company
property using company copiers and e-mail.
But this isn’t the only
time of year employees see some “action."
Odds are good that if
you have more than a handful of employees, someone is also running a Fantasy
Football, Baseball or NASCAR league, a weekly Football pool, a Football King of
the Hill league, a Lottery Tickets pool, a Kentucky Derby Pool, and/or a Dead
Pool. Let’s talk about the liability you might have, and practical ways to
handle it. A rundown of the most popular
forms of workplace gambling is included at the end.
First, a disclaimer: This
is not legal advice. If you want a rock
solid legal opinion to hang your hat on, contact an attorney.
What Could Go Wrong?
As stated above, this is
not an absolute legal guide written by attorneys.
Federal Law essentially
allows the states to decide for themselves the limits on gambling, but in the
U.S., we have seven kinds of legal gambling: Bingo, Lottery, Pari-mutuel, Off
Track Betting, Poker and Card Clubs, Casino Games, and Sports Book.
What we are mostly
talking about would be considered Sports Book gambling where the outcome of a
sports event determines the winner of the wager. Is Sports Book gambling legal
in the United States? Short answer is “Yes,” but ONLY IN NEVADA and only if you
are physically present.
As such, most types of
company-related gambling is illegal, no exceptions. That means that
participants could technically face at least misdemeanor charges and organizers
could potentially face felony charges. Winners could be subject to back taxes,
penalties and interest from the IRS if they don’t report winnings as income,
and employers could have serious liability on several fronts. What if the
gambling crossed state lines using company e-mail? How about if minors were
involved?
What else can go wrong?
Since the “bookie” that handles the money and administers the system for the
numerous types of games is usually at least a Supervisor, if not a Manager, and
members of Management almost always participate in the gambling, the implication
is that the company at least allows the gambling to happen with full knowledge
implicitly guaranteeing the game on some level to employees.
When an employee claims
to have been cheated, how can the company not take action? A client of ours had
accusations of cheating in the weekly football pool by the Supervisor that ran
the game, collected the money, and “graded” the weekly sheets. At that point,
the company had to get involved, interview all the key people in an “official”
capacity, and ultimately make an announcement to the whole company with the
results of the investigation.
What ultimately
happened? While no wrongdoing was established, the pool was forever cancelled, almost
every employee was disgruntled with either one side or the other, and company
resources were tied up for days just to reach a solution that created
tremendous disharmony.
Let’s consider that
incident from the 30,000 foot level for a moment - company time and resources
were spent investigating supposedly inappropriate conduct by a member of
management engaged in illegal activity on company property and on company time.
Some would (and some employees did!) ask how the situation is any different than
a complaint from an employee that the marijuana he bought from his Supervisor
had been diluted to unacceptable levels. This is the kind of criticism
companies are opening themselves up to by allowing gambling in the workplace.
Why don’t authorities
prosecute more often? The common response from law enforcement is that office
gambling is essentially considered a “victimless crime” that is less of a
priority than other more serious crimes, and that it is so widespread as to be
almost impossible to control.
What You Should Do
The “safe harbor strategy”
is no gambling on company premises or company time or involving company
communications systems, no exceptions. Give a moment's thought to the worst
case scenario at your company and how you would justify allowing what is
essentially going to be perceived as company-sanctioned gambling to the press,
the authorities, or even a customer that particularly disapproves of gambling.
Make sure your company policies are updated with regard to gambling and enforce
your rules and the related progressive disciple for employees that violate the
policy.
What You Should Do (Reality Edition)
You just read the advice
that can keep you out of trouble on this issue.
However…assuming you are
going to ignore the advice above and allow some versions of company gambling, here
are some things to consider from a non-lawyer’s perspective (and one that
cannot be legally relied upon):
- Games that pay out
100% of the money bet at least have some chance of getting sympathy from
authorities. They still can prosecute for what is completely illegal activity
if they want, but at least it’s seen as an “honest” game. If someone is taking
a percentage of the action bet, you are running an unlicensed casino, in
essence.
- It would seem that
having company Supervisors running the game would be a good idea; it’s not. If
there is even the allegation of wrongdoing by a participant when a Supervisor
or member of Management is running the game the company is firmly on the hook.
If members of Management are just players like everyone else, at least you have
some level of deniability. Better yet, have your Management Team steer clear of
workplace gambling altogether.
- Email essentially
lasts forever, either on your company backups (subject to subpoena) or on
someone’s personal inbox. Establish and enforce your company e-mail and
internet policies on this issue. Also, email allows employees in other states
to play thereby bringing the potential for all kinds of additional legal
complications if they are using company email. There are several ways for
employees to get free email hosting, and most have separate non-company
accounts of their own already. There is no excuse for employees using company email
for anything but company communication.
- Have the games kept
completely off company property. The websites that are essential to Fantasy
Leagues are not company-related and there are others that help players with
tracking weekly pools. If you eliminate
the games on company time, you can discretely encourage someone to engineer a
replacement game employees can access publicly hosted by someone else on their
own time. At that point all you have to do is discourage the money changing
hands on your property.
In conclusion, workplace
gambling is an issue with significant potential liabilities that is
consistently ignored by most companies. When the company is unwilling to take a
stand initially or put parameters on the gambling, it quickly becomes an
institution accepted by all right up to the point where there’s a problem that
can require significant company time and resources to resolve.
Games People Play
Fantasy Leagues
In these leagues,
participants “draft” players to be on their teams and earn points for various
achievements by their players. Participants typically pay an initial sum at the
start of the season, and the proceeds are distributed to the winners along some
pre-arranged formula.
Weekly Football Pool
Each week of the NFL regular
season, employees pay a nominal fee and pick the winning team, assigning a
points value for each game based on how confident they are. The most points
each week typically wins some percentage of the weekly fees, with the rest
going towards a pot for the season points total winner.
King of the Hill
Participants pay a
one-time fee. Each week they select a team to win and cover the points spread. The
last person that picks a winning team while all the other players have lost
keeps the “pot”.
Super Bowl Squares
In this game, players
buy squares on a 10 x 10 grid. After the
entire grid is sold, numbers from 1 to 10 are drawn randomly and assigned to
the X and Y axis of the grid, with one team assigned to the X axis and the
other to the Y axis. Each quarter pays the person that bought the square at the
intersection of the game score some fraction of the fees.
NCAA Brackets
Players pay a one-time
fee and fill out a “sheet” selecting the winning teams for each and every game
and round. Points are assigned for wins in each round, and the winner and all
ties split the “pot”.
Lottery Pool
Employees pool a small
amount of money together each week and buy $1 lottery tickets with the idea
that they will split any winnings on a basis proportional to each employee’s
contribution.
Dead Pool
In
this cynical game, employees find ways to bet on which employees will be laid
off, terminated or voluntarily quit, and in what order. In several situations I
am familiar with, the people have won the pool based on their own terminations.
