There is no denying the popularity of the annual NCAA Division I men’s basketball tournament, better known as “March Madness” and its attendant NCAA bracket pools. Stakes are even higher this year with Warren Buffet’s recent announcement that he will give $1 billion to anyone who successfully picks all 64 team brackets. While not quite as high stakes as the Buffet challenge, participating in NCAA bracket pools is somewhat of a national pastime with no shortage of workplace pools for cash prizes. The 2013 Vault Office Betting Survey estimates that 70% of employees have participated in a betting pool in the workplace—most commonly March Madness at 69%. If your employees are playing for more than mere bragging rights, this could implicate a number of legal issues for your company.
Are Office Betting Pools Legal?
As a general rule, gambling is illegal in most states. The legality of office betting pools depends on state gambling laws, and each state differs. Some states make an exception for “social gambling”—gambling in a strictly social context, where no profit is made and the individuals involved knew each other prior to the gambling activity. Social gambling laws may encompass betting on a co-worker’s pregnancy due-date or which actor will win an Oscar. Certain social gambling laws may also place limits on how much prize money can be awarded. For example, in Colorado, an office betting pool is “social gambling” if the participants have a “bona fide social relationship,” all the money wagered is paid out in prizes, and the organizer does not profit for running the pool. A “bona fide social relationship” means that the parties must have an established social relationship based upon some other common interest other than the gambling activity.
The issue becomes complicated when betting pools involve sports wagering for cash prizes, such as NCAA brackets. Although certain state laws pertaining to “social gambling” arguably encompass sports betting pools, the Professional and Amateur Sports Protection Act of 1992 (“PASPA”) outlaws sports wagering in all but four states: Oregon, Delaware, Nevada, and Montana. In Pennsylvania, a recently-enacted law allows volunteer organizations and clubs that have a “small games of chance” license to offer small betting pools if: (1) the entry amount is $20 or less; (2) there are no more than 100 participants; and (3) all pool proceeds are awarded to the contestants. However, Pennsylvania State Police maintain that sports betting pools are still illegal under PASPA despite this recent change in the state law.
As a practical matter, although local law enforcement probably is not concerned with an office NCAA bracket, it is important to know the legal risks and laws of your state if sponsoring a pool. For instance, in New Jersey, an employee was arrested for allegedly taking a 10% cut (about $3,000) from an office sports pool. The employee was charged with promoting illegal gambling (the pool had been advertised in company emails) and he faced a steep penalty—up to five years in prison.
Employment Law Risks
Office managers often conduct office betting pools as a way to increase employee morale. Problems can arise, however, when employees feel ostracized from their co-workers for declining to participate. For example, 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.
Further, if an employer prohibits gambling in the workplace, the employer should consistently enforce the policy. Uneven enforcement exposes an organization to potential lawsuits for disparate treatment of its employees. For example, in Dent v. Federal Mogul Corp., 129 F. Supp. 2d 1311 (N.D. Ala. 2001), the employer fired an employee for violating its policy against gambling on company property. Although the employee admitted to operating a weekly football pool at the company’s warehouse, he sued his employer claiming that management was aware of and tolerated the football pools but targeted him for termination because of his race and gender.
In Dent, the court granted summary judgment to the employer because the employee refused to reveal the identity of the other employees who allegedly engaged in the football pools. Specifically, the court held that the employee’s claims failed because he could not identify any specific employee who was similarly situated. The court explained that in order to indicate that other employees outside of a protected classification were similarly situated and treated more favorably, it was not enough to state that other employees engaged in the same or similar misconduct but were never disciplined simply because they were not caught. This case highlights the importance of consistent policy enforcement: had the employee revealed the identity of other employees who were legitimate comparators, the court likely would not have dismissed the claims.
Promoting an employer-sponsored sports betting pool in the workplace is a risky proposition because it is technically illegal in most states. That said, it is almost a sure bet that at least some employees are gambling on sports during company time with company equipment. While participants in small office pools with low stakes are unlikely to be arrested, gambling in the workplace should be approached with caution. If an employer is in a jurisdiction that allows employees to conduct betting pools in the workplace, the employer should consider implementing a company gambling policy that:
- Describes what type of gambling is allowed in the office. The policy may also require employees to seek approval from human resources prior to engaging in gambling activities at the workplace.
- Defines parameters for using company property (i.e., computers, emails, etc.) to engage in gambling activities.
- Tells employees that the activities cannot interfere with productive work time.
- Outlines a complaint reporting procedure.
- Explains the discipline that applies to violations of the policy.