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Moneyball

Taking A Gamble On March Madness

Office pools and social gambling can be harmless fun — if the rules are followed

Every human resources department in Arizona would flip a chip if employees set up a poker table in the middle of the boardroom and started playing Texas Hold ‘Em in the middle of the work day. But somehow, gambling in March Madness office pools gets a free pass.

“For many of us, March Madness is a rite of passage in the spring,” says Pavneet Uppal, managing partner of Fisher & Phillips in Phoenix. “It’s a chance to build camaraderie with co-workers through office pools, a chance to reconnect with college friends during games and a chance to indulge in a few chicken wings with the family.”

March Madness — the nickname given to the NCAA basketball tournament — is the nation’s largest gambling event. Conservative estimates project that more than $2.5 billion will be wagered on the tournament, which doubles the amount bet each year on the Super Bowl. More importantly for employers, March Madness costs anywhere from $1.4 billion to $3.8 billion in lost employee productivity each year.

Lost productivity aside, is it legal to bet in March Madness office pools?

“Under Arizona statute, March Madness pools are not illegal if they meet the four criteria of legal social gambling,” says Melissa Costello, an attorney in Bryan Cave’s labor and employment group.

The four criteria of legal social gambling are:
1. All of the participants compete on equal terms.
2. Each participant is at least 21 years old.
3. The participants can only receive winnings, and no other benefit.
4. No non-participant will gain any benefit from the pool.

“If an office pool does not meet all of the criteria for legal ‘social gambling,’ a company that allows an office pool could be charged with a class 5 felony if it conducts, organizes, manages, directs, supervises, finances, or furnishes advice or assistance in promoting the office pool,” Costello says. “A felony conviction could subject the company to a significant fine.”

If the office pool does not meet the ‘social gambling’ criteria, the organizer of the pool could also be charged with a class 5 felony for promoting illegal gambling and, if found guilty, could be sentenced to jail time and ordered to pay a significant fine, Costello warns.

“There can be numerous (other) legal issues, particularly if the gambling crosses state lines,” says Craig O’Loughlin, a partner with Quarles & Brady. “There can be IRS issues with winnings, (and) whistleblower issues.”

Beyond the legal ramifications of office pools, a Spherion study found that 52 percent of human resources executives say their top priority this year is cost containment. March Madness — accompanied by excessive score-checking and an exorbitant amount of water cooler game analysis — erodes workplace productivity and can jeopardize cost-saving measures.

“Employers have every right to expect employees to devote 100 percent of their energies to the job between stated work hours, and as long as they act consistently, can fire employees who play fantasy sports instead of working,” Uppal advises. “Human resources teams should consider reviewing and communicating the company’s office policies on the topic to ensure good people aren’t destroying their careers in the name of March Madness.”

Uppal says many managers are beginning to recognize and accept that employees will spend a portion of their work day handling personal business or surfing the Internet. And some even run March Madness pools as a team-building activity.

“If the employer sponsors (March Madness pools), make the entry free, and have prizes for the winners,” O’Loughlin says. “Also, know the tax ramifications of the prizes.”

Even if employers feel disinclined to allow March Madness office pools because they are a drain on employee productivity and efficiency, the reality is that employees will likely still participate in pools outside of the office, Costello says.

“Office pools should not be official company events, but rather than spend energy prohibiting office pools that meet the ‘social gambling’ criteria, employers should consider using March Madness as a tool for developing employee relationships and increasing morale, such as by inviting employees to wear a shirt from their alma mater on game days, hosting viewing parties during lunch hours, or providing basketball-themed snack breaks in the afternoon.”

Arizona Business Magazine March/April 2012