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NEW YORK (MainStreet) — Managing employees can be hard enough without having to break up illegal gambling at the office, but during March Madness that’s exactly what many supervisors find themselves doing. While a little sports rivalry and even casual betting can be a fun break-room pastime, serious betting can lead to loss of productivity and even hostility among workers.

Thankfully, there are solutions for managing March Madness without looking like a tyrant or appearing too permissive. In fact, some companies actually reap a benefit from the month’s activities, with 20% of businesses reporting an increase in employee morale, according to a recent survey by staffing company Office Team. The majority of companies — 75% — reported that March Madness events have no impact on morale or productivity, while just 4% of businesses viewed the activities negatively.

“Most employers view March Madness or other office pools as relatively harmless and not at all a cause for concern. The problem with this approach is that it ignores some practical and legal issues,” says labor lawyer Tim Scott of the New Orleans office of Fisher & Phillips.

An employer or managerial official should never sponsor an office pool that requires subordinate employees to contribute their own money to the pot, Scott says. Such pools are illegal in most states where they involve betting on collegiate or professional sports.

“Further, this could give rise to a legal claim asserted by an employee opposed to gambling for religious reasons or could cause morale issues to the extent that feelings are hurt about how the pool is operated or who is invited to participate,” Scott says.

With that said, some companies have had good experiences sponsoring their own pools that do not require any investment on the part of employees, Scott says. Instead of money, prizes can be given out to people who have the most successful (or even least successful) brackets.

“This is a good way to promote morale and build teamwork,” he says.

But what happens when group of employees take it upon themselves to start their own pool?

“It depends on the situation, but generally speaking I would counsel managers to permit the office pools,” says Anthony Campiti, an attorney and partner in the Dallas office of Thompson & Knight.

“Restricting pools altogether is somewhat draconian. Plus, the pools can be great for morale and I think many employees will participate in pools notwithstanding restrictions from their employers, especially since the online pools are so easy to administer these days,” he says.

When talking to clients, Campiti says he recommends making the pools voluntary and inviting everyone to participate. It’s also important to keep in mind what your company’s guidelines may be on gambling — or if your company needs to think about putting a gambling policy in place.

According to a survey by the Society for Human Resource Management, 57% of human resource professionals say employees at their companies organize office pools during March Madness. Approximately 20% of those companies have a written gambling policy, while 10% of companies have an unwritten (yet still understood) gambling policy.

Although he’s never heard of March Madness-related fights ensuing, Campiti says he has heard plenty when it comes to loss of productivity.

“I advise employers to be diligent in reminding their employees that work time is for work and that if they want to participate in an office pool, they should do so on breaks or off-duty,” he says. “I also advise employers to instruct their employees to refrain from viewing games online from their computers, as this type of viewing often involves significant amounts of lost work time.”

Helene Wasserman, a labor and employment attorney with Littler Mendelson, says employers should think about how many hours of work time may be devoted to looking at the games.

“How many hours are devoted to looking at the standings, watching the games stream live on computer screens? It is important that employers who allow pools place limits on the time that pool participants devote to the camaraderie of the event. Maybe put in place a rule that employees cannot watch the games while working, but maybe sponsor a lunch or pizza night to encourage the friendly rivalry at an appropriate time,” Wasserman suggests.

In other words, if you don’t mind the employee pool but you do mind the live streaming of the games all day, you need to speak up, Scott says.

“Managers should remind employees that the company’s system should be used for work purposes only and that employees should not be wasting large amounts of time monitoring scores or, worse, watching full real-time games through streaming technology,” he says.

But even if productivity doesn’t slack and your office pool has gone smoothly for years, be prepared to take any complaints from employees seriously, Scott says.

“Managers should take any complaints from pool participants or non-participants seriously. If management determines that things are getting out of hand — such as arguments, inattentiveness to work or large sums of money being risked — there should be no hesitation to shut down the improper activity,” he says.

The fact is, some folks take their March Madness very seriously. Too seriously, Wasserman says.

“‘Fighting on’ for their favorite teams can lead to a fight that carries on beyond the game,” she says. “Employers must make certain that employees are well aware of workplace rules and policies about proper — and improper — treatment of fellow workers, and that those rules apply even to ‘friendly’ sporting rivalries.”