When March Brings Madness to Your Company

The month of March has become associated with college basketball’s NCAA tournament and is as much an American tradition as apple pie, baseball, and the Mannings. Each year, the hysteria of teams competing for college basketball’s coveted prize amidst buzzer-beating baskets gives rise to the phenomenon of March Madness.

The frenzy is not relegated to the hardwood. According to its 2011 March Madness Productivity Report, consulting firm Challenger Gray & Christmas, Inc. estimates that the total online viewership during work hours reached 8.4 million during the 2010 tournament, which began on March 15. The report makes a monetary determination by multiplying that figure with the average hourly earnings of $22.87 among private-sector workers, arriving at a financial impact that exceeded $192 million.

The Challenger report said its estimate was based on 2010 March Madness on Demand traffic statistics from CBSSports.com, the site’s primary sponsor. It noted that the online streaming service garnered more than eight million unique visitors who watched 11.7 million hours of online video and audio, an average of about 1.4 hours per visitor. Challenger noted that this was a 36 percent increase over the prior year, and says it expects the number to increase by 20 percent this year.

Productivity risks aside, March Madness brings with it the thorny legal issue of workplace gambling activities, including workplace-sponsored gambling pools and on-premises gambling.

According to the sports gaming site Sandbox.com, approximately three million people worldwide entered online pools for the NCAA basketball tournament. The Society for Human Resource Management reported that 30 percent of employees are involved in office betting pools, but 63 percent of companies do not have policies regarding gaming or gambling in the workplace.

What legal liability risks does March Madness pose for companies and corporations? Can friendly, Web-based office pools put your company at risk of a lawsuit? 

According to Michael Schmidt, a member at Cozen O’Connor who practices in the firm’s Labor and Employment Group, there are three potential pitfalls of having these types of activities in the workplace.

“First is the effect that gambling—and worse, one’s gambling addiction—may have on your company, which can include decreased productivity, theft, and fraud,” he says. “Second is the effect that these activities can have on working and sometimes personal relationships between co-workers. One can surely imagine things turning sour in circumstances where one co-worker feels cheated by another in a game of chance, or someone may become too indebted to another as a result of frequent betting. Third, certain games of chance and gambling activities may actually be illegal in your company’s jurisdiction and pose the risk of civil or criminal exposure to company officials and/or the owners of the premises at which the offending activities are being engaged.”

With such attention on actions in the workplace regarding ethics, violence, harassment, and work-related trauma, employers and companies continue to be held liable for the work environment that contributes to criminal and endangering behavior.

A simple Google search on the issue turns up a case in 2002 of a manager at AT&T who was arrested for allegedly taking a 10-percent cut from a football office pool in New Jersey, which amounted to about $3,000. According to various sources, the pool was advertised in office e-mails, and a co-worker was alleged to have turned the AT&T employee into the police. The worker was charged with promoting gambling and faced up to five years in prison, but charges were dropped when he agreed to enter an intervention program prior to trial.

Additionally, there have been lawsuits filed against employers that alleged such activities either caused or contributed to a gambling addiction due to the allowance of workplace gaming and a failure to establish or enforce a policy to prevent it.

Holland and Hart’s John Husband, who served as the Chair of his firm’s Labor Practice Group, advises that companies need to know the risks that gambling can create.

“Office pools represent illegal gambling in many states, and if the employer has employees in multiple states, the employer should consider whether it is unwittingly condoning illegal behavior and whether it could indeed be held liable for occurrences arising out of workplace gambling,” says Husband. “Inconsistent enforcement of workplace policies or discipline related to workplace gambling has led to litigation.”

Husband also advised that premises liability and action brought against a company by the landlord of property that is leased is a very realistic probability. If the duty owed by the leasee is breached by workplace gambling on the premises, such liability could exist, he says.

In order to decrease the chance of being held liable for any actions that may derive from March Madness or workplace gambling, Husband says companies and employers should have a handbook that states clear policies against employee gambling.

“The policy should outline acceptable and/or prohibited behavior regarding employee gambling,” says Husband. “Your policy should define the type of behavior prohibited, state that some gambling is illegal, and indicate that gambling can interfere with employee productivity. The policy should also make clear that an employee can be disciplined for violating the policy.”

All agree that the most important aspect is to enforce the policy. Employers face a greater chance of liability when a policy in place is not enforced equally across the board.  

Mary Anne Medina is an instructor and course developer for Vale Training Solutions. She has extensive experience in claims process redesign and claims handling training, with an emphasis on liability loss adjusting. She has been a CLM fellow since 2010 and can be reached at MMedina@vale-ts.com.