Don’t bet the farm on March (legal) Madness

published in McAfee & Taft tIPsheet | March 3, 2017

By Zach Oubre and Phil Bruce

March is upon us, which means spring is near and the sweet smell of tournament brackets will soon fill the air. For many, the month is synonymous with March Madness, the NCAA’s annual tournament that crown’s college basketball’s next national champion. What will that mean for businesses? If history is any indication, it is a loss of productivity, the potential for office gambling, and traps for your marketing team. Here are some tips to avoid March becoming tornadic for your bottom line.

Brace for potential lost productivity

Although March Madness may boost employee morale, it may also mean a drop in worker productivity. The executive outplacement firm Challenger, Gray & Christmas, Inc. estimated that the 2016 March Madness tournament resulted in an approximate loss of productivity of $4 billion, with $1.3 billion paid to employees who were watching basketball rather than working. Some businesses like NuSkin embrace the madness. The personal care product company is said to treat its employees to hot dogs and popcorn while working and watching company televisions tuned into the tourney. Regardless of how you handle the event, you can bet your bottom dollar that March may bring distractions to your workforce.

Is it an office pool or gambling?

It is likely both. If you bet in any office pool, whether it’s for the NCAA tournament, the Super Bowl, Bedlam or another sporting event, it’s technically illegal gambling under Oklahoma law as well as the federal Professional and Amateur Sports Protection Act of 1992. Depending on how the pool is conducted and if it’s sponsored by the employer, the pool can actually violate multiple state and federal laws.

Nevertheless, betting on your best tournament bracket has become a national norm. The American Gaming Association estimated that 40 million Americans engaged in more than 70 million brackets for last year’s tournament, and some thought this was an underestimate. Because bracketology is so widespread, gambling laws are rarely, if ever, enforced when it comes to low-wager office pools. As a result, many speculate that the chance of being prosecuted for betting in a low-wager office pool is less than your chance of picking a perfect bracket (which happens to be 1 in 9.2 quintillion).

Employers shouldn’t bet on lack of enforcement, however. Companies that endorse and sponsor office pools face significantly higher risk, as the penalties for sponsoring and housing gambling activities can be harsher than engaging in them. So, as a company owner, the liability for your annual office pool may be more than you’d expect. An alternative to a pool for money is to turn each bet into a charitable donation where the bracket winner gets to decide where to donate the winnings by selecting from a pre-approved list of charities. Another alternative is to not require that entrants pay money to enter the pool and to award a non-monetary prize like “casual Friday.”

Employers should also lay their cards on the table when it comes to office pools. If your business has an anti-gambling policy, then, like any other policy, it should enforce it fairly and consistently. Picking and choosing when to enforce the policy can lead to other issues. For example, a terminated employee may argue that the employer illegally discriminated when the employer applied the policy in his or her case but not to those involved in an office pool.

Avoid March Madness becoming a marketing catastrophe

Businesses should also think twice before they try and tap into the marketing madness of March. The terms “NCAA,” “March Madness,” “Final Four” and “The Big Dance” are federally registered trademarks that the NCAA has aggressively enforced in recent years. NCAA logos are likewise protected. Importantly, it’s not trademark infringement where these terms are referenced in an informative sense (e.g., “my team won’t make the Final Four this year”), but use of the terms in connection with your company’s spring promotion could result in a not-too-pleasant letter from NCAA attorneys. So, businesses that use these terms (or something close) in their marketing are definitely raising the stakes. An alternative is to focus your marketing on the timing or concept of the tournament rather than using protected terms (like referencing the NFL’s “Big Game”).

So, regardless of who you are rooting for in this year’s tournament, make sure your business avoids these trap bets. And when you fill out your bracket, remember: no 16 seed has ever defeated a 1 seed!