Mega-millions, or mega headache?

Dear Mary, We have a lottery pool at our business where once a week everyone chips in a dollar and someone goes out and buys tickets. The idea is that if we win, we would split the prize money equally between employees. Is this a legally binding arrangement?

A good friend of mine from law school always says: “Any time you go into business with friends or family, you will end up hating and/or suing each other.” This advice also applies to your scenario—As we’ve seen recently, $640 million can quickly make people lose their minds. The history of lottery winners is scattered with lawsuits and heartbreak.

The most common issue with office lottery pools is knowing who is in the pool. In the unlikely chance that the office pool wins “the big one,” everybody wants to be a part of the winning pool, including people who normally play but “forgot this week.” At that point, everyone ends up in court trying to prove that they should be big winners too.

Mike Kosko, a state IT worker in New York decided to skip a lottery pool entry last year because he “wasn’t feeling lucky.” Mike’s co-workers ended up winning a $319 million jackpot, although in that particular situation, no one has ended up in court … yet.

If you’re willing to spend hours imagining how you’re going to spend the money—and we’ve all done it—you might want to spend a little bit of time on creating a lottery pool agreement to define the rights and obligations of the pool’s participants. It’s not as entertaining as decorating your imaginary mansion on Mount Veeder, but it’s a pretty good idea and an effective safety net.

Your agreement should explain which lottery game you’re going to play, how much each participant will contribute, how many people are going to be in the pool, and how you’re going to pick your numbers. Probably the most critical part of the agreement will be how you will distribute the winnings, should that day come.

There are endless tales of people who have tried to run away with their coworker’s prize money. It’s best to write down the rules of your office pool beforehand, including an explanation of who is in the pool and how to join or leave the pool.

Make sure that office lottery pools are legal in your state and in your profession. For example, Utah prohibits the lottery and some federal employees are prohibited from participating in lotteries. Also check your workplace rules to make sure it’s okay to have a lottery pool. Office pools are generally legal in California, and the California State Lottery even maintains a tool on its website to facilitate pools, called “Jackpot Captain.”

There’s another issue here to keep in mind. If you’re an employer, and your employees have a lottery pool, you should be aware of employees who may have a gambling problem.

Be aware of employees who constantly talk about gambling, who frequently borrow money from coworkers or ask for pay advances, or who brag about winning money. It’s a good idea to have a policy in place that provides resources to employees who may need help.

If you’re worried about employees gambling at work, consider blocking Internet gambling sites with Internet filtering tools like SafeSquid at safesquid.com or GamBlock at gamblock.com.

For more information about office lottery pools in California, visit calottery.com.

Mary Luros is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.