Dealing with employee theft

Embezzlement isn’t just for big cities and movie plots.

In January 2021, for example, the former CEO of Make-A-Wish Iowa was arrested on three felony charges of embezzlement from the charity that supports sick children. She allegedly made 84 unauthorized purchases on the organization’s credit card totaling more than $23,000, which the organization discovered during a compliance review.

And in 2019, a 24-year employee of a Vinton car dealership was accused of stealing nearly $300,000 over half a decade by funneling dealership money toward online payments for her own credit cards.

In both situations, the businesses may not have discovered their employees’ conduct for years had it not been for an official audit or the careful attention of a reporting co-worker.

Theft occurs in other ways, too. One study by a national supermarket organization found that grocery store employees were responsible for around 56 percent of supermarket thefts, ranging from stolen inventory to unauthorized customer discounts.

Data theft also is increasingly common and just as dangerous to a company if the stolen digital assets include proprietary data or individuals’ sensitive personal information.

Theft of any nature should be a terminable offense. Employers should take the following steps to ensure that they are prepared to respond when an employee is caught stealing.

Policies

Employers should consider requiring employees to sign an acknowledgment that they understand they have no privacy rights with items they bring to the work premises, such as purses and other bags; that they may be subject to and consent to video surveillance in certain areas; and that they are aware that participation in investigations is mandatory and that refusal to participate may result in termination.

Also, your progressive disciplinary policy should clearly identify that employee theft is a terminable offense. Your policy should not provide for deduction of stolen funds or goods from an employee’s final paycheck, however, as that’s prohibited by Iowa law.

Investigations

Theft should never be taken lightly. Make sure your evidence is strong.

Accordingly, a thorough investigation of the theft allegation is critical. Failure to conduct a proper investigation can serve as evidence of pretext for a discrimination or wrongful discharge claim.

I recommend employers suspend the suspected employee pending the outcome of the investigation. Sometimes this is enough to resolve the matter, with the employee resigning or abandoning their job in response.

Always allow the accused employee to tell his or her story in full, and ask witnesses to write their own statements without the investigator’s help or interference.

If your investigation produces strong evidence of the misconduct, then proceed with a termination. The termination meeting should not be the first time an accused learns that he or she is suspected of theft.

Pressing charges

Should you call the police? It depends.

For years, many managers and their lawyers believed it was a best practice and a good theft deterrent. However, times have changed.

Before calling the police, it is critical to know how seriously they will respond to allegations of theft of a few hundred dollars in merchandise. Some police departments are simply too overwhelmed to do more than write a report of the complaint.

Of course, thefts involving thousands of dollars may be another issue. Check with your local law enforcement agency and proceed accordingly.

Records retention

Keep all records regarding the alleged theft, investigation and termination. Nothing should be allowed to be destroyed.

Video footage of an employee pocketing a twenty, for example, is outstanding evidence in court.

Conversely, not having the video footage of the employee pocketing the twenty in an employment trial will be outstanding evidence for the plaintiff.

No explanation will overcome a jury's assumption that if the video is missing, the employer did not want them to see it.

Eliminating theft entirely in the workplace is impossible. However, employers can limit liability by having policies in place and conducting a proper investigation after a theft allegedly occurs.

Wilford H. Stone is a lawyer with Lynch Dallas in Cedar Rapids.