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THE LAW: What to do if you suspect an employee is stealing
First, have good policies in place, then investigate
By Wilford Stone, - Lynch Dallas
Mar. 17, 2023 5:00 am, Updated: Mar. 17, 2023 1:50 pm
Iowa employers are shocked when long-term, supposedly loyal employees steal from them.
The 8th Circuit Court of Appeals — the federal appeals court serving Iowa and six other Midwestern states — recently ruled in a case involving a longtime former Cargill manager in Albany, N.Y., who embezzled $3 million over eight years. According to the court, although Cargill had the appropriate checks and balances in place, including audit procedures and internal controls, the thieving employee knew how to circumvent them.
Several years ago, Iowa’s federal Judge Leonard Strand sentenced a former credit union employee to three years in prison for embezzling $1.5 million over six years.
And the former CEO of Make-A-Wish Iowa pleaded guilty to theft and fraud charges for embezzling 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.
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.
For example, assume a banking executive travels to a resort for a business conference, but is seen only golfing and hanging around the pool bar. The employer reviews the expense report and notices that she has fully expensed the entire trip. Theft?
Moreover, a 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. (Hy-Vee recently reported changes to its employee discount program because of this.)
Data theft is also increasingly common and just as dangerous to a company if the stolen digital assets include proprietary data or individuals’ sensitive personal information.
How to respond
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 or computer files and emails; 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.
- Investigations: Theft should never be taken lightly. But before accusing someone of it, be 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 that employers suspend the suspected employee, pending the investigation’s outcome. (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.
- Notify your insurer: If you have a policy that protects against such employee misconduct, notify your insurance carrier of the allegations and investigation findings immediately. You may have certain responsibilities to the insurance carrier to take certain actions before making a claim.
- 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. Again, your insurance policy may require you make a criminal complaint.
- Records retention: Finally, keep all records regarding the alleged theft, investigation and termination. Nothing should 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 their 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. Comments: (319) 365-9101; email@example.com