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The Forte Newsletter: Tips for Growing Your Business


What To Do If You Suspect An Employee Is Stealing From The Company

When you hire someone as an employee, you have entered into a commercial relationship with that person. They need to understand the rules of the workplace and the policies to which you expect them to adhere, and it's your responsibility to give them that information.

Employers who suspect that an employee may be stealing from the company need to proceed cautiously to ensure they don't expose themselves to legal liability. “Employers should be on the lookout for potential warning signs of employee theft, investigate these fully, and carefully document all findings before confronting an employee,” advises Maureen Q. Dwyer , an associate with Pepper Hamilton, and employment law firm.

“Depending on the results of the investigation, the employer next may have to decide the specific infraction of which to accuse the employee, whether or not to pursue criminal charges, and to review its loss prevention policies and procedures,” Dwyer added.

Among the types of employee theft affecting employers are:

-- Cashiers who steal cash from the register, or accept money from customers and then void the sale.

-- Office employees with access to company funds – such as sales representatives or financial officers – who falsify their expense accounts, or issue checks for non-business purposes.

-- Employees who steal tools or equipment.

Companies should be on the lookout for possible warning signs that an employee is stealing, as:

-- Frequent variances in cash balances
-- Inventory shortages
-- Noticeable changes in employee behavior, such as buying a new car or expensive clothing
-- Other employees' complaints about missing items

Once these warning signs are spotted and confirmed, employers need to determine whether to use inside or outside sources to conduct an investigation. Although an internal investigation will generally be less expensive, it will need to be conducted fairly and without bias. The employer also must have the necessary internal expertise.

But outside sources might also have to be notified. For example, Insurance companies may need to be notified to comply with policy provisions, and well as notifying the police. If surveillance cameras are to be used in a unionized workplace, the union must be notified, and bargaining may be required over the installation of cameras. Also, federal and state laws applying to wiretapping must be followed.

Whether the investigation is performed in-house or through an outside investigator, it should include the following steps:

-- Prepare an outline for interviews with suspected employees and witnesses, anticipate difficult issues, and know the company's position if a worker refuses to cooperate – such as, whether refusal will subject an employee to discipline.

-- In a unionized workplace, an employee has the right to have a union representative or co-worker present – but not a lawyer – during any interview that he or she reasonably expects would result in disciplinary action.

-- Evaluate whether a polygraph will be required. The Employee Polygraph Protection Act allows the use of polygraph exams in the workplace to assist in an ongoing investigation.

-- Document all investigative steps taken, and make summaries of all interviews. The investigative report will be a key document if further legal action is contemplated.

-- Audit computer and financial records, and preserve documents and evidence such as computerized records, e-mails, and videos.

-- Maintain the chain of custody to restrict the handling of evidence, and to document the movement of physical evidence.

If the investigation confirms there was misconduct, employers must decide on the type of discipline or corrective action needed.

•  Review the employee's past disciplinary record and performance evaluations to see whether there have been other incidents and warnings.

•  Research past disciplinary actions taken against other employees for the same or similar conduct in order to avoid claims of unfair treatment.

•  Evaluate the severity of the conduct, and the likelihood that the employee will engage in similar behavior in the future.

•  Determine whether anyone is at risk for retaliation or physical harm; if so, take steps to reduce this risk.

Based on this information and the company's policies, employers must next conclude what the specific charge will be. “Carefully consider whether to accuse an employee of ‘theft.' Can the employee instead be accused of a ‘violation of company policy' or a ‘cash handling violation?' The company may avoid a defamation claim by using these other terms.

Whether the company should pursue criminal action is another consideration. “Criminal proceedings initiated on advice of counsel are conclusively presumed to be supported by probable cause when the advice of counsel was sought in good faith, and it was given after full disclosure of the facts to the attorney. This will help avoid claims of malicious prosecution by the employee,” said Dwyer.

Finally, whether this is a first-time occurrence for a company or an ongoing problem, it is best to review – or, if necessary, create – policies and procedures to focus on loss prevention. It is important to develop measures that will help avoid similar claims. Let employees know that acts of dishonesty are serious infractions. Advise workers that if they know of another employee's dishonesty, and fail to report it, they can be subject to discipline as well.


InConcert Financial Group (a Biesheuvel Scarpa company) offers a holistic approach to your financial situation. Our expertise features a comprehensive range of economic management strategies, including Financial Planning, Wealth Management, Business Consulting, Accounting, and Tax Services. Our FORTE Newsletter offers direct, concrete advice to maximize your investments and business potential.