Employee Theft: What to Do and What Not to Do
I have been a Certified Public Accountant working in public accounting for over a decade. During that time I have worked with many businesses of all sizes to help them audit their internal controls, legal compliance requirements and ensure that they are doing all that they can to prevent internal and external fraud. I am also a Certified Fraud Examiner and have spent thousands of hours reviewing records for fraud. I’ve seen CFOs write checks in their spouses names to steal thousands of dollars from non-profits, employees padding their payroll by having friends log them in early or out late for work hours, inventory being stolen by janitors and employees filing false claims with governmental agencies to ensure they cannot be fired and collecting months and months of administrative leave pay while the small business pays for all of the legal costs, and the payroll to the employee during the administrative leave, to ensure they are not sued. It is messy, time consuming, stressful and costly to clean up fraud. It is far cheaper and cost effective to prevent it before it happens. An ounce of prevention is worth a pound of cure.
Employee theft feels horrible to a business owner. You’ve invested in training, mentoring, growing an individual within your small business and you feel betrayed. This is your baby, your dream, your livelihood and you’ve poured your heart, soul, time and energy into growing it and trying to make it the best little business you can and now someone you trusted is stealing from you. Step back, take a breath and use that energy and focus that grew your business to protect it. Don’t overreact and do something that can cause far more damage to your livelihood than an employee stealing from you will. Lawsuits are very expensive and many businesses have sunk under the weight of the costs, even if they “won”.
Now that you’ve taken a few deep breaths, went for a nice long walk, vented to your spouse or best friend and released some the righteous anger you felt about being betrayed let’s talk about what you can do to address this morally, legally and ensuring that you are protecting your business from further harm. Below is a short list of actions that you should take to protect yourself and ensure that the person stealing from you is punished.
5 Actionable Steps to Take For Employee Theft
- Double check your suspicions without letting the employee know you are checking. Could you be misunderstanding something? Could it be a vendor issue not an employee issue? Could it be a different employee or a customer that is responsible for the loss of cash or inventory? Asking yourself these questions can help you to take an objective look at the facts and circumstances to determine if it is an internal or external issue or even if the loss is intentional or accidental. This first step is very important and can save you a lot of headaches down the road.
- Contact a lawyer that specializes in this, if you google “employment lawyer” or “fraud lawyer” you will find one in your area. Protect yourself with legal advice so that you don’t do or say anything to someone that can cause irreparable harm to you or your business. The law is complex, especially employee law. Don’t expect google to give you all your answers when it comes to this area.
- The lawyer may ask you to do a couple of things to gather more information.
- Ask the employee to explain. This first step can go a long way to determine if it is something that you are missing.
- If there is proof that the employee has been stealing the next step is to determine if you want to press charges, discipline the employee or fire the employee. Again, a lawyer can help determine what the best course of action is for you and your business.
Emotions are high, you feel betrayed, this is a lot of time/effort/wasted money for something you didn’t expect to have to deal with and don’t really want to. Here is a list of things you should not do if you suspect an employee is stealing.
What Not to Do When Addressing Employee Theft
- Do not detain or restrain an employee. False imprisonment is a crime and you can be prosecuted for holding someone against their will. This includes making someone stay in your office while you call the police. Do not do this.
- Do not defame the employee. Telling others that you suspect theft by an individual opens you up to a lawsuit for defamation of character.
In Conclusion
I hope that you never have to deal with an employee stealing from you. If you do, I hope that this article gives you some tools to do it in a way that protects you and your business from further harm. I often am called in to do the fraud examination of accounting records to find how/if/when someone is stealing in a business and I can tell you that it is an expensive process that causes a lot of stress for all parties involved. The best way that you can deal with an employee stealing is to prevent it. In a future post I will write about the best way you can prevent employee theft. Hint, strong internal controls are your friend.
As always, thank you for taking the time to read. I hope that you have taken away a few key points and if you have any questions about this issue or suspect that you may be dealing with employee theft please feel free to contact me.