Legal and Regulatory
Workforce
Risk

Terminating Employees for Theft Is Not as Easy as It Should Be

Employers can take steps to reduce employee theft, but eliminating it entirely is impossible. Following certain guidelines when investigating thefts can reduce the risk of a lawsuit.
By Edward Harold
October 19, 2020
Topics
Legal and Regulatory
Workforce
Risk

The risk of theft, particularly significant theft, comes from inside of companies. One of the most common scenarios involves a payables employee creating a fake company, submitting fake invoices and cutting the checks to pay the fake invoices. These schemes have cost companies millions of dollars. While not uncommon, these schemes are nowhere near as prevalent as a hand in the petty cash or a few bags of concrete going home with an employee installing a new driveway. One employee stole a few gallons of a paint used on rail cars for a new paint job for his boat. The paint color was proprietary and commercially unavailable. He was caught.

In a world where employees can sue employers over their discharge on hundreds of theories, most managers feel as if this will not happen if an employee is discharged for stealing. Today, the prevalence of video surveillance creates an even greater comfort level because “I have the employee dead to rights.”

Unfortunately, this is not the case. Employees who are discharged for theft are just as likely, if not more so, to file a lawsuit claiming their discharge was illegal. This risk significantly increases if the theft is reported to authorities and the employee later escapes the charges. No company wants the injury of paying out on a lawsuit from an employee that stole from it. It is incredibly important that theft terminations be handled with the same level of care and caution as any other. The following guidelines will assist employers in this process.

To Catch a Thief

Many companies have found themselves in hot water over the tactics used to uncover theft and identify the perpetrator. For example, hiding baby monitors or other electronic listening devices in break rooms to try to catch employees talking about stealing violates federal anti-wiretapping laws and state privacy statutes. Using lie detectors is strictly regulated and those regulations must be followed to the letter. Digging through an employee’s purse or other personal belongings looking for stolen merchandise without consent to search could generate an invasion of privacy claim. Finally, preventing an employee from leaving an interview could lead to a false imprisonment claim and make it appear a confession was coerced.

Because of factors like these, it’s important that the company take several steps if attempting to catch an employee they suspect of stealing. Long before any incident occurs, every employee should sign an acknowledgement that they understand they have no privacy rights regarding the items they bring onto company premises. Employees should also acknowledge that they are aware of and consent in writing to being under video surveillance while in all public and employee-only spaces.

These consents will defeat an invasion of privacy claim. Companies should expressly advise all employees regarding policies pertaining to the protection of company assets and that violating these policies may lead to discharge even if there is no loss. Investigators need to be trained to understand that they should never force someone to stay against their will. All interviews should be conducted in an area that allows the employee to leave.

The Investigation

In virtually every employment lawsuit arising from a termination for wrongdoing, the first step of the termination process—the investigation—is the most critical when scrutinized by a jury. The investigation is more important when theft is involved. An allegation of theft is a powerful accusation and one that should never be taken lightly. If the investigation can be made to look shoddy and ill-conceived at trial, a jury may believe the employer’s conclusion was unwarranted.

To avoid this, there are several important pieces. First, two individuals should be involved and, optimally, one should not be personally acquainted with the subject. This will help avoid claims that the allegation was trumped-up against an employee by a hostile or biased investigator. The employee being investigated must be allowed to tell their story and the account must be included in the record of the investigation.

If the company has a written protocol for investigations, it must be followed to the letter. Juries demand that employers follow written procedures. Failure to do so can serve as evidence of “pretext” (a justification for a course of action that is found to be false) and could prevent winning a case on written motions as opposed to trial.

All witnesses should handwrite statements using their own words. Nothing undermines the credibility of a witness faster than not knowing the meaning of a word used in “their” written statement.

Even if the employee gives a written confession of theft, it will be no substitute for a complete investigative file. When a written confession is the only evidence, employees will claim the confession was coerced and/or they were told they would not be reported to the police if they agreed to sign it.

If the investigation relies on business records or recordings that are ordinarily destroyed in accordance with the company’s record retention and destruction protocol, the records must be moved from their usual location and preserved. Just as video footage of an employee pocketing a $20 bill is solid gold in a court, not having that video footage is solid gold for the plaintiff in an employment trial. If the video is missing, no explanation will overcome a jury’s assumption that the employer did not want them to see the video. Likewise, if an investigator reviews evidence, such as financial reports, stored on a computer, they should create copies of these records to be included in the investigation file.

Regardless of any benefit to keeping the employee in the dark about the suspicion while conducting a covert investigation, and even if discharge is a foregone conclusion before the employee knows, the employee should not be terminated during a first interview. It is far better to suspend the employee pending the outcome of the investigation. In many cases, the employee will not return for a follow-up meeting and can be terminated for job abandonment, which makes any claim by the employee harder to prove.

How the termination meeting is conducted depends heavily on the strength of the evidence. If the signs point to theft but the evidence is not conclusive, terms like “theft,” “dishonesty,” or even “suspicion of theft” should not be given as reason the employee is discharged. Lack of solid evidence of theft does not prevent discharging the employee, but accusing an individual of a crime is per se defamatory in many jurisdictions. As such, if that reason is used, the company may be required to prove in court that the employee did, in fact, commit a crime. Instead, language centering on the lack of trust in the employee, such as “We are terminating you because we have lost confidence in your ability to perform your job up to our expectations.” should be used.

Another way to explain the justification for termination if less than 100% certain of the employee’s guilt, is to cite a violation of company policy, not an allegation of criminal wrongdoing. In this scenario, the employee may be told that they are not being accused of a crime, but are being terminated because proper company procedures were not followed.

The Authorities

Before calling the police, it is critical to know how seriously they will respond to allegations of theft from a company. Some police departments are simply too overwhelmed to do more than write a report of the complaint. The police letting the matter drop regardless of the reason will undercut the conclusion of the employee’s guilt. Ultimately, no police involvement is better than limited or poorly handled police involvement.

If the police are called and move forward with charges against the employee, the company must provide all the assistance they require and be actively involved. Witnesses failing to appear for trial will result in charges being dropped and will cast doubt on the employer’s good faith.

While employers can take strong efforts to reduce employee theft, eliminating it entirely is an impossibility. But by following these guidelines when investigating, employers can greatly diminish the risk of an expensive lawsuit.

by Edward Harold

EdwardHarold is in Fisher Phillips’ New Orleans office where he Chairs the firm's Retail Industry Practice Group. Ed’s practice is primarily devoted to employment litigation in both state and federal courts, and he is also known for assisting employers in managing employee attendance, leave and various other workplace issues.

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