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Detecting and Combating Employee Theft

Filed under Managing the Workplace. Fact checked on May 24, 2012.

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Employers should know how to detect theft by an employee and how to properly handle suspicions. Depending on the particular situation and workplace, an employee anti-theft policy may be advisable.

Employee theft, even on a small scale, can result in big costs, particularly for small businesses. General work rules typically include provisions prohibiting theft by employees, but you may want to consider a specific policy targeting theft if you feel it's warranted.

The first thing you should know in combating theft by employees is how to detect it. Detecting theft can be difficult, especially if the thief is good at what he or she does.

Here are some signs to be on the lookout for if you suspect that an employee is stealing from you:

  • Look for unusual occurrences in the workplace such as:
    • discrepancies of cash amounts
    • missing merchandise or supplies
    • vehicles parked close to exits, i.e., an employee's vehicle parked in a loading area
    • unlocked exits
  • Watch the employee's behavior for:
    • unusual working hours
    • poor work performance
    • unjustified complaints about employment
    • defensiveness when reporting on work
    • an unexplained close relationship with, or unjustified favoritism by, a supplier or customer
    • a personal lifestyle that doesn't match salary

What Should You Do If You Suspect an Employee of Theft?

If you suspect that an employee is stealing and you want to confront and discipline the employee, we suggest that you first contact your legal counsel so that your rights — and the employee's rights — are protected.

If you have a reasonable suspicion that an employee is stealing or have actual proof, your lawyer might suggest that you follow these steps to address the issue:

  • Ask the employee to explain.
  • Ask the employee to take a polygraph test.
  • Decide whether to:
    • press criminal charges
    • seek restitution
    • discipline the employee
    • fire the employee

Just as important as what you should do, the following is a list of things you should not do:

  • Do not detain or restrain an employee. False imprisonment is against the law, and charges can be brought against you if you force an employee to remain somewhere (e.g., your office) and there was no reasonable basis for the action. Depending on the situation and the employee you're dealing with, there may also be an element of personal danger involved in trying to detain someone. Contact the authorities or your attorney for specific advice if this situation comes up.
  • Do not defame the employee. Publicizing the fact that a person was fired because he stole six plants and some artwork from the office may not be worth the expense that a possible defamation action may cost you.
  • Do not threaten to prosecute if you are not sure that you are going to bring charges. Keep in mind that bringing charges against someone is a money- and time-consuming process, too. Be sure to weigh the costs involved in prosecuting someone for theft and make sure it's worth it.
Warning

Keep in mind, even if you suspect an employee of theft, you should not accuse the employee until you have proof. A wrong accusation could cause irreparable damage to your relationship with other employees and to your business. It can also be expensive if the accused employee sues you for slander.

Polygraph Tests and Anti-Theft Policies

In case of a suspected theft, before you can require an employee to take a polygraph test, you must meet the following federal guideline requirements:

  • There must be an ongoing investigation involving an actual economic loss (stolen money, equipment, records).
  • The employee that you wish to test must have had access to whatever was stolen.
  • There must be reasonable suspicion.
  • You must provide the employee with a statement concerning the reasons why the test is to be conducted. The statement:
    • must be given to the employee at least 48 hours before the test
    • must be written so that the employee can understand it
    • must fully disclose the loss, the employee access, and the basis of suspicion, and must be signed by you or your agent
  • The employee:
    • can terminate the test at any time
    • cannot be asked any intrusive or degrading questions
    • cannot be asked questions concerning religious beliefs, racial opinions, political beliefs, sexual preferences, or beliefs concerning labor organizations
    • cannot be tested if a physician has, in writing, advised against such a test on mental, physical, or other medical grounds

These guidelines, from the federal Employee Polygraph Protection Act, in no way authorize the use of the polygraph for random testing or use arising out of investigations of unspecific incidents. In addition to the above, there are more guidelines on notices that must be posted concerning who may conduct the test and how the test is to be conducted, and on recordkeeping and disclosure requirements.

Warning

As with other consultants, select your polygraphist with care and insure that the individual who works for you meets all necessary qualifications.

As a practical matter, few employers resort to polygraph testing because of the onerous requirements, including federal and state laws regarding polygraph testing. If an employee refuses to take the test, gets a doctor's note, or simply quits, there may not be much that you can do. If the loss is extensive, you may want to consult an attorney to discuss other courses of action.

Creating an Anti-Theft Policy

If you're contemplating the creation of a policy specifically for anti-theft purposes, keep the following in mind:

  • Emphasize the fact that losses suffered by the company will affect all employees' job security.
  • Do not encourage employees' dishonesty by permitting them to believe that it doesn't matter.
  • Consider the following:
    • instituting an employee bonding program
    • performing regular audits
    • maintaining complete and up-to-date company records
    • limiting access to supply and storage areas
    • implementing electronic surveillance in the workplace

Examples of anti-theft policies. The following examples of anti-theft policies are ones you can use in your business. If you use one, be sure to tailor it to your specific needs and intentions.

The first example presupposes that, at some point (most likely on an employment application or at orientation), employees were notified that a condition of employment included polygraph testing (provided your state's laws permit polygraph testing).

Example

Stealing from XYZ Corporation or from other employees will not be tolerated. Materials may not be removed from company premises without approval. XYZ Corporation reserves the right to define "materials" in specific instances but, generally, if it doesn't belong to you, leave it in the office.

Because of the company's desire to prevent and detect theft, your terms and conditions of employment include polygraph testing when theft is suspected, routine searches of the workplace, and electronic surveillance.

Stealing is grounds for immediate termination and may cause the company to bring criminal charges against you.

The next example is simpler and a little broader:

Example

XYZ Corporation will not tolerate stealing, nor will it tolerate the possession of company property or other employees' property without prior permission.

Whether you should use a broader policy depends on your particular business needs.

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