Managing and Preventing Employee Theft In Arizona

Legal Gavel On Table

According to the U.S. Chamber of Commerce, 75 percent of employees have admitted to stealing from their employers at least once. The FBI also notes that employee theft is one of the fastest-growing business-related crimes in the United States. In some cases, it has resulted in as much as a 7 percent loss in profit margins and even eventual bankruptcy.

It is important that business owners understand how to spot the signs, investigate, and protect themselves before, during, and after the theft.

Detecting Employee Theft

Employee theft may be difficult to detect since it’s carried out by an insider, familiar with the system, with a certain permissible level of access. Additionally, employers and managers often trust their employees with sensitive information due to their experience and years of good service.

However, with careful attention to detail and an understanding of your employees’ morale and attitudes, there are some warning signs you can watch out for. For example:

– Excessive personal spending beyond what the income would logically support

– Employee has an unusually close relationship with one or more vendors 

– Employee is suffering financial difficulties

– Employee has excessive control issues

Additionally, theft can occur in various ways. It can be as simple as stealing petty cash, forging or writing checks for personal use, or unauthorized use of company credit cards to more sophisticated methods like utilizing fictitious payees or quid pro quo arrangements with vendors.

Theft can also encompass inventory or intellectual property (i.e. stealing propriety recipes or copyright/trademarks ideas). 

The Investigation

The first step you should take when you suspect theft is to embark on a data-gathering mission. Make sure before you levy accusations that you have gathered sufficient evidence of loss to back up your claims. It is preferred, if possible, that you have an unaffected third party conduct this initial research. 

Once you have a general idea of what or how much is missing you can then compile more documentation such as computer files, financial records, and applicable vendor contracts.  

While video evidence is ideal, it is not always available. So you will likely need to utilize witness interviews. Be sure to conduct interviews individually among employees, summarize all information you obtain and keep employee disclosures confidential.  Revealing confidential information about the situation or those involved can ruin the credibility of the investigation.

Also, preserve evidence and maintain a chain of custody to prove it wasn’t tampered with.

Lastly, keep in mind that the Federal Employee Polygraph Protection Act governs the use of polygraph exams in the workplace and they may not be allowable in your instance. 

Sample interview questions: 

– “I noticed that the petty cash lockbox has been depleting more quickly than it used to. Do you have any idea why our expenses have increased?”

– “Many supplies have gone missing. In the last three months, we’ve gone through 10 times the normal amount of cleaning supplies. Do you know why?”

Pay close attention to facial expressions and body language.

What To Do Once Theft Is Confirmed

Take Immediate Protective Action

Cancel compromised credit cards, change passwords, and lock down accounts or email addresses.

Decide on Appropriate Disciplinary Action

While deciding on permanent action, you may want to ask the employee to leave the building immediately on unpaid leave.

For relatively minor employee theft, you may consider:

– Giving a stern warning and ask the employee to repay or replace what they took.

– Clarifying or educating the employee on company policies. Applicable in cases of food service workers, if you genuinely believe they mistakenly thought they were allowed to consume food on the job or take leftovers home. 

– Documenting the disciplinary action in the employee’s record.

If it’s a serious or long-term matter (embezzlement, fraud, deception), you may consider:

– Terminating the employee on the spot. Be sure the employee leaves all company property behind including keys, laptop or company-issued phone or car. It is very important to adhere to your existing company policies regarding termination. Double-check for issues that may need addressing before the termination, for example, employee contracts or bargaining agreements.

Notify External Parties

Reporting to the Police 

You should report all serious employee theft situations to the police. This is for several reasons:

– It may be the only way to get restitution.

– Your other employees need to know you take stealing seriously. You don’t want anyone else to assume they can get away with it.

– You don’t want the embezzler to move on to some unsuspecting future employer because there’s no public record.

– A thorough investigation may help reveal how a fraud scheme occurred. This may help you take steps to avoid similar losses in the future.

Filing an Insurance Claim

If you have insurance to make a claim against or plan to try to hold another party such as a bank responsible, you will need to press charges and a police report will be needed.

Third-Party Liability

Third parties such as banks or vendors may also be liable for employee theft losses. You will want to work with your attorney to notify them of the issue and request that any information pertinent to your investigation or account in their possession be preserved. 

What Not To Do

– Do not make public unsubstantiated accusations. 

– Do not contact the employee’s family or friends. 

– Unless instructed by your attorney, you should not discuss your investigation with other employees or offer incentives for them to support the allegations.

– Do not tamper with the employee’s final paycheck. It may be illegal in your state.  

Preventing Future Theft

To prevent future issues, put basic policy and accounting controls in place. 

Changing the process for things like budget approvals, placing orders, delivery acceptance accounts payable and receivable checks and balances, and vendors vetting can go a long way in minimizing employee ability and temptation to steal.  

Also, business owners who are not on-site daily may want to consider utilizing security cameras for added protection. 

Conclusion 

As a small business owner, learning that an employee has stolen from your company can feel very personal. An attorney can help, even if the theft is not prosecuted, by assisting with contractual issues and the termination process as well as any litigation or insurance claims. They can also advise on policies and procedures should the issue arise again.

Contact Counxel Legal Firm

If you would like advice about how to handle this situation, contact us at (480) 744-6621 or at request@counxel.com. Don’t forget to check out the good things that others are saying about the services they received from Timothy Coons on Google.

This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Use of and access to this article does not create an attorney-client relationship between you and Counxel Legal Firm. Please contact request@counxel.com or (480) 744-6621 to request specific information for your situation.

*Conveniently located off the 101 Freeway and the US 60 in the middle of Phoenix, Scottsdale, Tempe, Chandler, Gilbert, Mesa, and Queen Creek!

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