WORKPLACE LAW - Employee Theft


I suspect one of my employees is stealing supplies and time from the company. What can I do about this?


This is a difficult and common problem. Recent news reports described an American software developer who outsourced his own job to a worker in China. The worker was reportedly paying a consulting firm in China $50,000 a year to do his job while he was earning a much larger salary sitting at his desk watching Internet videos, shopping online, and spending time on Facebook. This employee’s actions were discovered because the employer noticed that someone in China was routinely logging in to its computer network. The company accessed the employee’s computer and found invoices from the Chinese contractor.

A 2012 study conducted by the Association for Certified Fraud Examiners reported that 7% of employers’ annual revenues are lost to theft or fraud, resulting in total losses of 50 billion dollars a year from U.S. businesses. One obvious form of employee theft is stealing cash from the cash register or from a company account. Other forms of theft include time card fraud, office supply theft, padding expense accounts, and large scale embezzlement.

What steps can an employer take if it suspects employee theft? The first step is to conduct an investigation. The scope of the investigation and selection of the investigator will depend on the suspected theft. If you suspect supplies are being stolen, you can change your way of providing supplies to employees to control inventory and use. Time card fraud can be revealed by auditing time records and observing employees’ arrival, departure, and meal period times. For suspected embezzlement of large scale theft, a private investigator may be hired to investigate and gather evidence. Depending on your business, you may want to regularly monitor or audit use of employees’ computers and email, as long as you have a written policy advising employees that you will engage in such monitoring.

If you receive or uncover evidence of employee theft, the employee should be allowed to respond to any evidence. Depending on the nature of the theft, law enforcement may need to be alerted.

There are certain preventative measures that may help employers avoid losing revenue and resources to theft. Creating a work environment of open communication and conveying your company’s high ethical standards is important. Demonstrate to employees that the company is well-run and that the owners and managers value ethical conduct and adhere closely to company values. If managers deviate from the values, employees may conclude that the values are not important. Emphasize the importance of honesty and ethics in the following areas:

  • Recruitment and selection: Reference and background checks can reveal financial difficulties and a history of dishonesty, although credit checks can only be run in limited circumstances.
  • Orientation and training: Focusing on the company’s requirements for honesty and integrity in orientation and training regarding theft prevention and conflicts of interest can reinforce that the company will not tolerate theft or dishonesty.
  • Company Code of Conduct: The company’s code of conduct should establish responsibility for all employees to report violations of the code, usually with anonymity. Compliance with the code of conduct should be included in employees’ performance evaluations.
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