Employee theft is a workplace issue that our employers deal with all too frequently and – from our vantage – one that seems to have been exacerbated by a tough economy. It can range from the insidious and costly ongoing bleed of office supplies secreted from the workplace to a million dollar embezzlement by a long time trusted employee. What are people stealing on the job? According to lawyers and law firms on JD Supra, the shopping list is varied and can include such disparate things as intellectual property, trade secrets, wages, identities, merchandise, money, and productivity.
How common is employee theft? A pair of articles that recently passed our desk offers some perspective on scope:
Are Your Employees Stealing From You?

“Steven Wolf, the Executive Director at Capstone Advisory Group, says employee theft can involve more than just stolen physical equipment. He has dealt with cases of misappropriated funds, duplicate payments, kickbacks, and re-selling inventory owned by the company.
“The Association of Certified Fraud Examiners (ACFE) estimates that the typical business will lose an average of six percent of revenues from employee theft,” says Wolf, who advises companies to devote more funds to combatting theft in the workplace and developing policies. Employee theft, he says, accounts for one-third of all bankruptcies, according to the US Chamber of Commerce.”

Employee theft costs retailers more than shoplifting, organized crime

“Thefts by employees accounted for about 45 percent of retail losses in 2010, according to the National Retail Security Survey. Shoplifting and organized retail crime made up about 31 percent of inventory shrinkage, the accounting term for loss of products between the point of purchase from a supplier and point of sale.
Administrative error accounted for 14 percent of shrinkage, vendor fraud accounted for 4 percent and the remaining 6 percent was attributed to “unknown” error. The shrinkage rate in 2010 was 1.49 percent.”

Plugging the hole in the bucket: Preventing theft
We turn to a variety of experts to offer strategies for deterrence.
In writing about how employers are often blind to employee theft, business consultants Mary Goodman and Rich Russakoff offer the following tips:

  • Expect it. As Oscar Wilde said, “I can resist anything but temptation.” People are human. We’re sure your employees are likeable people, but no one is above reproach.
  • Make it clear you have a zero-tolerance policy. Whether or not you prosecute criminally is one thing. Continuity of employment will absolutely guarantee continuity of theft. Even more so, it will lower the bar (or open the vault) for every one else in the organization.
  • Put in place internal and external checks and balances. Always have a second set of eyes — both inside and outside the company — checking your numbers.
  • Know your margins. We can’t stress this enough. Know what your margins should be, and if they’re shrinking, find out why.

In Human Resource Executive, employment law attorneys discuss HR’s role in curbing employee theft. They suggest that the first line of defense is at hiring and conducting background checks. They also discuss the importance of an employer creating “a perception of detection” – and offer suggestions of controls that can be put in place, from policies to audits, job rotations, and employee education.
In discussing the topic of employee theft during the holiday season a few years back. post on the topic of theft, John Hyman of Ohio Employer’s Law Blog offered a sensible five-point attack for deterring employee theft. You should red the entire plan, it is simple and direct – but we offer the broad bullet points here:

  • Communicate: Employees need to know that theft of any nature and in any amount simply will not be tolerated.
  • Investigate: Proper investigation requires having the tools in place to detect theft or fraud and acting swiftly when misconduct is discovered.
  • Document: Once a theft is detected, a company has to act swiftly to complete a full investigation. This investigation includes interviewing any potential witnesses and gathering all necessary documents to support to a case against the employee.
  • Terminate: No other form or discipline should be an option. Theft is a serious offense. It represents a total breakdown of trust between a company and an employee.
  • Litigate: Employers have two choices – filing a civil lawsuit to recover the stolen funds or property, or seeking criminal prosecution … litigation will not be appropriate in all cases of employee theft.

In a prior post here on HR Web Cafe, we discussed one employer’s creative solution to deterring theft, which included such strategies as building an “equipment lending library” and offering amnesty programs.
In that post, we noted that:

Our experience shows time and again that employers who communicate often and well with their employees and who work diligently to maintain a healthy work culture experience fewer workplace behavioral problems than their mistrusting, suspicious counterparts. Keep things in perspective. Dishonest employees are in the minority so don’t cast a pall of suspicion over everyone. Set the policy and the expectation, ensure that risk control measures are in place, and be fair and consistent in the way policies are enforced.

ESI-Logo.jpg Employers: ESI EAP offers discounted background checks and pre-employment screening to member employers. And if you suspect a problem with a potentially disgruntled worker, a referral to your EAP can help to defuse a potential problem. Don’t have an EAP? Call 800-535-4841.


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