You Have Identified an Employee Stealing from Your Business: What are your next steps?

After you’ve discovered that an employee has been stealing from your business, your initial reaction may be one of anger, shock, or dismay. Your second reaction will probably be: What should I do now?

First Steps

Often times, the first step should be to call a business attorney and then probably (depending on the terms of the policy) your insurance carrier. Then, the next step should be, with the assistance and guidance of your business attorney, to launch an immediate investigation to gather all the facts and documentation available concerning the theft. This investigation often includes interviewing witnesses.

When an interview is necessary, it should be conducted both individually and, in private. Additionally, these interviews should be recorded. Depending on the size of the loss to the business, you may want to retain outside experts who are skilled in investigating employee theft. One such expert could be a forensic accountant who can assist the business in documenting the loss.

Once a business knows the nature and extent of the theft, file a proof of loss with your insurance carrier following the notice and any other requirements outlined by the terms of the policy. As discussed below, it might be necessary to contact law enforcement as well.

Should I Seek Criminal Prosecution?

If an employee steals from your business, it regularly involves both a civil matter and a violation of criminal laws. Often you as a business owner will question whether the perpetrator should be prosecuted in criminal court. Instead, you may prefer to recover your money or other assets through initiating a civil litigation or through some other means.

When your employee’s actions involve a criminal violation of the law, usually the best avenue for recovery is to coordinate with criminal prosecutors and demand restitution as part of any criminal prosecution. Restitution can be included in the terms of a plea agreement if the matter does not proceed to trial.

One of the issues to consider when pursuing the matter in civil court against an employee who has stolen from your business is that any civil judgment would probably be discharged if the employee declares bankruptcy. However, it’s more difficult for former employees who are faced with a criminal restitution order to completely avoid its terms and not make restitution payments. Often times, criminal restitution is one of the terms of the individual’s probation status. Constructing the individual’s probation status to be contingent as long as restitution payments are made provides additional incentive for the perpetrator to repay the money when the alternative for them may involve the revocation of probation, jail, or possibly even a sentence in prison.

Private Payback Options

Another option when criminal prosecution is not practical is to arrange payment through a settlement agreement or other similar arrangement. One choice may be the use of a promissory note, which gives you on behalf of the business the right to sue for nonpayment. Another option may be for the parties to stipulate to a specific judgment amount, but a separate agreement will direct how the judgment will be enforced. However, if the former employee is insolvent, a resolution through civil litigation or a monetary judgment may be impractical.

Conclusion

When your trust has been violated and your business harmed, you want to be able to both recoup your losses as well as chart a path forward. When facing these difficult circumstances it is essential to develop a strategy and course of action that can mitigate the damages caused. It is also important to reduce the chances of similar losses in the future. Reducing the chances of future losses to employee theft will be discussed in part three of our series on identifying and preventing employee theft.

©2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.