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Category: Employee Theft

Drafting Your Employee Handbook

The Provisions You Need to Include

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Employee handbooks can be a tremendous resource for both employers and their employees. Carefully written employee manuals get everyone on the same page – literally – by clearly outlining company policy, laying ground rules, identifying important objectives, and establishing an overall culture. In general, people thrive when they know what to expect and what is expected of them.

Furthermore, for business owners looking to guard against employment-related lawsuits, employee handbooks provide businesses with an opportunity to set forth clear, concise policies regarding sick leave, personal days, discipline, benefits, work-life balance, inappropriate behavior, compensation, and other important issues.

 

Getting Started: The Basic Disclaimers

So where to start? In Arizona, and in nearly every other state, your employee handbook should include a disclaimer stating that the handbook is not an employment contract. A business attorney can help you prepare precise language to protect your rights. You should also expressly state that you reserve the right to modify the handbook. Finally, your handbook should include a page, preferably the final page, where the employee will sign, to acknowledge that he or she has read the handbook, understands its contents, and agrees to abide by the guidelines it sets forth.

Employee Rights under State and Federal Law

There are a number of state and federal laws that require employers to inform employees of their legal rights. Many businesses include employee handbook provisions that outline the following state and federal employment laws:

Family Medical Leave Act

The FMLA applies to certain types of employers with 50 or more employees. Businesses that fall under the FMLA must give their workers up to 12 weeks of unpaid leave in a 12-month time period to bond with a new child, care for a sick family member, or deal with the worker’s own health condition. Arizona also provides state family medical leave benefits for state employees; there are no such state-specific laws for private employers.

Equal Opportunity Employer

Many employers include a section indicating that their policies are fully compliant with Title VII and Equal Employment Opportunity Commission (EEOC) regulations.

Workers’ Compensation

Arizona law requires employers to post notices regarding workers’ compensation policies and benefits in conspicuous places. Many employers go one step further by placing this information in their employee handbooks.

Common Employer Policies

Each business is different, but many employers include the following information types of information in their employee handbooks. These items allow both management and the workforce to efficiently handle conflicts, raise questions, and identify solutions that really work.

Appropriate Behavior

This can be a comprehensive section to disclose everything from the company dress code and smoking standards to personal relationships between employees and foul language. Harassment guidelines are often included in this section of the employee handbook as well. Whether harassment takes the form of workplace bullying or inappropriate sexual advances, both forms are distracting and unsettling. Harassment also exposes the employer to significant liability. It is especially important for employees to know to whom in the organization they should report if they are experiencing harassing behavior.

Compensation

Compensation, vacation time, personal days, sick days, health insurance, and other benefits should be very clearly spelled out. Because compensation is something that often varies from employee to employee, consult with an attorney as to whether compensation details should be included within your employee handbook or delivered in separate correspondence.

Computer/Technology Use

In today’s fast-paced business world, many employees use several different forms of technology on an everyday basis. These devices include computers, smartphones, fax machines, tablets, and more. Employers should never assume that employees understand that this equipment is the employer’s property. The employee handbook should make it clear that all communication transmitted on company-owned devices is owned and controlled by the employer.

 Conclusion

In conclusion, a well-crafted employee handbook supports employers and employees as they begin and continue their business relationship. Continuous review and revision of your employee handbook coupled with highlighting the company policies contained within will help create a positive and successful corporate culture for your business.

You are reading the final installment of our series on Employee Theft.
For part one of our series on Employee Theft click here.
To find part two of our series on Employee Theft click here.
Part three of our series on Employee Theft can be found here.

© 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.

How to Prevent Employee Theft

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It may sound simple, but the best way to address employee theft is to not let it happen in the first place. While it may be impossible to achieve that goal, several steps can be taken by a business to reduce the likelihood that employees will be able to embezzle.

Thoroughly Check Out Potential New Hires

First and foremost, business owners should use the hiring process to their advantage and use it as an opportunity to identify, and eliminate, potential risks before the employee is hired. A criminal-background check should be a standard part of this procedure. As part of this hiring procedure, the employer shouldn’t hesitate to ask interviewees about any past issues regarding thefts and criminal convictions. In calling candidates’ references, a potential employer should ask questions that will allow additional insights to shed light on whether the candidate may pose a theft risk. Often former employers may be hesitant about directly discussing problems with past employees. However, they may be more forthcoming when asked a more open-ended question such as “What are some of the areas for which you would NOT recommend this person?” or “What are some areas where the employee may require additional supervision?”

Have an Employee Handbook with Teeth

A business should create and regularly update an employee handbook with clear language detailing the consequences of theft and other bad behavior. Make sure that all employees read it and acknowledge that they have done so. The language in the handbook should identify particular areas or situations in which wrongdoers will be terminated immediately without exception. Once these policies are in place, the employer must enforce these guidelines without exception.

Incorporate Redundancy into the Workplace

The business’s management practices should employ a “second set of eyes” system so that no single employee is completely responsible for a specific area. In a retail setting, it is useful to train employees in multiple assignment areas, this allows for rotations on regular basis.

Encourage an Environment Where Employees Are Comfortable Reporting Suspicious Activity

A business can benefit greatly from a well-publicized, confidential reporting system, one in which the reporting employee incurs no negative ramifications for reporting the suspicious activity of fellow employees. Research has found that 27 percent of employee thefts are discovered by other employees observing an issue and notifying management.

Additional steps your business can take to reduce the risk of employee theft:

  • Make sure that employees’ access to classified or sensitive data is restricted.
  • Hold regular meetings where company policies (including policies involving employee theft) are highlighted.
  • Use periodic surprise audits in areas where employees may be tempted to skim cash or misuse funds.
  • Lead by example. If business owners and senior management follow company rules, their employees are more likely to do so as well.

The steps a business takes initially can save substantial money and headaches later on. Employee theft is a growing problem in the U.S. and it’s a risk a business should not take lightly. Take steps now to develop the policies and practices which will reduce the likelihood that your money and resources will head out the door in employees’ pockets.

You are reading part three of our series on Employee Theft.
For part one of our series on Employee Theft click here.
To find part two of our series on Employee Theft click here.
For the final installment of our series on Employee Theft click here.

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

This website has been prepared by Harrison Law 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.

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?

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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.

You are reading part two of our series on Employee Theft.
For part one of our series on Employee Theft click here.
To find three of our series on Employee Theft click here.
For the final installment of our series on Employee Theft click here.

©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.

Worried About Losses Due to Theft? Look at Your Employees First

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Worried About Losses Due to Theft? Look at Your Employees First

 

Often businesses are concerned about the loss of revenue from the occasional shoplifter or burglary. Although both situations can cause financial damage to a business, most losses due to this type of theft comprise a small percentage of losses a business will incur. Instead, theft by employees often causes significantly greater financial damage to a business and can even lead to the financial failure of a business.

It’s great to have fully-trustworthy employees that a business can utilize worry-free. Unfortunately, if national statistics are any indication, a fully-trustworthy employee may be more difficult to find than ever before.

Statistics Reveal a Huge Threat

According to recent studies by law enforcement and insurance groups, American businesses lose a staggering $50 billion per year to employee theft, which translates into approximately 7 percent of a business’s annual revenue. In fact, employee theft has been determined to be a primary cause for fully one-third of recent business bankruptcies.

Just as alarming, these studies have also determined that 75 percent of employees steal at least once from their employers and (more importantly for the long-term financial health of the business) half of that group steals repeatedly. Furthermore, employees are responsible for a greater proportion of inventory shrinkage every year than shoplifters—43 percent to 36 percent respectively.

Where to Look

The first step for any business seeking to address the problem of employee theft is to identify where theft most commonly occurs in the workplace. Perhaps most obvious is anywhere cash is being handled or changes hands. This can include cash transactions, payments, and access to petty cash. Another area to identify where employee theft occurs which is less obvious but often causes greater damage is the company’s books or recordkeeping. Here, payments might be recorded by an employee who is entrusted with recordkeeping for the business but routed to an account created by that employee.

In service, construction, or trade industries employees might also make side deals with vendors to create phony invoices and then split the money with their accomplices. As another area in construction or trade industries might see an employee utilize company equipment or resources for their own personal use to make money on the side.

Warning Signs of Employee Theft

If you are suspicious that employees are engaged in theft, personal behavior can provide warning signs that point to larger problems. These warning signs often include:

  • Employees living above their means with extravagant or a large volume of purchases.
  • Signs of substance abuse.
  • Secretive conversations among employees.
  • Periods of unusually low levels of sales transactions.
  • Taking procedural shortcuts to expedite deliveries.
  • Changing work habits—arriving early, before anyone else, for “quiet time” or working through lunch or after hours when other individuals are not present.
  • Excessive or unexplained absences.
  • Employees who want to work alone, physically out of sight.
  • Missing items.

If you are operating a business that may be experiencing employee theft, there are steps you can take to protect yourself and your business. Check back for the next installment of our four – part series on identifying and preventing employee theft to find out what you can do.

You are reading part one of our series on Employee Theft.
For part two of our series on Employee Theft click here.
For part three of our series on Employee Theft click here.
For the final installment of our series on Employee Theft click here.

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

This website has been prepared by Harrison Law 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.