After you’ve discovered that an employee has been stealing from the 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 for a business owner is to make a call to its attorney and then probably (depending on the terms of the policy) their insurance carrier. 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, obtaining key documents, and confirmation that the theft occurred.
When an interview of an employee is necessary, it should be conducted both individually and, away from other employees. Additionally, these interviews should be recorded with two representatives from the business present. 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 actual losses.
Once a business knows the nature and extent of the theft, file a proof claim 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 a Business Seek Criminal Prosecution?
If an employee steals from your business, it regularly involves both a civil matter and a violation of criminal laws. Often a business owner will question whether the perpetrator should be prosecuted in criminal court. Instead, a business may prefer to recover its money or other assets through initiating a civil litigation or through some other means.
When an employee’s actions involve a criminal violation of the law, usually the best avenue for recovery is to coordinate with local 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 prison time.
Private Reimbursement 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 trust has been violated and a business harmed, an employee and business owner want to be able to both recoup 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.
© 2021 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved.This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial 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.
