Saturday, September 19, 2015

Employee Theft

Employee theft is a big problem in Canada. One in ten small business failures are a result of employee theft and overall Canadian businesses lose over a billion dollars yearly to dishonest employees. The scale of the thefts can be staggering. I am working on a case now where my client, a modest sized business, lost well over two million dollars to a bookkeeper who took the money in small amounts over many years. Because the thefts were small they went unnoticed. Whether my client will survive as a business is very uncertain.

Employee theft comes in many different forms. Sometimes it is trivial – a staff person taking home a few stamps or a box of envelopes. Sometimes it is more significant, but still modest in scope – for example someone who pads their expense account a bit and claims reimbursement for things that didn't happen.

On occasion though employee theft can be almost unbelievable in audacity and size. I already mentioned the bookkeeper theft I am working on now but that scale of case is not especially rare. At least one a year I deal with cases where someone has stolen over a million dollars from an employer. Sadly most such cases, in my experience, are related to gambling or drugs and that has a very major implication for the employer – and the employee.

There are always two aspects to employee theft: civil and criminal.

In terms of civil law, an employee theft almost always means the employee can be fired immediately without any severance payable. Except for the most trivial of thefts (maybe taking a ballpoint pen home) a theft goes to the heart of the employer/employee relationship and justifies a termination. That said, an employer should be very careful not to jump to conclusions because a false allegation of theft can lead to serious legal problems for the employer.

The bigger issue is recovering the stolen money from the employee. In general you cannot recover money that someone doesn't have. So if an employee stole, say, a million dollars and spent it on drugs suing the employee may be necessary for various reasons but the money is literally "gone up in smoke" and there will be no recovery. Of course, if the employee has, say a house or other assets it may be possible to get back at least some of the money. If the employee has given the money to family or friends in is sometimes possible to get back the money from the family and friends although that can be legally complex.

In terms of criminal law, employee theft is taken very seriously by the court. In general, a term of incarceration is appropriate for employee theft and where the theft is very significant, say over $100,000 there is a very real possibility of a penitentiary sentence (prison of more than two years).

One way that a jail sentence for an employee can be minimized is if the employee pays back the money stolen. Such repayment or restitution does not mean the crime goes away – there will certainly be some significant punishment – but repayment is seen as helping to restore the victim as well as showing a recognition of wrongdoing. Of course restitution can be paid only if the employee still has the money stolen (or can get money from another source, like a parent or other family). If the money stolen has been squandered on drugs or gambling then restitution is quite impossible.

What is the bottom line? Employer should keep an eye on the financial records to try to catch irregularities early. Employees, of course, should not give in to temptation and never should steal from employers.

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