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Media Centre :: Levitt's Corner ::

Hands Off The Cookie Jar, Or Pay

Howard Levitt

A 2004 study found an astounding 79% of employees admit to stealing or considering doing so from their employers. One in five has already done so by providing inflated expense accounts, cooking the books or pocketing money from cash sales. From purloined paperclips to the more audacious embezzlement of corporate funds, Canadian employers lose more than $120-billion a year to employee theft -- a problem identified as the cause of 30% of business failures.

But can the cost consequences of such theft more fairly redound on the workplace thief?

An increasing percentage of my practice involves suing the persecutors on behalf of clients, sometimes laying charges, and even settling cases in return for both money and videotape evidence incriminating fellow miscreants.

An obscure decision from British Columbia adds a quiver to the arsenal of what Canadian employers can do to recoup lost revenues.

Sharon Brown, a cashier and customer service representative at a Safeway store in Cranbrook, B. C., had easy access to cash and accounting records. After noticing unexplained cash and inventory shortages in refunds processed without supporting records, Safeway began tracking the refunds and merchandise more closely. Security cameras were installed with a view to catching the thief in the act. Brown was revealed to be the thief.

The evidence was damning and when interviewed by Safeway, she admitted to the thefts. Although the exact amount was unknown, she admitted to slowly taking money over three months and accelerating that pace a month before her interview -- dipping into Safeway's account daily with a typical take of $100.

Safeway fired Brown and laid criminal charges. She pled guilty and, as part of the terms of probation, paid Safeway $1,500.

However, Safeway did not stop where most employers would have. Safeway sued for a further $6,000, representing the monies stolen and $24,000 for the corporate resources expended in its investigation and its assistance of the criminal prosecutors. Those expenses included the effective hourly rates for each employee involved in the investigation, as well as the cost of the security cameras.

Justice Cohen of the B.C. Supreme Court ordered Brown to repay all of the amounts claimed by Safeway. He held that the grocery store was entitled to be reimbursed for costs and expenses incurred as a victim of theft.

Termination alone will not recoup losses and the cost of monitoring, surveillance and investigations when theft is suspected. Usually the costs are absorbed as part of doing business, or passed on to employees through lower compensation schemes or customers via higher prices.

Apart from terminating an employee for cause, employers often feel powerless to prevent workplace theft. For the 79% of employees who are at least "considering stealing," the development of a corporate culture from the executive level down that makes it resoundingly clear there is zero tolerance for such actions.

The message must be clear: Those caught stealing will not only be criminally prosecuted but will also be sued to recoup all costs associated with an investigation leading to the thief's discovery. While it is unlikely the employer will recover all its losses, the message it will pursue civil remedies has an impact on potential thieves. In this way, the investment of pursuing the thief may pay off.

To successfully implement such a strategy, employers should:

  • Conduct a thorough investigation;
  • Keep records of the time, resources and additional expenses used to investigate any particular employee, including having investigators keep track of their hours;
  • Involve the police and lay charges;
  • Bring a civil action against terminated employees not only to recoup the costs of investigation but to send a zero-tolerance message.