Earlier this year, a Mississippi woman was sentenced to eight years in federal prison and ordered to pay $1.4 million in restitution to a Tennessee bank and two Oklahoma companies after she was convicted of embezzling money from all three companies. The employee handed direct payroll deposits and diverted money to her bank account and those of members of her family over an extended period of time.
Sadly, such cases of employee theft and embezzlement are not uncommon. Employers place trust in their employees, especially those employees who have access to banking, payroll or other financial records and accounts. In smaller companies in particular, or ones with long-time employees in such positions, that trust can lead to lax precautions and the failure to take other simple steps that could prevent or minimize the damage of an employee who may be tempted to take advantage of their position and their employers’ faith in them.
Although it may be impossible to entirely prevent the risk of employee theft, businesses can take several steps to reduce the likelihood that employees will be able to embezzle.
- Thorough hiring processes. A criminal background check should be a standard part of your company’s hiring procedures. When checking references, go beyond merely asking about the candidates skills, attributes, and work history and inquire about any past issues regarding thefts and criminal convictions. Because former employers may be hesitant to directly discuss problems with a former worker, prospective employers should ask open-ended questions that encourage a former employer to be more forthcoming.
- Clear and unequivocal rules. If your business doesn’t have an employee handbook that it gives to new hires, you should create one immediately, as it can help avoid a myriad of potential risks that arise from unclear expectations and misunderstandings. It should contain clear language about the consequences of theft and other bad behavior. 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.
- Built-in Redundancy. Your 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 to allow for rotations on a regular basis.
- Confidential reporting system. 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 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.
- Lead by example. If business owners and senior management follow company rules, their employees are more likely to do so as well.
Rushing & Guice, P.L.L.C.: Mississippi and Gulf Coast Business Lawyers
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This website has been prepared by Rushing & Guice, 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.