Australia: Theft in the workplace - what are the costs to employers and how should it be managed?

Last Updated: 7 July 2014
Article by Melissa Demarco and Anthony Ford

In brief - Employers need adequate policies and procedures to deal with workplace theft

Theft in the workplace costs Australian employers on many levels: loss of revenue, recruitment, low staff morale and time. These and other factors highlight the importance of employers having adequate policies and procedures, conducting an investigation into incidences of theft and knowing what their rights and obligations are with respect to dismissal, surveillance and privacy when dealing with theft in the workplace.

Multiple forms of workplace theft

Theft in the workplace is not limited to stealing of money and products. Theft can take the form of undercharging, giving unauthorised discounts to friends, altering documents or creating fictitious ones, theft of intellectual property, fraudulent refunding, receiving gifts or commissions from suppliers and incorrect time recording, as well as using company time for personal matters.

Theft in the workplace in all its forms can be challenging for Australian employers to manage because employers may not have the time, experience and resources required to handle it properly.

When dealing with such a difficult but common issue, it is recommended that employers consider the following:

  • How an investigation should be conducted
  • The employee's previous history of poor performance or conduct
  • What evidence is available
  • Whether the police should become involved
  • What policies should be considered

Costs associated with workplace theft

Statistics obtained by the Australian Federal Police indicate that 70 percent of business fraud losses are from staff and former staff, costing businesses over $1.5 billion a year. The Australian Retailers Association estimates that 55 percent of stock shrinkage relates to employee theft.

Just as the form of theft is not limited to loss of profit, the actual costs of employee theft are not limited to loss of products or revenue. Australian employers are also faced with additional burdens associated with theft, such as low staff morale, recruitment costs and importantly, time spent on dealing with the investigation and disciplinary process.

As a starting point, make sure you make your employees aware through company policies and an initial appointment letter or contract that the types of theft set out above are not tolerated and what the consequences will be if they engage in this type of conduct.

Investigating suspected theft in the workplace

If you suspect theft has occurred, you should investigate. If action is taken to dismiss an employee without conducting a proper investigation or without valid evidence and subsequently, the employee's explanation is found to be reasonable, the employee may have grounds to take action against the company.

Employers must inform employees of their rights before any interview. These include the right to have a witness present and the right to remain silent. Also, if the employee in question is a minor, ensure that an adult is present with the employee at all times when conducting interviews.

When investigating whether theft has occurred, it is important to gather all of the evidence such as financial records, statements from witnesses and video surveillance and to ensure that procedural fairness is afforded to employees at all times.

It is easy to become too focused on proving the theft and removing the employee (possibly for other reasons), which can affect the outcome of an investigation. Importantly, avoid the investigation turning into a witch hunt and exposing the company to an unfair dismissal, adverse action or defamation claim.

Notifying the police

Also, consider whether or not the police should be involved. If you have a reasonable suspicion that theft has occurred after an initial investigation, notify the appropriate authorities.

The Australian Institute of Criminology has reported that only one in 17 occurrences of employee theft are reported to the police. The actual number of employee thefts is far higher than the statistics show, because much of it is not detected and even when it is uncovered, employers do not report the theft to the police.

It may be necessary to stand an employee down on pay whilst an investigation is being conducted. However, take extreme caution when doing this. It is always recommended to engage solicitors to assist you with an investigation, as this will allow you to claim legal professional privilege over the information gathered during the investigation.

Can an employee be fired for stealing?

Under the Fair Work Act 2009, theft or fraud is considered to be "serious misconduct". However, it is not always the case that theft will justify summary dismissal.

Employers should always conduct a thorough investigation into an alleged theft prior to taking any disciplinary action against the employee. Further, an employer should be consistent in its treatment of employees. An employee may be able to make a successful unfair dismissal application if, for example, an employer has not conducted a proper investigation before the employee is dismissed or if behaviour such as theft was condoned on previous occasions.

By way of example, a retail employee stealing a tin of milo may justify a verbal warning. It is also extremely important to treat all employees consistently, regardless of the employee's position or status, age, race, marital status, sexual preference etc. The fact that an employee is a male senior manager does not entitle him to more or less favourable treatment in a case of theft than any other employee.

Can amounts be deducted from an employee's wages?

Another common question raised by employers is whether, after an employee has stolen company property, the employer is able to deduct amounts from any accrued but unpaid entitlements. Unfortunately, an employer cannot withhold or deduct any amounts from an employee's pay without an employee's authorisation.

In this situation, if the employee is charged and convicted by police, an employer could seek that the courts make an order for restitution or compensation.

Practical suggestions for employers

It is difficult to pinpoint the real reason why employees steal. Theft in the workplace occurs in high income occupations, often senior management positions, just as often as lower paid positions. A common theory derived from research suggests that employees who steal feel like they are treated poorly, feel unrecognised and not adequately remunerated or compensated for their efforts.

Apart from treating your employees with respect, other practical suggestions to deter or reduce employee theft are as follows:

  • Implement a strict no tolerance of theft policy and educate your employees
  • Review existing policies and procedures regarding investigations and disciplinary action
  • Encourage employees to report any suspected theft or fraud anonymously (e.g. telephone hotline)
  • Introduce video surveillance to areas where theft is likely to occur
  • Ensure access to computer systems, software accounting programs and cash registers is controlled through the use of passwords
  • Appoint private investigators if you suspect theft is occurring
  • When employing new staff, conduct criminal record checks and be vigilant in checking references

Practically speaking, there is no simple solution to a significant problem. By identifying and managing areas of weakness, employers can possibly control theft in the workplace or prevent it from becoming a serious problem.

Melissa Demarco
Workplace relations
CBP Lawyers

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