EMPLOYEE THEFT – Larceny

Dealing with employee theft is a concern for all businesses, large and small.  The first step in controlling the problem is to understand the types of loss a company can suffer.  The next step is to figure out when a loss is occurring, and then what you can do about it.

One of the most common types of employee theft is larceny.  Most often this occurs in small ways such as office supplies for personal use, or theft of product.  Although most of the time these types of theft are small, and seem inconsequential, they add up quickly.  When the product is a candy bar from a store, the loss is minor and hardly noticed.  However, when your inventory is refrigerators, one or two missing items cuts into the profit margin rapidly.

So, how do these things start?  Employees, like customers, like all humans, do things for a lot of different reasons.  There is no one “type” of employee who will steal, and no one “type” that won’t.  So being vigilant and aware of your business and employees is critical.  There can be a variety of red flags to watch for, depending on your business.  One indicator is a change in pattern, such as being at work at irregular hours.  This is particularly true if the employee changes his or her schedule to be at work when no one else is there.  Occasional flexing may not be an indicator of anything, and depending on your business it may be beneficial, but changes to the work routine should come through a supervisor, not through the employee without approval and justification.

Another significant warning sign is a failure to follow, particularly a new failure to follow, established procedures.  If your company has a well established routine, especially a written policy, then your employees should be following it.  If there is a better way to do things, your employees should come to you and present their ideas so the procedure could be changed.  If an employee individually decides not to follow company procedures you should pay close attention to the situation.

Humans have an expectation of what should be, and a sense of when things are wrong.  Things that seem out of place probably are.  Follow your instinct if something doesn’t feel right.  It doesn’t mean the employee is automatically wrong, there may be many valid reasons for their actions, and there may not be any problem at all.  But as a supervisor or a business owner, it’s your job, and in your own best interest, to stay involved.

Understanding the legal authority of the company, and knowing how to apply your authority will help prevent being a victim of theft, as well as help you catch on quicker and help make your case stronger when it does happen.  The statutes for larceny and embezzlement are available online at Vermont Legislature T13 Ch 57.  This chapter covers not just larceny and embezzlement, but also the rights of the merchant regarding merchandise, and the requirements regarding theft of rental property.

You can install video surveillance in non-private areas of the business, require check-in / check-out, and even inspect bags and packages.  Develop written policies and procedures to cover these situations, and document training in proper procedures.  Where ideas and information are important, establish no-compete contracts and non-disclosure contracts.  Make sure you consult your attorney to ensure the policies and practices you use are in compliance with your industry requirements and other applicable standards.

Documentation is key to protecting yourself both before you become the victim, and after you find out and begin take action.  By having written standards and policies, you can establish consistent and defensible expectations for your employees to follow.  By being vigilant and consistent in following them right from the start you can decrease your chances of having someone steal from you.  As soon as you realize something is not right, document the facts and circumstances you find.  Being able to present a clear, well documented picture to the police, the union representative or the attorney will make your life a lot easier.

Embezzlement Awareness

The intentional taking or diverting of funds or goods from the business for personal use is far worse than spending too much time at the water cooler.  Although these incidents happen less frequently, they can quickly become very costly for your business.

Entering into the realm of traditionally understood employee theft, embezzlement is a serious crime.  Under the statute, even a minor siphoning of funds or goods can be charged as embezzlement.  Many times embezzlement doesn’t get caught until the company hits a real snag in some other area, like bouncing a check.  This is too often because there is one person that “does the books” and no one is double checking those books.  A good supervisor has an obligation to understand at least enough of what is going on under him or her to conduct a monthly review.  Another option is to have an external audit of your books, or at least random aspects, at a regular interval.  This will put employees that would consider stealing on notice that the risk of getting caught is high, and decrease the time frame a person stealing from your company will have to act before they get caught.  This ultimately reduces the potential for loss, and provides a return on your investment in the auditing.

Once a business has identified a loss through whatever means, it is important to follow the proper steps to minimize your loss and maximize your ability to prosecute the person who has betrayed your trust.  The first thing to do is restrict access of the suspect employee to the accounts and financial information, or even the company as a whole.  With online access so prevalent, make sure the employee cannot access important information from home.  All systems (whether financial, information technology, internet, or anything else) should be set up so more than one person has access to the administrator aspects.  If you are the owner of the company, you are entitled to every bit of information about the company.  Appointing a chief assistant to have access will most often suffice.  Next, contact your financial institution to obtain accurate records, and prepare a package of information for the police. 

Sometimes an employer feels embarrassed at having been the victim of embezzlement, and does not seek prosecution.  But while letting a person go quietly may get rid of one part of your problem, there are others left behind.  First, the court system can help you get your money back if you are the victim of a crime, and if the person gets convicted.  Second, that thief may get a job somewhere else and get another opportunity to steal.  Odds are someone already let them go quietly, and that’s why they were able to steal from you. 

Regardless of the offense, the loss you’ve suffered, or whether you contact law enforcement, documentation is critical.  Keep a running log in a notebook with small infractions that problem employees commit.  Use these notes when completing annual evaluations.  Keep track of dates, times and conversations, especially if your incident may get forwarded to the police.  When dealing with a series of small acts over a long period of time, I cannot stress enough the importance of preserving the case.  Police will need to be able to understand how your system was supposed to work, and how the suspect subverted it, in order to bring charges to court.  Having a written policy, and a signed acknowledgement or receipt and reading of the policy will also help support your actions.  It’s your business, stay in it.

Introduction to Basic Business Security

This is a new blog to promote business security in the state of Vermont.  The intent is to post relevant safety and security information, ideas and principles that businesses and individuals can use to protect themselves, their employees and customers in Vermont.  Our focus is on real-world issues and real-world solutions.  The plan is to post weekly, unless events warrant more.  To start, here is an article published a few years ago in Business People Vermont a few years ago. 

Most of us spend almost 1/3 of our lives at work each week, many people work even longer hours.  When you consider running errands, social activities and running around with the kids, we may very well spend more waking hours at work than home each week.  Much like home, we develop a sense of security about our workplace.  Just as we think about security in our homes: locking the door, neighborhood watch programs and alarms, so should we consider security in our workplace. 

In 2008, 921 violent crimes occurred in the workplace in Vermont, according to the Vermont Crime Information Center (VCIC).  These crimes included assaults, robberies, kidnappings and weapons offenses, among others.  Vermont has one of the lowest violent crime rates in the country, and this rate of 1.48 violent crimes per 1,000 people seems like comforting odds.  Unless you are one of the 900 people for whom the odds catch up.

In 2008 there were 10 accidental workplace deaths, according to the Bureau of Labor and Statistics.  Vermont full-time workers logged almost 300,000 hours worked with only 5.4 work related injuries or illnesses per 100 workers.  Even with these low numbers, many training hours were spent learning important skills such as CPR, lockout procedures, and proper lifting techniques.  But how much time is devoted to workplace violence safety?

There are numerous things you can do in your workplace to increase your safety and reduce your risk of being a victim of violence.  Here are four things to keep in mind to keep yourself safe at work.

1-      Control access into your business.  Most businesses unlock their doors in the morning and don’t lock them until night, but while doing this you can control who enters and leaves.  Only leave one door open.  Lock and alarm all other doors, and have video cameras that record motion set up to record anyone who tries to access them.

2-      Greet everyone quickly.  Have someone at the entrance to greet people as they enter your business.  A person that is able to enter your business and wander around unchallenged may able to find a victim in a position where help is inaccessible.  Greeting a person as soon as they enter, and arranging for an escort through the building, will deter opportunistic crimes and let your visitor know he or she is being watched.

3-      Be able to summon help quickly.  A quiet, rapid method for getting help such as a silent alarm button is crucial for a greeter.  A code word over a PA system or two-way radios is good, but it should be something that is simple and trained on regularly so employees are familiar with what to do.  Most alarm systems can be set up to contact the police with just a button push to speed up the response for help.

4-      Trust your instincts.  If something appears out of place, it probably is.  Be curious about things that don’t seem right.  Tell someone else about what is bothering you, and then figure out the best way to check it out.  Don’t just look into something without telling someone else where you are.

Always be alert to your surroundings.  Police officers train to practice “What-if” scenarios in their head all the time, constantly rehearsing what they would do based on the conditions and changes in the environment around them.  Everyone should practice this whether at home, in the workplace, or traveling between.  You will be able to react faster, as a person or as an organization, if you have spent time preplanning what to do in an emergency.