Preventing Employee Theft in California

Legal Challenges in Theft and Trade Secret Misappropriation

The concept of employee theft may evoke the image of an employee removing money from a cash register, but this is only one simple example.  Employee theft takes many forms, and preventing employee theft in California can be difficult.  Unauthorized use of trade secrets, theft of merchandise, unauthorized use of a company checking account or an employee claiming to have worked hours he or she did not actually work are all potential sources of loss.

If an employer determines that an employee has stolen from the company, should the employer terminate employment?  Perhaps.  But the answer requires consideration of the underlying facts on a case-by-case basis.  If an employer rushes to terminate an employee for theft, there is significant legal risk, and that risk may carry a much greater cost than the underlying theft.

Consulting with an attorney for employee theft and trade secret misappropriation can help ensure that your company is compliant with the law when dealing with employee theft in California.

Preventing Employee Theft in California and What to Do When It (Eventually) Happens

The preferred option for an employer is preventing employee theft in California altogether.  In the past, employers have tried to curb the risk of loss by using background checks.  Criminal background checks can be useful but must be conducted within the boundaries of federal, state and local laws.

Employers should also train employees thoroughly on company policies and consequences imposed for violations.  Policies should be well-documented, and employees should formally acknowledge that they have received and reviewed the documentation.

The best preventive practices can fail, however.  Eventually, employee theft often becomes a reality.  What then?

Screening and Training Employees is Key to Preventing Employee Theft in California

As a first step to preventing employee theft in California, find out whom you are hiring before he or she has an opportunity to steal.  California law limits the use of background checks (both criminal and financial) during the application and hiring process.  It is crucial that your company conduct any screenings properly, with the appropriate documentation, at the permissible stage in the process. 

California’s Fair Chance Act (AB 1008) is one example of this form of regulation.  The Act precludes employers from asking about an applicant’s criminal convictions until after a conditional job offer has been made. 

In addition to background checks, companies should contact references and the applicant’s former employers to verify employment.  These efforts can reveal new information that you otherwise might not have learned until much later.

After performing due diligence in background checks, a company should also ensure that every employee is aware of the policies against theft and what will happen as a result of theft.  This requires documentation that clearly states employees may face discipline up to and including termination should they steal from the company.  These policies should also clearly define materials and information that are considered trade secrets, how these should be handled, and what may result from the mishandling of trade secrets.  Employers should require employees to acknowledge these policies in writing.

Investigating and Prosecuting Employee Theft in California

Even after taking the steps above, there are no guarantees.  If employee theft occurs, it is unlikely that a surveillance video will clearly show the employee’s actions, removing any doubt as to the identity of the thief.  In most instances, there will be some need for investigation, which often includes taking statements from other employees and performing document reviews. 

The company should establish and follow a written procedure for managing an employee theft investigation.  The company should also carefully document the steps and findings of the investigation throughout the process.  The employer should act to ensure the following:

  1. Investigators and human resources personnel abide by written policies and procedures.
  2. Employer or supervisory personnel conducting the investigation consult legal counsel to ensure the company is protected.

At the end of the investigation, the employer might determine that Employee A did indeed steal from the company.  If Employee A stole $500, can the employer deduct $500 from Employee A’s next paycheck?  While this may seem to be a reasonable option, particularly where the identity of the perpetrator is indisputable, such recoupment is not permitted under California Labor Codes 221 to 224.

If the stolen amount cannot be withheld from wages, the employer may wish to terminate the perpetrator’s employment or even prosecute the employee.  Determining whether these options are advisable requires a case-by-case analysis, depending upon the strength of the evidence regarding the theft. 

Preventing Employee Theft in California: What Are the Risks?

After a theft, the employer should make best efforts to handle the situation appropriately and swiftly.  Perhaps the employer made an honest mistake along the way, or the employee (or former employee) still brings an action when the employer has done everything right.

Some instances of theft are complex and require significant discovery (such as cases where an employee misappropriates small amounts of money over time or where the employee has disclosed trade secrets).  Without guidance, employers are often ill-equipped to carry out a thorough investigation compliant with the law.

Consult Susan A. Rodriguez for Employee Theft in California

Whether your company has a specific instance of employee theft or you are reviewing your policies and practices to prevent future incidents, engaging the services of the right attorney is important to avoid potential missteps.  

Preventing employee theft in California is not always possible, but experienced help is available.  The Law Offices of Susan A. Rodriguez, APC, can be your California attorney for employee theft and trade secret misappropriation.  From establishing and training on employee theft policies and maintaining compliance in the performance of background checks to providing viable disciplinary options tailored to the situation, our lawyers have the experience and knowledge to help employers avoid legal pitfalls.  Contact us today.  Call (213) 943-1323 or visit our contact page to schedule an appointment.

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