How Should a Company Terminate Employees Caught Stealing?

In general, employers have broad authority to fire workers at any time for any reason, as long as the firing doesn't violate an employment contract and doesn't amount to illegal discrimination. When a company wants to fire an employee who has been caught stealing, however, managers must tread extremely carefully. To accuse a worker of a crime is to risk a defamation lawsuit -- one the company may lose if it has not laid the proper groundwork. Since every situation is different, managers should involve their human-resources department and consider consulting with an attorney who specializes in employment law.

The path of least resistance is for the firm to simply let the employee go without any accusation of theft. In general, employers are not legally obligated to tell workers why they're being terminated. Edward Harold of Fisher & Phillips LLP, a national labor-law practice, says that unless a company has conclusive evidence of theft, it should make no direct accusation and not even use words such as "theft" or "stealing." Terminating the employee this way -- rather than firing him for wrongdoing -- may allow the worker to claim unemployment benefits, which can cost the company in higher unemployment tax rates. But leveling a theft charge could lead to expensive litigation and, if the accusation can't be backed up in court, a costly civil judgment.

Before a company says it is firing someone for stealing, it is imperative that the firm conduct a proper investigation because, as Harold notes, the investigation commonly becomes the focus of litigation. Investigations must be conducted with an eye toward discovering what really happened -- not simply justifying the accusation against the employee. The firm should strictly follow all written company procedures for investigations. At least one person conducting the investigation should not know the employee, to avoid the appearance of the probe being a personal vendetta. Suspected employees must be allowed to provide their side of the story. All evidence must be catalogued and retained even after the employee has been dismissed. If the company can't produce the evidence later in court, a jury may assume it never existed.

The firm should never coerce to obtain an admission of guilt. Keeping an employee bottled up in a room with managers playing "good cop, bad cop," for example, may produce a confession, but a judge or jury may throw it out as coerced. (It may also lead to an accusation of unlawful restraint.) The same goes for using threats to withhold pay, call the police, press charges or impose some other sanctions in order to exact a confession. Steven Cupp, another labor law specialist for Fisher & Phillips, notes that confessions are more likely to hold up if they're freely given, written legibly in the suspect's own hand and dated and signed.

According to Harold, the meeting at which an employee is to be terminated should never be the first time the worker hears he is suspected of theft. A better course of action is to meet with the employee to say a theft has occurred and the company is investigating whether the worker is involved -- without discussing termination. This meeting itself may prompt an admission of guilt, and Harold says guilty employees often resign voluntarily at this point. When it does come time to terminate, the company should not flatly accuse the worker of theft unless it believes it could prove it in court or in a hearing on a claim for unemployment benefits. If not, it may be possible to frame the termination in terms of a violation of company policy: the worker may have not stolen money, for example, but didn't follow required cash-handling procedures. Alternatively, saying the worker is being let go because management has lost confidence in him is less defamatory than saying the worker is untrustworthy. Again, obtaining legal counsel before the firing can reduce the risk of problems afterward.