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What to Do When You Catch an Employee or Shareholder Embezzling Money From Your Company

LS Carlson Law January 23rd, 2023

It’s never a good feeling to suspect that one of your employees, or even a shareholder, is stealing from your business. Unfortunately, it’s more common than you think.

It’s estimated that roughly 22% of small businesses have had employees steal from them, and the average shareholder embezzlement leads to over $350k in losses for the company. It’s a disheartening truth, but it's the world we live in.

As a small business owner, discovering a workplace theft is only half of the battle. If you’re wondering how to handle suspicion of shareholder or employee embezzlement, here’s what you need to do.

1. Contact a Lawyer

It's not uncommon for employees to steal from their employers, but it can be hard to spot the signs. If you’ve seen the red flags and believe an employee is stealing, the first thing you want to do is contact a lawyer – before you even start an investigation.

When you suspect employee embezzlement, a lawyer will help you get your company back on track and set up a careful investigation. You don’t want to make any moves that could potentially backfire on your business, its management, or other employees. Looking into embezzlement cases requires a careful hand – specifically one from a trained, prepared attorney.
You’ll want to work with a lawyer who is intimately familiar with embezzlement cases and can accurately guide you through the entire process, from the preliminary investigation to any criminal and civil proceedings.

2. Keep the Procedures Confidential

Don’t immediately announce the investigation to the office. Instead, treat the entire process as strictly confidential.

There are many reasons to keep procedures under wrap when you suspect employee embezzlement. Acting too quickly or boldly could result in a false accusation, which could then expose your company to potential defamation claims by affected employees.

Secondly, you’ll want to have time to gather the facts and evidence before anyone involved has the chance to cover their trial. You’ll need to compile documentation and conduct any necessary interviews before the alarm sounds. Otherwise, you can bet that guilty employees or shareholders will take action.

Lastly, it is simply not necessary for other employees in the workplace to know about the situation until the at-fault individual is terminated. You want to be sure that your suspicions are correct before an announcement is made. An ill-timed or unfounded claim could cause employees added stress and make them feel unsafe at work.

3. Ask - Don’t Accuse

As you interview employees, ask careful questions instead of throwing around accusations. Also, remember to document all interviews regarding the situation so that you can reference any pertinent information later on down the road.

When it’s time to have hard conversations, call employees into the office individually. Keep everything professional and confidential, and don’t point any fingers upfront.

Here are some helpful tips for conducting interviews regarding employee theft:

● Before conducting any interviews, speak with your lawyer so you are well aware of what can and can’t be done regarding the suspected theft.

● Ask for the employee's written permission to tape the interview, if possible.

● Maintain a professional and businesslike tone, rather than resorting to angry comments.

● Without sounding accusatory, direct the conversation towards the area of suspicion and allow the interviewee to voice their point of view.

● Ask open-ended questions that allow the interviewee to offer up more information than a simple yes and no. The more a person talks, the more likely they will confess or offer useful information.

● Don’t keep anyone longer than they are willing to speak with you. Detaining an employee against their will builds up more animosity and may cause them to tell you less.

4. Confront With Evidence

You’ll want to wait until you have either a confession and/or strong evidence to confront someone about employee embezzlement. Be patient: it’s always better to act later but be fully prepared for the confrontation.

When you do have the necessary evidence or a confession, it’s time to face the guilty individual. You need to make your first conversation extremely clear. Explain what you are accusing them of, what evidence you’ve gathered, and why you are bringing it all up.

Try opening the confrontation with a statement like, "I have reason to believe that you have been stealing from the company." This will allow them to defend themselves if they are innocent and will give them time to process what is happening before you reveal the evidence.

After the confrontation, your course of action will depend on the seriousness and nature of the theft. Most business owners opt to fire an employee who has stolen from them, though some prefer to focus on rehabilitation and rebuilding trust.

If you choose to retain the employee, express your disappointment and be clear that your trust has been violated. Set up a clear path for future accountability and communication. You may even want to create a detailed list of performance-based expectations with a set time for review.

5. Terminate the Employee If Necessary

As we stated, most choose to terminate guilty employees immediately. If you have solid evidence and wish to fire the employee for embezzlement, ask them to leave the building immediately. The employee should leave behind all company property, such as keys, company cell phones, and company documents. All sensitive passwords that the employee had should be changed to restrict access to programs and areas they no longer have a need for.

You may also ask the employee to exist on unpaid leave for a time until you work with your lawyer to determine the next steps. If you put an employee on unpaid leave, you will eventually need to officially terminate them through documented follow-up communication.

No matter what termination path you take, you’ll want to consult an attorney. They will help you determine what paperwork needs to be filled out and when to get law enforcement involved, if necessary. They will also help you secure a conviction if the embezzlement case is taken to court.

Do You Need an Embezzlement Case Lawyer?

Theft by employees can be very costly for a business – and more common than you think, with up to 7% of employees stealing from employers at least once. It can lead to the loss of revenue and profits, and even lawsuits.

That’s why it’s crucial that you seek legal counsel when you suspect an employee of theft. A knowledgeable attorney who is familiar with these types of cases will walk you through the situation and make the next steps clear.

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