For employers all over the world, employee theft is an all-too-common occurrence. According to research, 95% of all businesses suffer theft in the workplace. For victims, the consequences can be devastating. More than 33% of all business bankruptcies in the U.S are the result of employee theft, totaling $50 billion in losses annually.
Fortunately, employers that discover an employee stealing from company funds have some options to mitigate their losses and prevent theft from occurring in the first place.
An Overview of Texas Employee Theft Laws
In Texas, an employee stealing from company funds or property is embezzlement and is a crime. Texas embezzlement laws, penalties, and defenses are codified in Texas Penal Code, Title 7, Chapter 31.
Elements of Embezzlement Under Texas Law
The burden of proof in a case involving an employee stealing from company is on the prosecution to prove beyond a reasonable doubt that the employee:
- Appropriated property;
- Had the intent to deprive the employer of the property; and
- Did so without the employer’s consent.
Defenses to Embezzlement in Texas
Under Texas employee theft laws, those charged with a crime may be able to assert one or more possible defenses. Some common defenses to a criminal charge for employee stealing from company are:
- Lack of intent. The employee did not intend to deprive the employer of the property.
- Consent. The employer gave its consent to the employee’s use or appropriation of the property.
- Mistake. The employee did not have the requisite intent to deprive the owner of the property.
The Penalties for Workplace Theft in Texas
A charge of embezzlement can result in a broad range of potential sentences under Texas employee theft laws. The key factor that determines the severity of the penalty is the value of the stolen goods stolen:
- Less than $1,500: Misdemeanor punishable by up to 1 year in jail.
- Between $1,500 and $20,000: State jail felony punishable by up to 2 years in a Texas state jail.
- Between $20,000 and $100,000: Third-degree felony punishable by 2 to 10 years in prison.
- Between $100,000 and $200,000: Second-degree felony punishable by 2 to 20 years in prison.
- $200,000 or more: First-degree felony punishable by 5 to 99 years in prison.
Types of Employee Theft
When we think about employee theft, most of us picture an employee stealing money from a company. For instance, an employee taking cash from the register, using company credit cards for personal purchases, or a chief financial officer misappropriating money from the corporate accounts. But there are many different types of employee theft, ranging widely in complexity and severity.
Many cases involve some level of fraud, not just in the commission of the crime but in an attempt to cover it up. According to experts, more than half of thieving employees create fraudulent physical documents to cover their tracks, while others alter physical and/or digital documents.
A less obvious but more prevalent issue of employee theft is an employee stealing time from their employer. According to research, some 75% of U.S. businesses are affected by time theft each year. Time theft occurs when an employee is paid for the time that they did not actually work. The following are several examples of employees stealing time from their employer.
- “Buddy punching.” An employee clocks in or out for their coworkers. This form of time theft costs U.S. employers nearly $400 million per year.
- Extended breaks. Employees take longer coffee or lunch breaks.
- Personal activities. Employees engage in activities that are unrelated to their job functions while being paid by the employer. For example, talking to a friend on the phone or surfing the internet.
Detecting an Employee Stealing from Company
While no employer wants to consider the possibility that a trusted employee may be stealing from the company, there are often some warning signs that indicate something is amiss:
- Excessive personal spending. Excessive spending — such as purchasing luxury items while earning an average salary — could be a warning sign of an employee stealing money from a company.
- Refusing to take a vacation. An employee that refuses to be away from the office for extended periods could be worried that their theft will be discovered while they’re away.
- Close relationships with vendors. An employee that has a close relationship with a vendor can be a sign of a larger problem. A common form of theft involves employees conspiring with one or more vendors to overbill the employer in exchange for a kickback.
- Substance abuse or gambling issues. Gambling, as well as substance abuse, can cause employees to experience financial difficulties. Excessive alcohol and drug use can also impair an employee’s ability to foresee consequences for illegal behavior.
- Large petty cash or business expenses. If you notice that an employee is spending more petty cash or running up larger business credit card bills, it can be a sign that the employee is misappropriating funds for personal use.
There are many ways that employees can steal from a company. Ensure that you have adequate processes in place to mitigate theft, and always trust your instincts if an employee’s behavior seems suspicious.
How to Handle an Employee Stealing from Company
Restrict the Employee’s Access
If you suspect that an employee is stealing from your company, restrict their physical or digital access to the workplace. You not only want to prevent the employee from stealing more money or property from the company, but also prevent them from acquiring or tampering with sensitive data.
Investigate the Theft
Bring in an unbiased person to investigate any suspected theft. Your emotions and personal opinions could make it difficult for you to view the situation objectively. The investigator can be a person from another department that does not know the suspected employee or a third-party vendor.
Determine the Full Extent of the Damage
A single act of theft could be part of a larger scheme. Look at everything the employee touched and had access to, and consider that other people might’ve been involved.
Follow Your Company’s Policies
If the employee is still employed, it is important to follow your company’s disciplinary policies. This often involves meeting with the employee and giving them a chance to explain their conduct. It also helps to ensure that you are fully documenting the incident and protecting your rights.
Contact the Police
Contacting the police is important for several reasons. First, if your company has an insurance policy, you will need to provide the insurance company with a copy of the police report. Second, reporting the theft can lead to criminal charges under Texas employee theft laws. If convicted, the employee may be legally obligated to pay your company restitution for your losses.
Observe the “Need-to-Know” Rule
Be careful not to give in to the temptation of retaliating against the employee. Also, avoid saying more than necessary to other employees and third parties about the incident. If it subsequently turns out that you were wrong about the theft, you could face a potential libel suit.
Maintain Detailed Records
To protect your company’s interests, you must preserve relevant documents, emails, and digital files. Moreover, if you conduct interviews, document everything that you learn. Also, be sure to maintain a clear chain of custody to ensure that there is no tampering with the evidence.
The more detailed your records are, the easier it will be to report the theft to the police, file an insurance claim, and pursue civil litigation against the employee and potentially third parties.
Learning that a trusted employee has stolen from your company can be devastating. However, to protect your interests you must remain calm. Follow the steps listed in this article as well as your company’s policies and procedures to gather evidence, conduct a thorough investigation, and maximize your potential recovery.
The experienced attorneys at Padua Law have helped countless business owners successfully navigate cases involving employee theft throughout the state of Texas. If your company has been the victim of employee theft, contact us today for a free consultation to discuss your rights and options.