Dealing with customers trying to steal from you is one thing, but what do you do when your own employees turn on you? Employee theft is, unfortunately, quite widespread, and small businesses are especially vulnerable. Still, many business owners don’t know anything about employee theft coverage, and I want to change that.
Employee theft is a topic that hits home for me, as it’s by far one of the worst experiences I’ve had throughout my career. Luckily, in my time of need, I was able to rely on my employee theft coverage insurance to help me get back on my feet.
As the name suggests, employee theft coverage will protect your business against all types of theft that a current or former employee commits. So keep reading if you want to learn all there is to know about employee theft coverage.
What Is Employee Dishonesty Insurance Coverage?
Employee dishonesty insurance coverage is also known as crime coverage, a fidelity bond, or crime fidelity insurance. It’s a type of insurance meant to protect small businesses from financial loss caused by an employee.
Employee dishonesty insurance coverage can protect every upper-level person in your business, including directors, partners, and trustees. In addition to safeguarding you from your current employees, temporary and seasonal ones will also be held liable.
So if your worker steals securities, property, or money from your business, you can rely on the dishonesty coverage. This type of insurance is by far one of the most important ones, and every employer should have it.
It can be written as a stand-alone policy or in conjunction with other coverages. Stand-alone employee dishonesty policies cover:
- Unauthorized transfers of funds
- Forgery
- Computer fraud
- Money order fraud
- Counterfeit fraud
- Credit card fraud
Also, you can and should add endorsements and exclusions into your business’ employee dishonesty insurance coverage.
Endorsements
Endorsements are quite common in most employee dishonesty insurance coverage policies, and for a good reason. These third-party policies make slight changes to the employee dishonesty policy in order to include premises coverage. They’re the only way to ensure all parties engaging in a business deal are safe from any loss of property or money by an employee.
Exclusions
Policy exclusions are a way that the insurance company can protect itself within an agreement. Because employee theft coverage policies are typically quite broad, there have to be certain exclusions to portray the risk that the insurer isn’t willing to take.
For example, most exclusions include accounting and math omissions and errors, as well as theft by the policyholder. They also include a loss of income that was realized without any damage or loss of money, property, or security.
Editor Side Notes: Still searching for the right remedy for employee thefts? Here is a guide in surveilling your employee with the right CCTV as we have talked about the best security cameras for business reviews for the year 2020.
What Does a Crime Policy Cover?
Because most commercial property policies don’t cover crime-related loss, investing in a crime policy is a must. There are two types of these — commercial and business. Commercial crime policies are made to fit the needs of most organizations except financial institutions. They offer several types of coverage, such as:
- Fraud,
- Computer fraud,
- Alteration and forgery,
- Funds transfer fraud,
- Extortion,
- Ransom,
- Kidnapping,
- and employee dishonesty coverage.
On the other hand, business crime insurance policies are made for businesses to protect themselves against business-related losses and crimes. They cover assets, cash, and other property loss that has been perpetrated through embezzlement. So if you end up losing money as a direct consequence of your employee’s actions, you’ll be able to call on the policy to cover your losses.
What Do You Do If You Catch an Employee Stealing?
Step 1: Gather Strong Evidence
Speaking from personal experience, it’s better to have solid evidence before going forward with the case. If possible, you should try to obtain video evidence, but you can also rely on a witness to testify to the crime.
You’ll also need to review and gather financial records, computer files, and emails. Make sure you document every step of the process and compile it into one logical unit.
If you don’t think you can do it all by yourself, hiring a private investigator might be the best thing to do. A PI might be able to help you gather evidence of an employee’s guilt. Also, a polygraph examination is an option in some cases, as long as the employee consents to it and the police believe there’s sufficient evidence. To find out if polygraph testing is applicable in your situation, you can check out this guide by the U.S. Department of Labor.
Step 2: Alert the Police
No matter what happens, you should always go through official channels to get the best results possible. That means calling the police as soon as you’re aware that a crime had taken place.
Also, know that your insurance company will ask for a police report before reimbursing you. So don’t get too carried away with playing detective and always include law enforcement agents when you need to.
Step 3: Terminate the Employee
No one likes having to fire someone, and I find the experience quite awkward every time I have to do it. In addition to that, termination can quickly turn into a legal nightmare. Before firing the employee for theft, make sure you have all of the documentation you need. Also, check with your attorney if there are any other issues and clauses to work through.
Keep in mind that if the employee is in a union, they have a right to have a co-worker or a representative present during an interview. You’ll need to honor all of the employee’s rights to ensure the case goes smoothly. If you don’t follow all the rules, the person has every right to sue you, so always be aware of your actions.
You should also take some safety measures if you fear that the employee will run away or try to harm you. If the person tries to make a break for it, call the police straight away.
Step 4: Don’t Do Anything to Hinder the Investigation
Deducting any amount from the employee’s last paycheck might be restricted under the law of your state. So if you try to reimburse the amount stolen by yourself, you might do a lot of damage to the case.
Also, don’t talk about the case with anyone outside of the investigation. Revealing confidential information might ruin your credibility and will most likely backfire on you in the future.
Can an Employer Sue an Employee for Stealing?
As you know, stealing of any sort is a crime punishable by law, so there are legal remedies available to you. If an employee is convicted of embezzlement, they could end up paying restitution or even getting jail time.
But keep in mind that you might not end up not getting all of your money or assets back. The fine depends on many factors, and it will be up to a judge to decide how much the employee is able to pay you back.
It’s also important to know that you can bring up charges against both a current and an ex-employee. With all of that in mind, there are three types of charges you could press against an employee for theft.
1. Paycheck Penalties
If you decide to keep the employee, you could simply deduct the amount of money stolen from their paycheck. But know that some states (California, for example), prohibit this. Other states place some restrictions on the amount of money you can withhold from a paycheck, among other things.
Believe it or not, the employee can even sue you if you make the wrong move. So again, I don’t think this solution is easy or even good for that matter. Make sure to think things through and consult a lawyer before deciding to keep the employee on the payroll.
2. Conversion Claims
You could sue an employee for conversion if they commit petty theft of merchandise or cash. If they’re convicted of the crime, the court could order them to repay a part or the entirety of the stolen amount. Also, if they don’t pay you on time, you could pursue the case in civil court in order to get the full amount back.
3. Breach of Contract Claims
Depending on the nature of a person’s employment contract, you could file a breach of contract claim. If the person is stealing your data or selling your company’s trade secrets, you’re very likely to win the claim. Also, if they violate the terms of their NDA, they could end up having to pay you for damages greater than the stolen amount.
With all of that in mind, I would advise you to discuss the case with an attorney and get their thoughts on the matter. Hiring an experienced legal representative has saved me a lot of stress, as they knew exactly how to deal with my specific case. Also, if you decide to pursue charges, you’ll need these professionals in the courtroom.
Final Thoughts
As there are more and more innovations in business practices and technology, there are also more opportunities for potential abuse. It’s now easier than ever for employees to take advantage of you and your business and try to defraud or steal from you.
For this reason, and because I have personal experience with employee theft, I want to ensure others aren’t as lost as I was when it happened. It’s always an unfortunate situation, but you have to realize that it’s not the end of the world and that there are remedies available to you.
Employee theft coverage will protect all operations, assets, as well as the reputation of your business. Every and any business can be a target, so it’s important to take precautions and learn more about employee theft coverage on time.
Hopefully, now you know what to do in case an employee steals from you, as well as how to prove it and get justice. If you have learned something from this article, feel free to share it with your friends and people in your network. Also, please tell me about your experience and thoughts on employee theft coverage in the comments.
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