What Can You Do If an Employee ‘Steals’ from You?

If an employee quits, can you deduct money from, or withhold his entire final paycheck, for damage to company property or until he returns company equipment? Short answer: No. Here are your options.

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Sometimes the hardest part of being a custom integrator has nothing to do with keeping your clients satisfied. Unfortunately, many times it’s dealing with a “bad apple” on your team. But one recourse that apparently is not an option is to withhold an employee’s final paycheck, even if that person has allegedly “stolen” company equipment or damaged company property.

That’s the advice from the expert law firm Kirschenbaum & Kirschenbaum in response to a question from an integrator. The dealer recently had an employee quit with no notice. The person, who had been with the company for just eight weeks, departed with company-owned items that were assigned to him. He also smoked in one of the company’s non-smoking vehicles, requiring it to be professionally cleaned.

“I know there are specific laws that apply to payment of employees, but I am getting tired of short- or long-term employees either failing to return tools, parts, equipment, or partially destroying the nice vehicles that we provide them,” wrote the anonymous dealer.

Unfortunately, according to Judge Ruth Kraft, retired administrative law judge and legal expert at Kirschenbaum & Kirschenbaum, an integrator cannot withhold money from a person’s paycheck.

“You can’t withhold from the final paycheck whatsoever. That is called wage theft these days and it is a violation of state labor laws,” she says. “If he didn’t return expensive items assigned to him, such as a laptop, you could sue in small claims court and get a judgment which could be enforced against him.”

But what about charging back the employee? In some states, like Colorado, the employer has “10 calendar days to audit and adjust the accounts and property value of any items entrusted to the employee before the employee’s wages or compensation shall be paid.”

But just because you can, does not mean you should, according to Kraft. She says that charge back will surely likely trigger a report to the state labor authority.

“If an employer charges back, the employee can go into an administrative proceeding under the 2014 changes and raise all sorts of other wage/hour issues. An employer who thinks that taking the deductions is a home run would be foolish,” she says. “Additionally, there would have to be an underlying agreement between the parties as to consequences and you can bet that, under FLSA, these will be scrutinized for fairness, opportunity to negotiate in good faith, adhesion, etc.”

Should You File a Police Report?

Another issue is whether employer reported the missing items to law enforcement. If not, proving that the deduction was appropriate will be more difficult in the administrative proceeding.

What about filing a police report for the missing property? Legal expert Ken Kirschenbaum, who writes for CE Pro‘s sister publication Security Sales & Integration, says that is an option, but he does not advise “threatening” to file a police report in exchange for getting the returned property back.

“Just file it when you’re ready,” he says.

Related: Warning: Your Employment Ad Could be Against the Law

One integrator says he would play a cat and mouse game with an ex-employee who did not return equipment. He says he would ask the person to come in to the office to pick up his final paycheck and to bring the equipment with him. If the former employee does not return the equipment, then he tells them that there is a problem in the accounting department and the check is not ready. And then he reminds the person to bring the equipment when he comes back again.

“Two can play that game,” says the anonymous dealer. “I’m sure most of us can come up with as many excuses for why a person’s check isn’t ready as the former employee can as to why they forgot to bring back equipment. As long as you don’t say you are ‘holding their check’ in lieu of returning the equipment, they would have a hard time proving wage theft. You get dog tired of taking it on the chin, losing customers due to crap employees, and then the crap employee quits and steals equipment and then the courts are going stick it to you as well. 

“I’d say, ‘ENOUGH.’ Rather than small claims court, I would be more inclined to call the local police department and have an officer respond to take a report of the theft. That does two things… It lets the ex-employee know that you aren’t going to play games and it might just scare him enough to do the right thing.”

Think You Got It Bad?

The next time you think you have a horror story of employee theft, think about this anonymous dealer in Alabama who wrote to Kirschenbaum. The integrator says an employee stole a company truck and parked it at an airport in a different city. The employer wanted to withhold the person’s final paycheck until he told them where the truck was. He refused.

Even in that circumstance, the employer was informed by the state labor relations board that he could not withhold any of the technician’s final paycheck. So, he paid the person for two weeks, plus a portion of the third week (withholding the rest of the third week’s pay). Even still, the ex-employee contacted the labor relations board. Finally, the dealer was informed where the truck was and he had to fly to that remote city and then pay huge airport parking fees to retrieve the vehicle.

Can You Prepare for Employee Theft?

So can an integrator protect himself from employee theft by having stipulations in his or her Employee Handbook? Yes, and no.

According to Kraft, it is not advisable for a custom installation or security company to try to rewrite its Employee Manual to cover this circumstance, primarily because it will likely open a potential Pandora’s Box whereby the former employee will file a complaint with the state labor board. That would result in “a huge fishing expedition” in which the board scrutinizes every part of your employee management, hourly wages, etc., she adds.

Kraft recommends that a dealer’s best bet is to try to control the resignation process by requiring an employee to give a specific reason they are quitting.

“This makes it much more difficult for the employee to later claim another reason,” she says.

Kraft also says dealers need to have an employee manual written after 2014, calling anything written before that date “an albatross” due to changing National Labor Relations Board (NRLB) rules.

Tell us your stories of employee theft and how you handled it?

About the Author

Jason Knott
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Jason Knott:

Jason Knott is Chief Content Officer for Emerald's Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California.

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