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Employment Law Procedures and Policies

How to Deal With Fraud in the Workplace from an Employment Law Perspective

Workplace-Fraud

My past life in retailing flashed before me recently.

Before I became a solicitor I spent about 20 years in retailing, developing, running and selling my own retail businesses. I came across a few instances of theft from me by employees, including one large one when a pound was a pound.

Recently, I was contacted by an employer who uncovered an employee dipping the till in a retail workplace. He was primarily concerned with how to deal with the situation, and whether he should contract an Garda Siochána.

Given the substantial sum of money involved I felt he had no choice but to get the Garda involved.

But that then leads to the question: when the employee is arrested and questioned how the employer should deal with the situation, from an employment law perspective.

Suspending the employee on full pay until the outcome of a criminal prosecution could be an expensive move, especially given the pace at which some criminal cases come before the Courts in Ireland.

Before I take a look at what I believe the employer should do in a situation like this it is worth looking at fraud in the workplace, and some of the issues which arise.

What is fraud?

Firstly, fraud is an intentional act of deceit with the objective of gaining an unlawful advantage. It is vital that the act is intentional for, otherwise, it may just be a case of incompetence, inadvertence, or negligence.

Fraud in the workplace can take many different forms depending on the workplace ranging from clocking in/out cheating to fiddling expenses to dipping the till or business stock/inventory to falsifying records to gain an advantage etc.

Once an employer uncovers what she considers to be fraudulent activity what should she do?

Generally, the employer should have two goals: removing the fraudulent employee from the workplace to minimise the financial damage, and gathering evidence.

I would advise the use of the disciplinary procedure in the workplace in the first instance.

If the employer can form a view on reasonable grounds that the employee was engaged in gross misconduct then this should be a summary dismissal situation, in accordance with the disciplinary procedure and policy in the workplace. This is why it is vital to have a disciplinary procedure in the staff handbook, or as an additional document to the contract of employment, and which all employees confirm receipt of.

Note that what is required in respect of gross misconduct is the forming of a view on reasonable grounds, not the criminal burden of proof standard of “beyond a reasonable doubt” nor the civil standard of “on the balance of probability”.

It is also worth considering reducing the allegations to the ones with the strongest, clearest evidence and acting on these “sample allegations”. This will allow the investigation and disciplinary procedure to progress rather than having to wait an interminable time to gather all the evidence in what may be a complex investigation involving a lot of documents and witnesses.

It is important for the employer not to rush to judgment and to gather some crucial documents prior to embarking on the disciplinary procedure. These documents would include the written contract of employment and the staff handbook, or at a minimum the disciplinary procedure. This type of problem in the workplace is difficult to deal with if there is no written contract of employment or disciplinary procedure.

Once the employee is faced with allegations of gross misconduct and/or fraud one of two things is likely to happen:

  1. He will go out sick or
  2. He will resign.

How the employer deals with these situations will depend on the circumstances, the value of the fraud, perhaps the need to take action to prevent copycat acts and set an example, and other considerations.

However, the employer can still choose to make a complaint to an Garda Siochána and have a criminal prosecution carried out. In addition, she can pursue a civil claim against the employee to recover the value of the fraudulent activity.

To circle back to the situation at the beginning of this article the High Court in a 2015 case involving an employee of an Post and an Post held that it was in order for the employer to proceed with the employment disciplinary procedure, unless it was “manifestly unfair”, even where the criminal prosecution against the employee had not been concluded.

In this case the employee had sought an injunction against the employer carrying out the disciplinary procedure until the criminal prosecution had finished.

In conclusion, if you are the victim of employee fraud in the workplace how you react will depend on the particular circumstances of the case, and how the employee reacts when confronted with the allegations.

You can, though, invoke your disciplinary procedure, afford fair procedures and deal with the employee before the conclusion of any criminal prosecution, provided there is no “manifest unfairness”. If the employee is on certified sick leave matters will be more complicated and it would be advisable to seek professional advice before taking any action.