Employee Dishonesty: Avoiding Potential Liability

Companies are afforded a certain degree of latitude in resolving internal dishonesty issues. Certain factors, however, can turn doing the right thing into a bad situation.

These factors include:

  • Actual or perceived treatment of an employee throughout the interview
  • The evidence that supported dismissal
  • The consistency in decision-making
  • The length of the conversation

In situations where you address an employee’s dishonesty (theft, fraud, or other criminal acts), there are several steps to mitigate potential liability.

Before you interview an employee, my recommendation is first to seek professional advice. And, of course, nothing in this article should be construed as legal advice.


Professional treatment

Professional and respectful treatment of an employee is the most critical factor in determining outcomes.

Dishonesty issues tend to be emotional for both companies (they feel betrayed) and the employee (they are fearful). Adding to the “fire” by making disparaging comments, yelling, threatening, or embarrassing the employee will increase the possibility of future litigation.

Post-interview disparagement can also lead to lawsuits. For example, communicating that an employee theft occurred is fine. However, speaking poorly of the employee afterward can create a desire to defend their reputation (or honesty) by filing a lawsuit.

During the interview, treat the employee with respect. Provide no indication that they are being held against their will (such as blocking them from the exit). And don’t use inflammatory adjectives or threats.

The evidence should speak for itself. Your demeanor should be firm and respectful.

Wicklander & Zulawski (WZ) provides expert training and covers the proper interview process. Professional training and certification are recommended for anyone conducting employee dishonesty interviews.



The length of the interview is a crucial factor in determining wrongful imprisonment. A company has the right to speak with an employee regarding behavior and wrongdoing. Although there is no legally defined time, a determination will most likely be based on what the ordinary person considers “reasonable.”

Forty-five minutes is a reasonable period to discuss dishonesty with a person who adamantly denies involvement. However, when an employee admits to dishonesty and provides a statement, it may take longer to complete the process. In that case, the employer is still in the safety zone up until around ninety minutes or so.

Once the interview and process reach the ninety-minute mark, the employer or interviewer should have strong, documented reasons for continued detainment.

Valid reasons would be the time it took the employee to write their statement, review the information with the employee, wait on communication from the corporate office, or wait for the police to arrive.

Most professionals use a consent to interview form that includes a signed statement of fair treatment and the length of the interview.



It is almost always best practice to have a witness to the interview. The person should be a manager and preferably have no interpersonal issues with the interviewed employee.

The witness can later serve to validate the treatment of the employee, verbal statements, and the length of the interview. It is also good practice to have the witness validate aspects of the discussion upon completion.


Written Statement

An employee who admits to dishonesty should be requested to provide a written statement. The statement should be in their own words and contain enough details to support their admission.

Details should include what they did, how often they did it, when they did it, and why they did it.

People change their stories later, and often a lawsuit may come up years after the parties involved had moved on to other companies. The written statement memorializes events and can be a critical factor in determining liability and cause.


Consistent Practices

Consistent practices and consistent outcomes are essential factors in reducing liability. Each employee should be treated the same throughout the process regardless of the accusation against them. The company should have a written protocol for conducting investigations and consistently execute these protocols. Included case notes should explain any reasons for deviations from the process.

As close as possible, outcomes should also be the same.

For example, if one employee is terminated for theft, future employees apprehended for theft should be terminated.

When the rules are applied differently for similar situations, there is more significant potential for liability.


Documented Cases Reports

Most importantly, everything in an employee investigation requires documentation. The case file should include the evidence that led to the interview, the employee’s written statement, the witness statement, times, dates, and amounts. Consider that many lawsuits occur several years after the event.

In addition, the lead case manager/interviewer should provide a complete written narrative that details all the steps, evidence, and findings along with who ultimately authorized the final employment decision.

About the Author

Raymond Esposito is President of Loss Prevention & Compliance for HS Brands Global. He has over 30 years of loss prevention experience and has spent the past two decades building premier LP outsource programs for some of the world’s most well-known brands. He has worked with over 130 retailers within the department store, specialty, restaurant, grocery, and pharmacy industries in the US, Canada, and the United Kingdom.

His articles and interviews have appeared in various magazines, including Security Source Magazine, LP Magazine, Family Circle, and Small Business Radio.

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