Employee theft – your legal rights as an employer

Employee theft is an unfortunate reality that employers may have to tackle at some point. With theft being a hot topic in the media recently, we thought it was timely to traverse the employment law considerations when dealing with theft.

Theft by an employee does not automatically mean that their employment can be terminated. To justify dismissing an employee for theft, an employer must show that:

• The procedure they followed to reach the decision was fair and reasonable.
• The dismissal was substantively justified. In other words, the employee’s conduct was sufficiently serious to warrant dismissal and the decision was one that a fair and reasonable employer could reach in all the circumstances.

In Gillan v. Birchleigh Management Services Ltd [2018] NZERA Christchurch 142, an employee working as a caregiver at a care centre was fired for stealing a small bag of potato chips. At a meeting with her employer, the employee denied dishonest intent but admitted taking the chips and was dismissed for serious misconduct in line with the care centre’s strict policies.

Foundation of trust not undermined

The Employment Relations Authority (ERA) held that the employer failed to carry out a proper investigation of the incident in accordance with its obligations under the Employment Relations Act 2000. While a fair and reasonable employer could have found the employee guilty of serious misconduct, the essential foundation of trust and confidence in the employment relationship was not undermined to such a significant degree as to warrant the dismissal.

The ERA noted that some disciplinary action may have been justified, but that dismissal was unnecessarily severe in the circumstances. The employee was awarded three months’ lost wages and compensation for humiliation, loss of dignity and injury to her feelings.

In Tuisamoa v. Tē Whare O Ngā Tūmanako Māori Women’s Refuge Incorporated [2022] NZERA 214, the ERA determined that the employer’s dismissal of an employee for theft was justified. The employee was the service manager of one of Tē Whare O Ngā Tūmanako Māori Women’s Refuge Incorporated (TWONT) women’s refuge centres. She was captured on CCTV bringing members of her whānau to a refuge centre garage where donated goods were stored and taking various items.

An investigation was conducted and the allegations against the employee were substantiated. TWONT decided to terminate the employee’s employment.

High trust role justified dismissal

The employee claimed she had been unjustifiably and constructively dismissed. The ERA’s investigation found TWONT followed the proper process when investigating the allegations against the employee and complied with its own complaint’s procedure. It also found that the dismissal was substantively justified, as the employee was in a high trust role and her misconduct resulted in a complete loss of trust and confidence in the employment relationship.

The ERA highlighted that although the employee was accused of theft, she was dismissed not because of a crime but because of a significant loss in trust and confidence in her.

The cases demonstrate that dealing with employee theft is not straightforward. Dealing with employee misconduct such as theft may require legal assistance.

Gwen Drewitt is a Special Counsel in the employment team at Lane Neave in Christchurch. Abby Lohrey is a solicitor in the employment and building and construction teams at Lane Neave in Auckland.