Unauthorised personal spending: Employer pursues misappropriated funds

The Employment Relations Authority (ERA) recently dealt with a case involving unauthorised personal spending by an employee and the subsequent efforts of the employer to recover the misappropriated funds.

This case highlights the importance of proper financial controls in the workplace and the challenges that can arise when dealing with employee misconduct.

It also underscores the significance of open communication and cooperation between parties in resolving employment disputes.

Unauthorised spending and initial agreement

The case centred around a worker who was employed to manage accounts and payments for their employer, a distribution company.

During their employment, the worker engaged in unauthorised personal spending using company funds. The employer also became aware of other cash sales which it could not account for, prompting the initiation of a disciplinary process.

As a result of this process, the worker acknowledged their debt to the employer, which amounted to $16,138.01. Subsequently, the worker resigned on 4 May 2023, and both parties reached an agreement on a repayment plan.

In an attempt to rectify the situation, the worker made two payments to the employer: one for $5,000 and another for $95.00. However, a substantial sum of $11,043.01 remained outstanding.

Employer's pursuit of repayment

The employer sought to recover the outstanding amount as a lump sum payment. They reported making numerous attempts to discuss and negotiate with the worker, but claimed the employee was unresponsive and had ceased making further payments.

In response, the worker admitted to owing the money but stated they were not in a position to make a lump sum repayment. They also acknowledged failing to attend two scheduled mediation sessions, which had been arranged in March and May 2024 in an attempt to resolve the matter.

The HR Manager of the employer company provided a statement, saying:

"[The employer] reached agreement with [the worker] that she would repay the money over time, but that she did not stick to this agreement. The last payment was in September 2023, and over the last 11 months [the worker] has made no other repayments, and when [we] tried to reach out to her including via mediation, she did not respond."

This statement emphasises the employer's frustration with the worker's lack of commitment to the agreed-upon repayment plan and their unresponsiveness to communication attempts.

ERA's decision and reasoning

The ERA determined that the worker owed the employer the outstanding sum of $11,043.01 without dispute. The Authority ordered the worker to pay this amount within 28 days of the determination.

Notably, the ERA considered but ultimately rejected the worker's request for a payment arrangement. The Authority's reasoning was based on several factors:

1. The worker had previously agreed to repay the employer in instalments but stopped doing so.
2. No attempts were made to continue repayments at a lower, more sustainable rate.
3. The worker failed to communicate with the employer and did not attend two scheduled mediation sessions.
4. Despite participating in the ERA process, the worker made no further payments.

The ERA's decision highlighted the importance of adhering to agreements and maintaining open lines of communication in employment disputes. As stated in the determination:

"[The worker] accepts that she previously agreed to repay [the employer] by instalments, but stopped doing so. She made no attempts to make repayments at a lesser rate that might have been sustainable to her, but simply stopped repayments and declined to communicate with [the employer]."

This quote underscores the ERA's consideration of the worker's lack of effort to maintain the repayment agreement or propose alternative solutions.

Conclusion and implications

In concluding the case, the ERA emphasised the employer's right to receive the owed funds without further delay. The Authority stated:

"[The employer] has waited on its money for some considerable time, and has had to go to the effort of invoking the Authority process in circumstances where there is no dispute. It should not have to wait longer."

This statement reflects the ERA's view that the employer had been patient and had made reasonable efforts to resolve the issue before resorting to formal proceedings.

Furthermore, the ERA's decision not to grant a payment arrangement was explained as follows:

"Although she asks for a payment arrangement, she has not suggested what payment arrangements she would be able to realistically meet, or why."

This quote highlights the importance of providing concrete and realistic proposals when requesting alternative payment arrangements in such situations.

Lastly, the ERA's order that the full amount be paid within 28 days was justified with the following statement:

"[The employer] has waited on its money for some considerable time, and has had to go to the effort of invoking the Authority process in circumstances where there is no dispute. It should not have to wait longer."

This final quote emphasises the ERA's position that, given the undisputed nature of the debt and the employer's patience, immediate repayment was the most appropriate resolution.

The case serves as a reminder to employers of the importance of robust financial controls and clear communication channels. For employees, it underscores the seriousness of financial misconduct and the potential consequences of failing to adhere to repayment agreements.

The ERA's decision also highlights the value of active participation in dispute resolution processes and the need for realistic proposals when seeking alternative arrangements.