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What Do You Do When You Discover Your Employee is Cheating on You


You have your own business. You’re the boss. You’re on top of your world. Then suddenly, you notice something weird going on with one of your employees.

He’s acting strange. He doesn’t meet your stare. There are questions about his work. You dig deeper. What is wrong with your employee? Then you find out. Your employee is cheating on you and has committed fraudulent acts against your company (and even your clients!). Your first instinct? Scream blue murder, wring his neck, shake him senseless then throw him to the dungeon (er, I mean jail). Paints a nice picture, doesn’t it? But you’ll have to admit, your own method of taking “revenge” on your thieving, lying fraudster of an employee will not really get anything done. It guarantees satisfaction - yes, but guarantees results? Definitely not.

So what do you then when you discover that your employee is committing fraud against you and your company? There are a lot of options available for you and you can have your pick of them. Listed below are just some of the things that you can do when this thing happens to you:


Breathe Deeply and Relax

First of all, you need to calm down. Get your emotions under control. Stop thinking about how you’ll exact your revenge. Instead, start thinking rationally about your next steps (like not killing your employee). Do you want to get legal help? If yes, get an appointment with a lawyer you can trust. Or do you just want expert advice? Best of all, start thinking this – what is the extent of your employee’s fraud in your business? Then go to the next step.

Dig Deeper

So you have already uncovered his fraudulent activities. But are you sure that is ALL? To reassure yourself, dig deeper into his past months’ activities. Find out how long he has been doing it, who are the clients affected and if anybody else is aware of what he was doing. Go through the papers or documents he handled, his drawer, his table, his computer, your computer system and everything else you can think of that might possibly give a clue to his dealings. Only when you have exhausted all efforts to do so, can you finally say stop and enough and that’s it. BUT say stop only when you are really satisfied with the output of your “investigation” and not because you’re just plain tired or afraid of what you will find out. As the boss (and the owner), you have every right to find out the extent of his (fraudulent) activities. Of course, you can always ask him, your employee, but would you really trust his word now that you what he is capable of doing? Not likely.

Get Legal Help

Or at least consult a lawyer, one you really trust. This doesn’t mean that you are really contemplating filing a legal case against your employee (although this is a better alternative than “revenge”). But you need to know what are your legal rights, what are the documents that you need to gather (as evidences) and how do you go about. If you want to file a legal case against your employee, you need to take this a step at a time. The last thing you want is for your employee to walk away free due to a technicality on the actual case.

Obtain Outside Advice

Know somebody who went through the same thing? Or you think you know of somebody who may have possibly experienced the same thing. Then go to him or her for an advice. Ask this person if he or she has experienced this before and what did he or she do. However, do make sure you really know this person and that he or she will keep the matter confidential. It is always good to get a third-person opinion but one must be careful who one talks to, otherwise, everything can just blow up on your face.

Talk to Your People

Even if you try to keep everything hush-hush, chances are your other employees have a pretty good idea of what is happening in your company. You can opt to talk to them and tell them what is really going on. Tell them the truth about what happened, what you have discovered so far and what are the initial steps you’re taking. Then, get their cooperation by telling them not to discuss anything outside of the company (not even to the clients) because of the sensitive nature of the situation. If your employees are really concerned about your company and you, they will keep mum on the matter.

Be Ready

Lastly, make all the necessary preparations for when you will talk with your erring employee. Follow your lawyer’s advice to the letter. Gather your documents and prepare your thoughts. Prepare all necessary papers and memos. Then prepare yourself. You will eventually (if you haven’t done so already) talk to your employee and you need to be calm and collected when you do so. Just remember, you already know what he was up to and you have the documents to back you up. This, among everything else, is what will keep your confidence up (and your temper under control).

One last note, fraudulent activities are done because of certain weaknesses in the company’s internal controls. You need to find out what these weaknesses are and correct them. Make your corrections fast and announce them when you talk to your people. This way, you head-off any possible repeat of these activities and this gives an assurance to your concerned employees that you are on top of the matter.

Note: This hub is based on a true story of one of my friends. To date, there is still no end in sight to his problem but he and his (ex) employee have already signed an agreement and the latter just made his first payment. Most of what is written above he has already done them. It’s just a matter of him recovering from this setback. Fortunately, his business and his clients were not overly affected.

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Cara Duty on February 20, 2018:

I know it's been some time since this article was written, but I was appalled at this section:

"Talk to Your People

Even if you try to keep everything hush-hush, chances are your other employees have a pretty good idea of what is happening in your company. You can opt to talk to them and tell them what is really going on. Tell them the truth about what happened, what you have discovered so far and what are the initial steps you’re taking. Then, get their cooperation by telling them not to discuss anything outside of the company (not even to the clients) because of the sensitive nature of the situation. If your employees are really concerned about your company and you, they will keep mum on the matter. "

This type of approach belies your inexperience and lack of professionalism in the workplace when handling sensitive employee issues. The Manager should NEVER talk about employee discipline with any other employee except the one involved and his or her manager(s)! This would invite a lawsuit for sure. The best way to handle the employees behavior is to

1) Bring the employee into the HR/Manager's office and discuss the problem - get the story from the employee FIRST to be sure you understand clearly the facts - we don't always know everything at first.

If things were done that were not appropriate/against company policy, review the policy with the employee and provide a PIP, or Personal Improvement Plan, which would include a time frame for improvement, and also have them sign a Non-Compete Agreement.

2) Speak with the employee's direct manager about the issues, the follow-up with the employee and the PIP so he/she is aware of the next steps to be taken.

3) If the employee improves and the Non-Compete agreement is signed, then all the better. Everyone learned something, and no one had to be fire. Dismissing employees is always more expensive than working with the current employees. Remember, everyone is human, and we hired them to do a job - perhaps there was a problem with upper management and created an unhappy or abrasive working environment for the employee.

If that is the case, then more serious discussions with management need to take place to coach them on being a better supervisor/leader. How to motivate employees, how to empower employees to be more creative, how to appreciate their contributions to the workplace and help them to understand how their contribution fits in to the overall goals of the company is very important!

Managing employees take a lot more thought and consideration than raging against them, dismissing them immediately or rudely yelling at them in front of others. That isn't managing - that is using your position to make yourself feel superior.

Last thing to remember - it's not about YOU. It is about ensuring business integrity and continuation, and interacting with peers and subordinates in a professional manner.

Tamara Wilhite from Fort Worth, Texas on February 15, 2015:

What acts fall under the fraud described in this article?

emievil (author) from Philippines on January 04, 2012:

Hey Cardisa, it's actually very difficult to fire an employee here. You need lots of memo and warnings and documentations, stuff like that. I think everything's well now. But it certainly made him more wary of his employees :). Thanks for your comment!

Carolee Samuda from Jamaica on January 04, 2012:

I was wondering at what point do you fire the employee, or do you wait until you have investigated them thoroughly. I don't know if I could reign in my temper not to give them a fine thrashing!

Cleaning service on November 15, 2011:

I did just found out that's my ex employee is started the business under almost same name as mine,she worked for me couple of months ,got trained,fing out how is going and.... Contacted cliennts behind my back,offered them her own service,now operating using my reputation,made the business card with the same logo as mine,created the profile on www.yelp.com almost same as mine,ehhhh,how can I stop her? She worked for me for cash,doesn't have tax id( forget about Ss) - she is such a disgusting person,left 2 of her kids in her country and forgot about them,here she already have "boyfriend" and 2 year old son,using Vic,food stamps etc....

emievil (author) from Philippines on August 11, 2010:

Yes, it is not pleasant. Until now my friend is still recovering from what happened. Thanks for visiting my hubs and reading them Pcunix.

Tony Lawrence from SE MA on August 10, 2010:

yeah. I have been through this myself with an employee who was stealing clients for after hours work and have seen it happen to two customers. It is not pleasant.

emievil (author) from Philippines on September 14, 2009:

Thanks UH. LOL, "firing the employee" is very tempting, believe me. But it has given the employers a lot of grief because the ex-employee will just sue the employer for dismissal without due process. Better to do it step by step. May be boring but it's safer.

Ultimate Hubber on September 14, 2009:

Nice step by step procedure and tips. I saw the topic and jumped to your hub, thinking it will be a one-liner and the only line will be "Fire the employee." But its not and its good. A lot to learn for a person like me.

emievil (author) from Philippines on September 01, 2009:

100% agree Lady_E. Some of the reactions of our mutual friends include ganging up on that employee, stalking him, etc., etc. They were too emotional, as it was. My friend just told them to calm down because nothing can be achieved if they were hot-headed. So for now, everybody remains calm (don't know how long it will last though).

CJ, I'm beginning to think your course is the best alternative for me. I don't want that very same thing to happen to me =(.

fierycj on September 01, 2009:

One of the main reasons why I'm self-employed, I really have no patience for career sneaking around. Its sickening to me.

Elena from London, UK on August 31, 2009:

Perfect way to do it, instead of jumping right in. It's best to gather all the evidence so they don't turn the tables on you.

Hope for your peace of mind, it doesn't happen again.

emievil (author) from Philippines on August 31, 2009:

Dohn, yup I agree with you. But now that I am the boss, I can't seem to fire anyone because I'm too afraid of getting a labor-related case here =). But this one I have to agree he deserves to be fired (and more).

dohn121 from Hudson Valley, New York on August 30, 2009:

I've never had to fire employee, but I did have to yell at more than a few, as a manager. The firing is usually done by upper-management and I was in middle-management. It's never easy, but take comfort in realizing that handling your employees, i.e. shit-canning them, is all a part of business. Sometimes I wish I could have gone back, get promoted, and fire some people who deserved to be fired! Thanks, ernie :D