Theft by an employee

17 July 2003 by
Theft by an employee

The problem

You suspect a member of your staff has been stealing from you. You confront him and he confesses. You fire him and deduct an amount equal to the sum stolen from the balance due to him. You then receive a solicitor's letter threatening to take you to court unless you pay the full amount of the wages. What are your legal rights?

The Law

The S13 Employment Rights Act 1996 states that, unless the employer has the written consent of the employee to deduct sums from the employee's wages, it is unlawful to deduct such sums. The court will order the employer to repay the sum deducted, and the employer will lose the right to sue the employee for its recovery.

While theft is almost always gross misconduct, the employer must follow the rules and apply employment procedures correctly and consistently. If an employer does not sack one employee for theft, he may not be entitled to sack another employee caught stealing.

The employer must in every case carry out a reasonable investigation and establish reasonable grounds for a finding of gross misconduct, based on a reasonable belief. The employer must decide whether dismissal is appropriate and falls within the band of decisions available to a reasonable employer.

In some cases, where you know the thief is one of a group but cannot establish which one it is, it has been held by a tribunal that it is permissible to dismiss the entire group. This can be a useful tactic to threaten so as to apply peer pressure, but advice should be obtained before it is implemented.

Expert advice

The harsh results of the S13 Employment Rights Act 1996 can be avoided by an express provision in the employee's contract that the employer may deduct all sums owed by the employee to the employer at the termination of his employment. This entitles the employer to deduct sums due without further consent from the employee.

The Police Act 1997 provides for employers to be able to make checks against potential employees. Checks will reveal if the employee has been found guilty of a criminal offence. The basic checks should be available later this year.

There is no general duty on an employer to give a reference for an employee. If you wish to give one, it can be limited to a factual statement that "X" was employed between certain dates, in a certain role. However, if an employer gives a negligent or wilfully misleading reference, he can be sued by the new employer or his old employee if either suffers loss.

Finally, report the employee to the police. The police are surprisingly willing to take action and you may prevent a rotten apple going on to steal from elsewhere.

Check list

  • Make sure there is an express clause in every employee's contract of employment entitling you to deduct all sums owed by them to you at the end of their employment.
  • Have employment procedures and follow them consistently. Confirm everything in writing.
  • If possible, take up references personally. Don't rely on a written reference, but phone the referee and insist on speaking to him or her. Some written references are forged. Perhaps the reason you can't speak to the referee is that he or she doesn't exist, or didn't give the reference.
  • When the basic employee searches under the Police Act 1997 are available, make use of them. Remember, however, that these will reveal only successful prosecutions, not instances where the employer has simply sacked the thief and not taken it further.
  • Have a consistent policy on references.


Avoid being sued for slander or negligence by giving accurate and fair references. For example, if you accuse an employee of theft, but he denies it and resigns, your reference must not give the impression that he was sacked.


Antonia Brandes
Fladgate Fielder
020 7323 4747

David Bickford
Fladgate Fielder (Employment group)
020 7323 4747

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