Employee Theft: Legal Aspects

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Virtually every society, type of economy, enterprise, and occupation has a variant of employee theft. In security-intensive work systems such as banking, pharmaceutical, and electronic microchip plants, employee theft is limited to relatively few items. In security-loose systems, the gray areas of pilferability are more inclusive, covering a wide range of goods and services. There are some work systems such as construction and cargo handling where employee theft is extensive and endemic (Baker and Westin; Ditton; Greenberg; Hollinger and Clark; Horning).

Estimates of cost

Each year millions of workers pilfer billions of dollars worth of goods and services from the places where they work. Approximations of the cost, while expected by the business community and security system providers, are not of much value to the social science community because they are only crude guesses. Consider the range of estimates cited in 1999 on the Internet: The American Management Association reports that U.S. businesses lose more than $10 billion annually to employee theft and commercial bribery; the U.S. Department of Commerce estimates that employee theft costs about $50 billion annually; the American Society for Industrial Security reports that employee theft currently costs U.S. businesses $100 billion annually; and the Federal Bureau of Investigation estimates that shrinkage due to employee theft, error, and shoplifting range from $10 billion to $150 billion. Other estimates are as high as $200 billion annually. Recently, several efforts to provide benchmark data have been initiated, but only for selected industries. Jack Hayes International, a security business, provides an annual retail theft survey representing twenty-two retail companies and ten thousand stores; summaries of these reports are available on the Internet. Richard Hollinger of the Security Research Project at the University of Florida provides an annual report entitled "The National Retail Security Survey." Hollinger's 1998 report indicated that the annual cost of inventory shrinkage in selected segments of the retail industry was $26 billion, an inventory shrinkage of 1.7 percent of total sales. Of that, employee theft represents 43 percent of the total, shoplifting 34 percent, administrative error 18 percent, and vendor fraud 6 percent. The report indicates that retailers lost an average of $212 per shoplifting incident and $1,058 per employee theft incident. Evident in these statistics are many of the problems inherent in studies estimating the costs of employee theft. Note first that the total figures for estimated loss are for all inventory shrinkage, of which employee theft is only a part. Note secondly that the value of the employee theft per incident does not represent the pilfering of most employees, that is, petty theft on an irregular basis. Finally, note that these figures are inventory based and do not include many employee activities that could be included in a more comprehensive definition of theft such as time theft, or the unauthorized use of facilities or services. According to the U.S. Department of Commerce approximately one-third of all business failures each year can be traced to employee theft and other employee crimes. It should be noted, however, that an employee does not need to steal large quantities of expensive items to have a significant cumulative effect. If a worker in a supermarket takes a can of soda and a deli sandwich and a small bag of potato chips for lunch every day, at a retail value of $3.50, for one work year (240 days) the cost of that "job benefit" is $840. Most studies of employee theft do not include losses of this type nor do they include other so-called job benefit losses such as the value of employee phone calls to family and friends or the cost of the time used for those calls (e.g., a five-minute call by a $12 an hour employee equals $1 for each call, or $240 per work year).

It can be seen from the above why estimates of the amount of pilfering vary so much. The lower estimates focus primarily on major acts of theft, while those at the upper end are more inclusive of all theft. Like other forms of crime, employee theft can be only crudely estimated; like other forms of crime it too is subject to the dark figure of crime concept, that is, that there is a large amount of it that cannot be determined (Hollinger; Hayes).

Legal status of employee theft

Employee theft is a violation of the criminal law, a misdemeanor or felony depending upon the value of the goods taken. However, its legal status is clouded by its being an activity that has achieved legitimation, as a "job right," in its lesser forms. Employee theft has an unusually high immunity from prosecution in that most victims seek solutions other than through legal procedures. The victim's tacit approval of low level pilfering is often an important factor in the decision not to prosecute. Other factors are those of establishing proof, fear of charges of false arrest, and concern that theft will be viewed as a manifestation of poor management. In lieu of criminal prosecution, there are often civil arrangements requiring restitution and sometimes the termination of employment. For most workers, some level of pilfering is viewed as a legitimate or quasi-legitimate (not in the job description or work rule manual) job right. Thus, the workers are spared having to view their pilfering as a crime and having to view themselves as criminal (Greenberg; Hollinger and Clark; Horning; Robin; Shepard and Duston; Snyder).

Conceptions of property

Legally, there are only two types of property in the work system: company property owned by the enterprise, and personal property owned by the employees. Conceptually, workers acknowledge the existence of both of these but add a third typeproperty of uncertain ownership. The latter has no official status but to those in the work system it is very real. Property of uncertain ownership is a malleable entity, contracting and expanding as ownership is claimed, ignored, or relinquished. It comprises countless items such as paper clips, pencils/pens, tools, samples, postit note pads, damaged goods, returned goods that cannot be returned to stock, scrap, and much more. This category of property has the following general characteristics: the items comprising it are system-specific, they vary from one work system to another; the items are those used up in the course of one's work or are the byproducts of work or are not part of the work system's materials; they are items for which no accounting is thought necessary or possible; they are items the control of which has been relinquished to those who use them in the course of their work.

Most workers agree on a core of items in the category of uncertain ownership; however, as one moves out from the core, agreement diminishes. Viewed through time, the items in this category ebb and flow as ownership is claimed or relinquished. Ultimately, this results in a distribution of property that embraces the full spectrum of property in a work organization. The opposing ends of the spectrum represent property of certain ownership: company property at one end, personal property at the other. Between these, in the malleable middle, is the property of uncertain ownership, which flows from the owned property. Property of uncertain ownership is most amenable to theft, offering the advantage of having no victim and of not requiring that one define one's behavior as theft (Greenberg; Henry and Mars; Hollinger and Clark; Horning; Sykes).

Employee norms and employee theft

In time, every work system develops both formal and informal work-group norms that are unique to it. The formal norms comprise the official policies, rules, and procedures; the informal norms emerge as workers seek to adapt the formal norms to their particular work culture and environment. These adaptions often produce subtle, sometimes significant, divergences from the formal norms, and this process is often particularly apparent in the work-group norms on pilfering. Because the formal norms are legalistic, they ordinarily acknowledge only legal forms of property: company and personal. Informal norms, grounded in workers' experience, reflect the full spectrum of propertycompany, personal, and property of uncertain ownership. The formal norms generally proscribe any form of employee theft or in some instances define what goods and services can be contractually taken (e.g., unusable tools, damaged goods, limited product, personal phone calls). Some contracts also provide a purchase at cost policy to allay workers' desire for the product. The informal norms define what is acceptable behavior as it applies to the taking of property, all types. In general, work-group norms are characterized by the following:

  1. The norms relative to employee theft are situationally specific; those found in one work setting may differ significantly from those in another.
  2. The norms of pilfering are disseminated in the course of worker socialization at work; precept and folklore are prime elements in the transmission of those norms.
  3. Although necessarily vague, the norms delineate the boundaries within which legitimate employee theft may occur.
  4. Legitimated employee theft is bounded by prescriptive and proscriptive definitions of takeable property, modus operandi, the value of pilfered goods, and legitimacy rationales.
  5. An important element in the boundary-establishing process is collusive tolerance by management wherein management, through enforcement, coveys to workers what is acceptable taking and what is not. Workers learn that there is an operational calculus that sets limits to managerial action on pilfering.
  6. Those who operate within these customarily accepted boundaries adopt acceptable modes of action (e.g., open vs. concealed taking); coterminously, they adopt legitimating vocabularies of justification, standards for assessing and limiting their behavior, and strategies for coping with guilt.
  7. Those who operate within the parameters established by the norms receive tacit support of the work group. Those who violate work group norms (e.g., pilfering excessively or openly) are viewed as a threat to the collusive tolerance of management (possibly forcing a redefinition of property or the establishment of new limits). They are not supported by the work group, are viewed as a threat to it, and are often pressured to limit their activities. Often the work group will put pressure on extreme pilferers to limit their behavior.
  8. Workers who inform on pilferers do so at considerable risk from the work group because snitching is considered unacceptable behavior. Even extreme pilferers are accorded this protection.

Control strategies

It is important to employees that their taking behavior be perceived as something other than theft. Among the cognitive strategies they use are minimalization, neutralization, externalization, compartmentalization, rationalization, super-ordination, and reconceptualization. Historically, efforts to deter employee theft centered on close supervision and controlled access; those are now augmented with a full panoply of physical and psychological control strategies. Physical control includes simple barriers, such as fences, sealed windows, and gates; its more sophisticated forms include electronic surveillance, electronic monitoring, elaborate inventory control schemes, and property branding, to mention only a few. Psychological control includes preemployment screening, and the posting of company policies and rules regarding theft; often open prosecution of those apprehended is used to deter theft by others. One of the most significant deterrents involves the neutralization of the cognitive strategies that workers use to dissuade others from interpreting their taking behavior as theft (Greenberg; Hollinger and Clark; Shepard and Duston; Snyder; Traub; Victor, Klebe, and Shapiro).

Donald N. M. Horning

See also Computer Crimes; Theft; White-Collar Crime: History of an Idea.


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