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Handling a suspected fraud

Many employers faced with evidence that one of their employees has been involved in a significant fraud might be tempted to dismiss the prime suspect immediately. However, careful thought should be given to the approach to take in such circumstances particularly if the matter involves criminal behaviour. 

In this particular scenario, if the Operations Manager is an employee with more than two years’ continuous service, then he will have the right to bring a claim for unfair dismissal in the Employment Tribunal. If the Operations Manager’s employment started before 6 April 2012, he will only need to have one year’s continuous service to bring a claim for unfair dismissal.

Assuming that the Operations Manager has the requisite service, the employer will need to be able to show that it has a fair reason for dismissing him and it must follow a fair process in carrying out that dismissal. Where acts of theft, fraud or dishonesty are suspected, the fair reason will be a dismissal on the grounds of misconduct. There is no need for the employer to prove to a criminal standard, i.e. beyond all reasonable doubt, that the Operations Manager is guilty of the misconduct. In order to fairly dismiss him for gross misconduct, the employer must show that, on the balance of probabilities, it has a genuine belief, based on a reasonable investigation that the Operations Manager has carried out acts of dishonesty and possibly fraud in respect of the specific customer account. 

Even if the Operations Manager’s guilt seems obvious, it is crucial to investigate first before any disciplinary action is taken. Carrying out a good investigation will not only give the employer a sound basis upon which to defend against a claim for unfair dismissal but also to establish whether there are other employees involved in a potential large scale fraud. 

If the Operations Manager admits his guilt then there may be no need to carry out much further investigation, however, if the employer wishes to involve the police, then the more information that is obtained by the employer, the more likely it is that the police will take the matter seriously.

Next steps...

  • Consider suspending the Operations Manager so that a proper investigation can be carried out. Periods of suspension should be kept to a minimum and the Operations Manager should be suspended on full pay and benefits unless his contract states otherwise. It should be made clear to the Operations Manager that the suspension is not in itself a form of disciplinary action.
  • As part of the suspension process the Operation Manager’s access to IT systems should be blocked to prevent loss of evidence.
  • The employer should ensure that the person investigating is appropriately qualified. Normally this would be the Operations Manager’s line manager. However, given that this is potentially a large fraud, there may be others within the Operations team that are involved. It may therefore be sensible to get someone from outside the Operations section of the business to carry out the initial investigation and disciplinary process.
  • Any staff members interviewed as part of the investigation should be advised that they are required to keep the contents of the discussion confidential.
  • The investigation should be conducted as quickly as possible. The investigating officer should interview witnesses privately, take statements and get the interviewees to sign them. The investigating officer should invite the Operations Manager to an investigation meeting and put the allegations to him. Any plausible explanations for the accounting discrepancies must be properly considered and investigated prior to a disciplinary hearing being arranged.
  • Once the evidence has been gathered, the employer should write to the Operations Manager inviting him to a disciplinary hearing. The invitation letter should warn the Operations Manager that a potential outcome of the hearing may be summary dismissal without notice on the grounds of gross misconduct. The Operations Manager should be given the opportunity to review the evidence prior to the disciplinary hearing and should be given the right to be accompanied at the hearing.
  • Once the Operations Manager has been dismissed, he should be informed in writing of the reasons for his dismissal and given the opportunity to appeal the decision. The appeal should be carried out as quickly as possible.
  • Different staff members should carry out the investigation, disciplinary hearing and appeal.

Points to consider

Many employers choose not to involve the police at an early stage of internal investigations simply because it can significantly delay the employer’s ability to remove the guilty employee. Save for where there are professional or legal obligations to report the fraud, the most commercial approach would be to deal with the internal employment issue first, obtain the appropriate evidence to remove the guilty party from the business and then consider involving the police.

If you have any questions or would like more information please contact Suzanne Treen, Solicitor, Employment.

Read more articles in our series dedicated to the response in a fraud crisis:

Be prepared

Rebuilding your business’s reputation

Ten key things to consider in the aftermath of a fraud crisis

 

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Steffan Groch

Partner and Head of Regulatory - Head of Sectors

I head up DWF's national Regulatory team as well as leading the firm’s ‘go to market’ sector expertise. I am also Chair of the UK Health and Safety Lawyers Association.