Eliminating IndividualsThe Detroit Free Press (by Tresa Baldas) reported that a former McDonald’s employee was recently caught stealing customers’ credit card information while working the drive through.

According to the criminal complaint filed in the Michigan Eastern District Court (PDF) the former employee, Teresa Pulliam, is charged with access device fraud after she was caught on video surveillance using a hand-held skimming device while handling customers’ credit and debit cards at an Oak Park McDonald’s restaurant. After her arrest, Pulliam admitted that she was paid more than $1,000 for providing the stolen credit card accounts. If convicted, she faces up to 15 years in prison.

Best Practices for Preventing and Limiting Liability for Employee Misconduct  

This unfortunate case illustrates three important points that any employer should consider in managing its risks associated with employees engaged in criminal or wrongful misconduct.

Eliminating Bad Apples at the Outset: First, the business necessity for conducting some form of background checks on employees or applicants for employment is critical. This is because Michigan, like many states, recognize the torts of negligent hiring, supervision and the retaining of unsafe employees. A particularly insightful analysis as to why such checks are essential in avoiding such claims was provided by the court in Verran v United States, 305 F. Supp. 2d 765 (ED Mich 2004), which explained:

To sustain such a claim, Plaintiff must produce evidence of the appropriate standard for hiring, retaining, or supervising the relevant class of employee, as well as evidence demonstrating that the employer knew or should have known of the employee’s propensity to engage in the challenged conduct. 

Therefore, the issue of liability will largely focus on the adequacy of the employer’s pre-employment investigation of applicants, which will include what, if any, background checks were conducted. 

Continuous Due Diligence in Maintaining Crime-Free Workplace: Second, background checks should not be the endpoint in an employer’s due diligence efforts to maintain its workplace. Going back to Pulliam’s misconduct, not only was it recorded by the employer’s video surveillance , but the surveillance was actually reviewed by a manager. Further, this manager understood the importance of promptly contacting law enforcement.

Insuring Risks and Make Sure Risks are Insured: Third, in addition to the bad publicity employees like Ms. Pulliam create, such misconduct may result in an employer facing civil liability. In this regard, it is important for employers to carefully evaluate their insurance coverage. This is because under most general commercial liability policies, misconduct Ms. Pulliam admitted to engaging in is often excluded under a criminal acts and negligent supervision exclusion. Generically, such an exclusion will provide that an insurance company’s duty to defend and indemnify do not apply:   

To bodily injury, personal injury, or property damage arising out of and/or resulting from any actual or alleged negligent hiring, training, and/or supervising of any former or current employee of any insured or any volunteer worker, subcontractor, or any person under the direction and control of any insured.

At the end of the day, protecting a business against employee misconduct requires a holistic, on-going commitment that begins with the application process and continues throughout the life of the employment relationship.