An employee is caught committing fraud in South Africa – here’s what happens next

No matter the size of a business, fraud can have a significant impact on its reputation, operations and revenue, says Lucinda Hinxman, lead consultant of Employment & Labour at law firm CMS South Africa.

As such, many businesses may have put in place a number of measures to detect and prevent fraud from being committed against them by an outsider, she said.

“However, it can often be the case that businesses are not as prepared to deal with cases of fraud that have been committed from within the company and lack clear and fully implemented processes in place. This leaves the door open to severe consequences arising, which may be compounded by a delayed and disorganised response.”

Below, Hinxman shared some insights into key questions you might have as an employer when taking action against employees suspected or alleged of having committed fraud.

When should you take action?

The moment that any serious allegations of misconduct are suspected or have been discovered against an employee is exactly when an employer must take action, said Hinxman.

“The amount of time an organisation takes to leap into action and address any fraud allegations may impact its ability to collect valuable evidence. This time can be equated to the golden hour, a period immediately following the commission of an offence when evidence is abundant and readily available to investigators,” she said.

“Rapid response in these situations can help employers avoid the possibility of losing out on valuable information or destruction of key evidence as a result of inappropriate handling of processes or inadvertently tipping off a suspect.”

What are the procedures you need to follow?

The first step that any employer should take when any allegations of fraud have been brought to its attention is to suspend the employees who are alleged to be involved.

This helps to safeguard the integrity of the investigation, any evidence, as well as any potential witnesses, said Hinxman.

An employer is legally able to suspend an employee without informing them of the nature of the allegations. However, it is important to note that an employee must be suspended on full pay.

“Once an investigation has been completed and sufficient evidence has been established to take disciplinary action against the employees involved, the next step is, generally, to convene a disciplinary enquiry.

“However, employers may need to begin to rethink their idea of what an enquiry should look like, while still meeting the procedural fairness required in terms of the Labour Relations Act (LRA), particularly as the Covid-19 pandemic and remote work have changed the work environment.”

Currently, disciplinary enquiries are held as extremely formal affairs, where those involved will sit down together in a tribunal manner.

This is not what was envisioned by the current LRA which aimed rather to de-formalise the disciplinary enquiry and move away from a system similar to that used in criminal cases – including a shift away from a criminal language such as being “charged” or being found “guilty” or “not guilty”, she said.

“The procedural requirements which employers must meet are that an investigation must be held; employees must be notified of the allegations against them using language they can reasonably understand; employees must be able to respond to the allegations, and be given a reasonable amount of time to prepare such response whereafter an independent decision-maker must decide whether the employee has acted as alleged and whether dismissal is appropriate.

“Nowhere does the LRA speak of the formal disciplinary enquiry that we have come to love and hate.”

Who needs to preside over these proceedings?

It is important that misconduct enquiries be led by a competent, impartial chairperson in order to ensure fairness, substantively and procedurally.This person can be an independent party or an internal manager who has no prior knowledge of the incident, said Hinxman.

Appointing the correct chairperson can also help to ensure that the true misconduct (if any) is identified, notwithstanding the categorisation of the allegation against the employee, she said.

“For example, employers often get trapped into levelling an allegation of fraud against an employee. “Fraud” is a criminal charge and has criminal elements to prove.  To prove fraud, the employer must be able to prove misrepresentation, unlawfulness, actual or potential prejudice and intention.

“However, for the same misconduct, the allegation of misappropriation of funds could be used which has less of a burden of proof – did the employee take the money without an authorisation? In either instance, a capable chairperson will be able to recognise that an employer is not a legal representative and can identify the true misconduct of the employee.”

With a continuing remote work environment, instances of misconduct have become much more exposed, as the checks and balances businesses have put in place to ensure that working from home is safe and secure, have brought increased oversight into business and employee operations, Hinxman said.

“It remains increasingly important that businesses fight fraud and corruption by understanding when and how to process any allegations that come forward while remaining cognisant of the employee and employer rights.”


Read: The new Covid-19 legal case that South African workers should know about

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An employee is caught committing fraud in South Africa – here’s what happens next