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Employee checks are key – but are your methods legal?

The number of fraud stories being reported by the media at present must have employers wondering how they can prevent this happening to them. One of the best methods of doing so it to undertake thorough screening before employing anyone.

employee theftA striking recent fraud case is that of 30 year old Miramar woman, Jenna Davidson, who used a corporate credit card to defraud Wellington Airport of $40,000 while working there. She then went on to work for ACC and used the same method to defraud the government agency of $40,000.

Davidson was employed as an executive assistant to the CEO of Wellington Airport in February 2013. In her role she was entrusted with a corporate credit card. Between the start of her employment and August 2014, Davidson made extensive personal purchases and attempted to hide her spending by altering bank statements and receipts. Wellington Airport’s internal review revealed she had “misused” $42,567.29. This amount was then revised to $40,469.41, $2,000 of which Ms Davidson immediately repaid.

In January 2016 Ms Davidson was convicted of ‘theft in a special relationship’ and sentenced to six months’ community detention and 120 hours community work, in addition to being required to pay back the stolen money. During sentencing, the Judge took into consideration that Ms Davidson had two children and a husband to support and she was the main financial provider. The Judge was also provided with a “glowing” character reference from Ms Davidson’s new employer, ACC.

The “glowing” reference Ms Davidson produced was actually forged by herself. She had written the document on her work computer and signed the statement herself. Ms Davidson had commenced employment at ACC in December 2014 as executive assistant to the Chief Talent Officer. While reading an article about the case, her boss at ACC came across the Judge’s comments about the character reference and realised Ms Davidson must have forged it as he had not written it.

ACC also began an investigation which discovered that between February and June 2015 Ms Davidson had used an ACC visa card for 181 personal purchases at 43 different retailers, spending a total of $39,732.50. Ms Davidson had bought an iPad, clothing, perfume, petrol, Sky TV, video games, and dental services. Amongst other purchases she spent $500 at Kirkcaldie & Stains on cosmetics, over $1000 on betting to the New Zealand Racing Board, over $5,000 on clothing, and $216 for children’s’ swimming lessons. She disguised these transactions as room hire, gift vouchers, flowers, and stationery.

On 27 January 2017 Ms Davidson pleaded guilty to charges of forgery, obstructing the course of justice, and fraud. She is to be sentenced in April.

ACC has now tightened the criteria for using purchasing cards and strengthened the approval process for staff purchasing transactions.

How can employers prevent this from happening?

Employers should always undertake appropriate checks and a thorough screening process before employing new staff. It is vital that employers ask the right questions – such as whether a prospective employee has a criminal record or is currently facing criminal charges. It is certainly easier to make good hiring decisions than to try backtrack once you have employed someone. If ACC had carried out a thorough screening process it is unlikely that they would have hired Mr Davidson in the first place.

Prospective employees do not have a general duty to voluntarily reveal material information about themselves, but if an employer requests such information, and the applicant elects to answer, the answer must be full and honest. Depending on the nature and seriousness of a lie, the dishonesty can be viewed as a misrepresentation which induced the employer to offer employment and has fundamentally injured the employer’s trust and confidence in the employee. Often serious lying, such as concealing extensive criminal records, will entitle an employer to terminate the employment. However, even in such cases it is important that employers follow a fair process of investigation.

There are some limits on prospective employees revealing their criminal record. Under the Criminal Records (Clean Slate) Act 2004, an individual is said to have no criminal record if they have never been sentenced to a custodial sentence and have had no convictions within the last 7 years. This conceals the individual’s full criminal record. It is against the law in New Zealand for an employer to make an applicant reveal their full record unless they are applying for the role of a police officer, prison officer, judge, or a role of national security.

Employers should be wary of methods that are commonly used to evaluate prospective employees, but are not lawful. For example, informal references. In a country as small and connected as New Zealand, it is common for an employer to know someone who knows the prospective employee. In these situations it a breach of the Privacy Act to talk to that person about the prospective employee without consent.

On the other hand, information found by employers through a Google or Facebook search is not covered by the Privacy Act as it is publically available information. Many businesses have policies around not looking up prospective employees on Facebook or Google during recruitment, and where these policies are in place they must be followed.

Another important thing to note is that employers must be careful with how they use information they discover in the pre-employment phase. You cannot decide not to employ a prospective employee because of their ethical, political or religious beliefs, sexual orientation, marital status, or their ethnicity. Doing so would contravene the Human Rights Act, regardless of how the information was obtained.