Quick Article Summary

Employee theft in Texas can be grounds for termination and even prosecution, but employers must act carefully to avoid violating legal protections. This article explains how to recognize theft, legally investigate misconduct, and take compliant disciplinary action. Texas business owners must follow best practices to protect company assets without exposing themselves to wrongful termination or defamation claims.

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Understanding What Constitutes Employee Theft

Employee theft isn’t limited to stealing cash from a register. It includes a wide range of behaviors that can harm a company’s financial health or operations. Examples include:

• Stealing merchandise, cash, or supplies
• Falsifying time records or padding expense reports
• Diverting customers or leads to another business
• Unauthorized use of a company credit card or fuel card
• Downloading or removing confidential data for personal use

In Texas, the legal definition of theft follows Section 31.03 of the Texas Penal Code which includes the unlawful appropriation of property with the intent to deprive the owner.

Texas Is an At-Will Employment State — But Be Cautious

Texas employers can generally terminate employment for any lawful reason or no reason at all. However, when firing an employee for theft, employers should still take steps to reduce risk:

• Document the evidence of theft thoroughly.
• Avoid stating “theft” unless you can prove intent to steal.
• Do not make public accusations, especially without concrete evidence.
• If theft is suspected but not proven, consider a neutral explanation (e.g., “violation of company policy” or “loss of trust”).

Accusing someone of theft without proof could expose you to a defamation claim. Employers should document only what they can prove, and avoid sharing information with anyone who doesn’t have a business need to know.

Investigating Employee Theft the Right Way

A proper investigation is key to avoiding legal pitfalls. Employers should:

Step 1: Secure Evidence

Gather documentation such as video surveillance, point-of-sale data, time records, and eyewitness accounts. Make sure any surveillance complies with Texas privacy laws.

Step 2: Interview Carefully

Meet privately with the employee. Ask open-ended questions and avoid leading accusations. Allow the employee to explain. Take detailed notes and, if possible, have a second manager present.

Step 3: Avoid Coerced Confessions

Texas law prohibits false imprisonment. Do not threaten or detain the employee, even briefly, unless law enforcement is present. Avoid statements like “You’ll be arrested if you don’t admit it.”

Involving Law Enforcement

If the evidence supports it, employers can file a police report or press charges. However, you are not legally required to do so.

You can also pursue a civil theft claim under the Texas Theft Liability Act (TTLA) which allows recovery of actual damages plus up to $1,000 in additional damages, plus attorney’s fees.

If you do file charges or claims, remember:

• Let law enforcement handle the criminal investigation.
• Do not publicly share the employee’s identity or make social media posts.
• Maintain all evidence and communication records.

Can You Deduct the Loss From Their Paycheck?

No. Under the Texas Payday Law employers cannot make deductions from an employee’s final paycheck unless the employee has signed written authorization for that specific deduction.

Even if the employee admits to stealing, you must pursue reimbursement through legal channels or negotiate a separate repayment agreement.

When Termination Is Justified

Employee theft is almost always considered “misconduct connected to the work” under Texas Workforce Commission (TWC) unemployment claim rules. If properly documented, you can contest unemployment benefits. Per TWC guidance employers should:

• Clearly show the conduct was intentional
• Provide firsthand evidence or signed documentation
• Show that the employee knew the conduct was against policy
• Firing for theft, when handled correctly, is likely to result in a denial of unemployment benefits to the former employee.

What About Suspicion Without Proof?

If you cannot prove theft but have reasonable concerns:

• Avoid labeling it “theft” and use general terms like “violation of company policy” or “loss of confidence.”
• Consider placing the employee on paid administrative leave while investigating.
• Use at-will rights cautiously — but fairly.

Avoid creating a perception of retaliation, discrimination, or unfair treatment. Ensure similar cases are handled similarly, especially when protected classes (age, race, disability, etc.) are involved.

Preventing Theft Starts With Policy

Strong policies can both deter misconduct and protect you during enforcement. Your employee handbook should:

• Clearly define theft, fraud, and misuse of property
• Outline your right to inspect property (with limits)
• Set expectations for honesty and integrity
• Describe investigation and disciplinary procedures

Your onboarding and ongoing training should reinforce these standards and ensure employees sign off on them.

Need HR Help? Contact the Texas HR Experts at The Unit Consulting Today

At The Unit Consulting, we help Texas business owners handle tough employee issues — from theft investigations to handbook policies and unemployment claim defense. All of our service packages provide you with unlimited, real-time guidance and HR support. Contact the #1 HR company in Texas today to protect your business and your bottom line.