All Hope Not Lost When Attempting to Secure Return of Company Property

April 15, 2022

Securing the return of company property from departing employees isn’t a new issue for employers, but the increase in remote work since 2020 (sometimes involving long distances) may present additional challenges. Companies that have equipped their remote workers with computers, laptops, scanners, monitors, printers, phones, or other office equipment may face significant loss if workers fail to return them upon separating from their employment. What can companies do to ensure the return of their property?

Be Proactive

Start by educating employees about the expectations concerning return of company property at the time you issue it. Include language in handbooks, employment and remote work policies, employment contracts, and nondisclosure agreements that clearly states company property (including confidential and proprietary information stored on company property) must be returned upon termination of employment or at any other time upon request by the company.

Remind employees of their obligations at the time of termination. Issue a notice listing the items that must be returned with a date when the company property is expected to be returned. Make it as easy as possible for employees to return the property. If items will need to be shipped, provide instructions on how to properly ship the items and where to ship them. Consider providing a prepaid and prelabeled box the employee can use to drop off the property at the nearest shipping company or having an employee or delivery service pick up larger or more valuable equipment.

Be Mindful of Making Deductions from Paychecks

A company’s first instinct when dealing with an employee who hasn’t returned property may be to simply make a deduction from her final paycheck, but it isn’t as easy as that. There are significant restrictions on making deductions from pay under these circumstances that vary from state-to-state.

For instance, in Wisconsin, an employee must provide written authorization before any deduction from wages for lost or stolen property. Authorization must be obtained at the time of the deduction. Similarly, in Illinois, an employer cannot withhold any part of an employee’s final pay while awaiting return of company property unless the employee gives written consent when the deduction is made.

Also keep in mind that any deductions made from a nonexempt employee’s paycheck shouldn’t reduce her final pay to below minimum wage or reduce the amount of overtime pay owed, or it will cause problems under the federal Fair Labor Standards Act (FLSA). Deductions from an exempt employee’s guaranteed salary may also run afoul of the FLSA.

Incentivize Employees to Return the Property

Adding a gift card to a coffee shop near the shipping company, along with the information about returning the property, may be just the little extra that convinces an employee to cooperate in returning company property. Another approach may be to condition payment of severance or unused vacation on return of company property.

Be aware this is another area governed by specific state laws that may affect if or how these approaches may be used.

If All Else Fails, Consider Legal Action

At some point you may be faced with a recalcitrant or disgruntled employee who simply refuses to return property. All is not lost. If your company determines the value of the equipment is worth the time, effort, and cost of pursuing legal action, there are civil and criminal routes for doing so. You may also be more inclined to use legal action as an option when company property contains confidential, proprietary, or trade secret information.

Civil claims, such as civil theft or breach of contract, may be pursued to force return of company property. In a recent case decided by a Wisconsin appeals court, an employer successfully sued under Wisconsin’s civil theft statute after its employee failed to return a company hard drive disk following termination of her employment. The employer was awarded the replacement cost of the laptop, and the court exercised its discretion under the statute to treble that amount in its total damages award. Software One, Inc. v. Carol Eastman, Appeal No. 2020AP1279 (WI App, Feb. 23, 2022) (per curiam).

Reporting the property as stolen to law enforcement is another option of last resort, although it may be difficult to convince law enforcement to pursue the theft criminally.

Bottom Line

You can and should take steps (both at the time of the equipment’s issuance and at the time of the employee’s separation from employment) to increase the likelihood employees return company property. The key will be to ensure all steps taken are in accordance with applicable state laws and to consult legal counsel, as necessary. Legal action is also an option if the steps fail to secure the return.

This article, slightly modified to note recent updates, was featured online in the Wisconsin Employment Law Letter and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.