Addressing and Preventing Employee Misconduct: A Guide for Small Businesses

You can take every imaginable measure to avoid misconduct in your small business, but the day may inevitably come when employee behavior issues raise their ugly head and need to be addressed. When that happens, you will want to make sure it’s done in a thorough and fair manner, and always in compliance with state and federal law.

It’s important to understand the basics of employee misconduct in a workplace, including different types of misconduct and industry best practices that will be most effective in aiding you to deal with the array of issues you may experience. 

Types of Employee Misconduct

The following examples represent some of the most common reasons why a member of your workforce may need to be disciplined:


When an employee knowingly violates company policy, fails to adhere to their responsibilities, or does not follow directives, it’s considered insubordination. This type of misconduct is usually considered minor when compared to other forms and generally requires minimal discipline.

Theft or Fraud

An employee stealing from the company or its clients is a serious offense that can take many forms. For example, an employee may have access to company funds that they are misusing. An employee may also commit fraud to take money from you or your clients.

Discrimination or Harassment

Once an employee’s misconduct begins to involve other employees, legal issues become a strong possibility. Discriminating against, bullying, or sexually harassing co-workers is a serious form of misconduct that needs to be addressed promptly.

Inappropriate Relationships

Company policy may state that inter-office relationships are either restricted or banned. This is because these sorts of relationships can cause an array of problems in the workplace. Employees violating these policies should be disciplined swiftly in order to avoid the potential for a toxic work environment, legal issues, and other problems.

Addressing Employee Misconduct

If you identify any of these types of misconduct in your workplace, your next step will be addressing it properly. Take a look at these crucial tips for ensuring you handle misconduct fairly and legally.

Act Quickly

Failing to act quickly when employee misconduct is identified can result in bigger and more severe problems down the line. Confronting issues can be uncomfortable, but handling issues early and swiftly will save time, money and headspace. 

Conduct a Thorough Investigation

There’s almost always more to the story than you anticipate. Because of this, it’s important to avoid jumping to any conclusions when misconduct is suspected and, equally important to ensure that you investigate the issue as thoroughly as possible. 

Speak individually with everyone involved to gather testimony, document your findings, and work alongside trusted colleagues and members of your leadership team to root out bias and prevent oversight.

Consider the Legal Implications

Certain forms of employee misconduct, such as harassment, can be in violation of state or federal law. This means that if you don’t take the necessary actions in a reasonable timeline, you may be liable for the misconduct yourself. Conversely, you may also run into legal troubles if you take disciplinary action that violates your employee’s rights. 

For both of these reasons, make sure that you are thorough, careful, and thoughtful of company liability during your investigation.

Determine Severity and Communicate Clearly

Once you have a full picture of all issues surrounding the misconduct, you can more easily determine the severity of the violation. You then have several options to choose from when disciplining the violation, including a verbal warning, a written warning, probation or suspension, or dismissal. 

Proper communication during the disciplinary action or termination is key. Make sure to provide the employee with as much evidence of misconduct as possible and to be as clear as you can about your reasoning behind the disciplinary action. 

These best practices can help you avoid a range of issues — including legal concerns — down the line.

Avoiding Misconduct in the Workplace

One of the best ways to handle misconduct in the workplace is to take proactive steps to prevent it before it happens. Some of those steps include the following:

Be Clear About Company Policy

Let your employees know right from the onboarding process exactly what your company policies are, and continue to gently remind them regularly. This can help prevent misunderstandings.

Follow Through 

When your employees see that there are real consequences to misconduct, they may be less likely to violate company policy.

Provide a System for Reporting

Make it as simple as possible for employees to safely report misconduct so that you can stay in the know. This can also ensure that anyone who considers violating policy knows how easily they can be caught.

Lead by Example

If your workforce sees you living by the values and policies your company espouses, they are far more likely to follow suit.

Need HR Advice for Your Small Business?

Navigating employee misconduct can be particularly challenging for small businesses. Focus HR can provide you with the tailored guidance you need to protect your company and keep your workplace running smoothly. Reach out today to request a consultation.

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