Strategies to Reduce Litigation Risk Arising From Retail Loss-Prevention Activities
Imagine the following scenario: You are in-house counsel for a retailer. You arrive at work on Monday morning, only to be served with a summons and complaint filed by a customer who alleges that her civil rights were violated when, five months ago, she was detained and humiliated by your security personnel, who had falsely accused her of shoplifting a package of batteries. The customer alleges that she was singled out for scrutiny and detention and was treated roughly by security personnel who were focused on the color of her skin and a desire to meet a monthly quota for shoplifting detentions. When you ask the store manager for the detention file, you learn that the only record is a one-page fill-in-the-blank form that identifies the security officer, the detainee, the date and time of the detention, the item allegedly stolen, and a notation that the customer was released and no charges were filed. The security officer who made the detention no longer is with the company, and there is no forwarding address. To make matters worse, you have two voicemail messages that came in over the weekend: one from a national civil rights organization and one from a local TV news station. Both reference this lawsuit. How did this happen?
Prudent business owners always are on the look out for opportunities to trim expenses, and retailers often focus their resources on efforts to minimize shrinkage due to external theft. In the months ahead, retailers will step up their loss-prevention efforts in an attempt to preserve profits despite increasing expenses and declining sales. At the same time, shoppers who are confronted with a sharply increased cost of living, and perhaps declining wages, may succumb to the temptation to shoplift. This combination of heightened vigilance by retailers and the potentially increasing economic desperation by consumers will increase the average retailer’s exposure to claims of improper loss-prevention practices. The risk is heightened for larger retailers, who interact with customers thousands of times each day and who necessarily must delegate that interaction to sales people, store managers and the like.
Of course, the threat of external theft is not new, and retailers are entitled to implement loss-prevention programs. However, customers and employees have a right to be free from inappropriate contact and unlawful discrimination. These rights sometimes conflict, and that conflict often leads to accusations that the store employees engaged in racial profiling or used excessive force in apprehending a suspected shoplifter. Whether filed in court or announced from a soapbox, these sorts of allegations are susceptible to heavy publicity, which can result in stigma and additional financial loss. This begs the question: How can retailers implement effective loss-prevention strategies without unnecessarily increasing their exposure to litigation?
Managing Sources of Litigation Risk
Every business is different, but there are certain common denominators relevant to this discussion. A retailer’s exposure to litigation risk increases with each contact between an employee and a customer. While each customer presents an opportunity to make a sale, so too is each customer a potential plaintiff. Claims can be brought by individuals suing on behalf of themselves, or by individuals suing on behalf of a “class” of similarly situated persons. The exposure can be significant.
While the goal of any loss-prevention program must be to prevent loss, a well-crafted program will be designed to minimize the risk of collateral litigation, which can arise under both state and federal law. What follows is a discussion of ways in which retailers can limit their exposure to several prominent sources of litigation risk. However, readers should be careful to note that there is no one-size-fits-all solution. While most of these suggestions will be broadly applicable in one form or another, many will not be suitable for all circumstances. Store owners should consult their attorneys for specific advice, as the protections offered to retailers can vary from state to state.
Policies and Procedures
Policies and procedures are at the core of any loss-prevention program. Properly drafted, they will articulate the purpose of the program, define the manner in which it is to be implemented, and set minimum and maximum parameters for employee conduct. Though necessary, they are a prime source of litigation risk. Loss-prevention policies and procedures often are the first place an enterprising plaintiff’s attorney will look for evidence that a company improperly targets specific groups for disparate treatment, encourages excessive force or acquiesces in bad behavior by its employees.
Loss-prevention policies and procedures must be adapted to the needs and circumstances of particular companies and store locations—particularly, as the protections afforded to retailers can vary state-by-state—but there are steps that all stores can take to mitigate the suggestion that their policies and procedures institutionalize, or tacitly condone, misconduct.
Initially, storeowners should think strategically about who will develop their loss-prevention policies and procedures, and upon what models they will be based. Programs that are developed by outside expert consultants, based on best practices and industry standards, are more likely to with stand judicial scrutiny than are programs developed by company insiders who lack particularized expertise and a broader understanding of industry practice, or who may have a personal or corporate profit motive to encourage inappropriately aggressive techniques. When policies and procedures are developed in-house (which often will be the case), they should be “scrubbed” by a neutral expert, or at least developed mindful of industry best practices. In all cases, store owners must periodically review their loss-prevention policies and procedures to ensure that they remain consistent with prevailing law, evolving best practices and changed retail conditions.
But preparation of world-class policies and procedures is not enough. No matter how well thought out they may be, a collection of policies and procedures that sits on a shelf in a back office will do little to protect a company that fails to monitor its implementation. Companies must ensure that their loss-prevention policies and procedures are adhered to in practice, and that they are consistently enforced. Periodic surprise audits can be very effective tools to ensure compliance, identify gaps in training, weed out problem employees and defend against suggestions that the company acquiesces in bad behavior.
In short, to reduce litigation risk effectively, a company’s loss-prevention policies and procedures must be well-thought out, consistent with industry best practices, actually enforced, and routinely reviewed and revised to remain current.
Training
Even the best loss-prevention programs will do little to insulate a company from liability if its employees are not adequately trained. As with development of the policies and procedures themselves, what constitutes an appropriate training program will vary with a retailer’s particular circumstances (e.g., physical size and layout, number of locations, number of employees, nature of goods sold). What is appropriate for a “mom and pop” shop with one location likely will not be appropriate for a national department store. However, certain fundamental principles should be considered. For example:
• Is the training curriculum developed in-house, or by outside consultants who are “trainers” by profession? If the curriculum is developed in-house, is it reviewed by an outside consultant, or at least modeled on industry best practices?
•How is the training curriculum implemented? Is it entirely in lecture format, or does it involve explicit, scenario-based training and role-playing exercises? Does it include specific instruction on the subject of racial profiling?
•Who is required to undergo training—just loss-prevention personnel, or sales employees as well?
•What are the standards to “graduate” from loss-prevention training, and are there mandatory periodic refresher courses? What is done to ensure that the training “sinks in”?
•What steps are taken to periodically review and update training procedures to adapt to new laws, circumstances and industry best practices?
As with policies and procedures, the training curriculum must be a living document that is subject to regular review and evaluation. The store owner who gives careful thought to training employees will be a step ahead in defending their conduct.
Loss Prevention and Sales Employees
The constitution and supervision of a company’s loss prevention and sales staffs can be sources of substantial litigation risk. For example, a staff that is demographically homogenous, in a store located in a community that is relatively diverse, may suggest to a jury that the company’s hiring and promotion practices are tainted by discrimination. A minimally creative plaintiff’s attorney will use racial disparity in a store’s staff to suggest that the store enforces a culture of discrimination that extends to racial profiling in shoplifting detentions. Accordingly, retailers should ensure that their hiring and promotion policies are non-discriminatory and reflect best practices. Similarly, employee discipline must be consistent and non-discriminatory in all respects.
Vigilance is essential. Supervisors and store managers must keep on top of the staff, including hiring, promotion, disciplinary and loss-prevention statistics, so that problem situations can be identified and resolved at an early stage. And when customers complain of mistreatment, staff at all levels should be instructed to take those complaints seriously, to document them as they are received and to promptly forward them for supervisory attention.
Surveillance, Apprehension and Detention
Despite the introduction of new and sophisticated technologies for video surveillance, product tracking and the like, there continues to be a necessarily human element to customer surveillance, apprehension and detention. Even when an alarm is sounded, a store employee must decide whether and how to detain a customer. That human element invites litigation risk, and loss-prevention policies and procedures must take great care to define the bounds of appropriate employee conduct.
Careful thought should be given to the criteria that are employed to determine whether to monitor a particular customer or a particular department, and whether to focus surveillance on particular days of the week, or at particular times of day. Where possible, loss-prevention resources should be dedicated based on verifiable shortage statistics (rather than “hunches”), and surveillance decisions should be based on objective, race-neutral criteria.
Similar caution should be exercised in developing policies and procedures for whether and where to apprehend a shoplifter, and whether to use force or handcuffs. There are several useful models in popular circulation. Generally speaking, apprehension decisions should be made based upon objective, race-neutral criteria, and uninterrupted observation. Apprehensions should be carried out on-site, but away from large crowds. Use of force should be minimized, and handcuffs should be employed only based upon an individualized and race-neutral assessment of need. On a broader level, stores should emphasize preventing the loss over making the apprehension. Detentions and recovery quotas should be de-emphasized.
How a person is treated during the course of a detention can have a significant impact on whether that person feels sufficiently aggrieved to file a lawsuit for discrimination or mistreatment. Accordingly, detention processing should be “humane” and efficient, while still being safe and secure for employees, detainees and others. Particular care should be given to the treatment of juveniles. Careful thought should be given to the extent to which body and bag searches are necessary, and how they should be conducted. In most cases, they should be limited to searches for weapons based on an individualized and race-neutral assessment of risk. Where possible, searches should be “same sex” and witnessed.
Collections and Referral for Prosecution
Collections and referrals for prosecution can be a source of litigation risk because of the lingering impact they can have on the shoplifter. One who is caught, but allowed to “get away,” is far less likely to pursue litigation than one who is caught and thereafter pursued for monetary relief or a criminal sanction.
Whether to collect a civil penalty and refer a shoplifter for prosecution are decisions that should be de-linked and based on objective, race-neutral criteria, preferably by a supervisor. Companies that attempt to collect civil penalties should do so only after the decision to prosecute has been made and communicated to the detainee and the situation (including a statement that the decisions are not linked) should be explained in the detainee’s native tongue. Bilingual forms should be available. Generally, stores should not attempt to collect civil penalties from juveniles.
Record-keeping and Review
As with all facets of business, adequate record-keeping can be a powerful tool to reduce litigation risk. In the loss-prevention context, retailers should give careful thought to the type of paper work that is prepared when a customer is detained. Generally, employees should be required to make a contemporaneous written record of each detention, and they should be required to provide a narrative description of the process by which they came to observe and detain the customer. Those reports should be stored in a central location, and reviewed by supervisors for sufficiency and identification of deliberate or inadvertent employee misconduct.
A company that takes care to document its loss-prevention activities, and to review and evaluate that documentation on a periodic basis, will be well-positioned to defend against a suggestion that it tolerates bad behavior.
Summary
Race discrimination claims related to loss-prevention activities are a growth industry for plaintiffs’ lawyers and civil rights agencies, which are eager to grab headlines and substantial monetary awards or settlements. The foregoing is neither an all-inclusive nor a universally applicable blueprint for reducing exposure to such claims, and the need for case-by-case analysis should be obvious. Store owners should consult their attorneys and security professionals for store-specific recommendations.
This article first appeared in The Retail Law Strategist©, Vol. 9, Issue 2, published by the International Council of Shopping Centers, Inc., 1221 Avenue of the Americas, New York, NY 10020, (646) 728-3800.
Reprinted with permission.