California employees accused of theft are sometimes presented with a horrible choice by their employers: Either confess to the alleged theft, agree to pay us back. or face criminal charges. Even innocent employees might well respond by signing an agreement to repay, especially if its on monthly terms. So the question is whether the employer is within its rights in threatening criminal action against the employee. Should you sign it or not?

In California, our Penal Code prohibits extracting written agreements or promises to pay (employee or not) based on the threat of force or fear. Several cases have established that threatening criminal action is reliance on fear. The employer’s good faith belief in whether or not theft occurred is not legally relevant. So, even an employee who has occasionally stolen from an employer may sue for extortion. California specifically recognizes a private cause of action called “Civil Extortion”, and it is based on the requirements of Penal Code 518. If “consent” is obtained by force or fear, then we have extortion. Whether or not money is actually paid is irrelevant.

In a recent case in this office, we had a food establishment falsely claiming theft by servers, followed by their termination and demands for restitution or “criminal prosecution will follow”. We advised each client to revoke the agreements to repay as products of duress and filed suit to void the agreements and for damages for the accompanying slander (termination paperwork said “terminated for theft”) and emotional distress resulting from the demand.