The In-House Loss Prevention 'Consultant'
You are a licensed private detective in Minnesota retained by a regional hardware retailer to investigate suspected internal theft at its Duluth store. The retailer’s loss-prevention manager, Dana, is a salaried employee of the retailer and has already conducted 11 days of off-site surveillance of a cashier, including at her apartment and a second job. Dana is not licensed. The retailer’s attorney asks you to 'bring Dana under your license,' bill her hours through your firm, and have her continue the off-site work while you review her reports. The attorney says this will save money and that Dana is 'basically your subcontractor.' You have not met Dana, have no written scope, and the cashier’s termination hearing is in six days.
1. Does Minnesota’s in-house exemption allow Dana to continue the off-site surveillance, and can you bill her time under your license? Explain the licensing analysis and your response to the attorney.
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The exemption is not a portable license. Minnesota’s private detective licensing scheme generally exempts a person employed exclusively by one employer in connection with the affairs of that employer only. Dana’s status therefore turns on three facts: (1) she is a bona fide employee of the retailer, not an independent contractor; (2) she acts only for the retailer; and (3) the surveillance is genuinely related to the retailer’s own theft investigation. Off-site surveillance of a cashier at her apartment and second job can still relate to the employer’s affairs if it is reasonably tied to the suspected theft, but it becomes unprotected if it is personal, for another client, or unrelated to the employer’s business.
What you cannot do is 'bring her under your license,' bill her hours through your firm, or treat her as your subcontractor. That would misrepresent who performed the licensed work and could make you a conduit for unlicensed activity. If Dana becomes your subcontractor or performs work for your clients, she likely needs her own license. Your response should be to decline the billing/cover arrangement in writing, confirm Dana’s employment status and the scope of her work, and limit your role to consulting and reviewing the work of the retailer’s own exempt employee-or tell the retailer that Dana must be licensed if she is to act as your operative. Do not accept the file on the eve of the hearing without those controls.
2. What written controls and disclosures should be in the engagement letter before you accept any role?
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The engagement letter should make the licensing structure explicit so there is no later argument that you supervised or sponsored unlicensed activity. Include:
- A statement that the client is retaining your licensed firm, and that Dana remains the client’s employee, not your employee or subcontractor.
- A scope description limited to the theft investigation at the Duluth store, with a list of prohibited methods (trespass, audio interception, pretext involving law enforcement, access to protected records).
- A no-billing clause: the client will not be billed for Dana’s hours through your firm, and you will not invoice for work you did not perform.
- A direction that you will not give Dana operational assignments; any review is limited to the client’s own work product.
- Confidentiality and data-handling terms, including how reports, notes, and video are stored and produced.
- A stop-work provision if Dana exceeds the exemption or if the client asks you to conceal the arrangement.
- A fee and termination clause, plus acknowledgment that you made no guarantee about the termination hearing.
You should also document your advice that Dana may need a license if her role changes. These controls protect the client, Dana, and your license.