The Law @ Work

Employers Use Employee Theft Databases to Prevent “Sticky Fingers” at Work

Hiring can be a headache for employers.  This is especially true during difficult economic times, when more and more applicants compete for dwindling job opportunities.  Employers, in their quest for reliable employees, routinely invest in standard screening programs, such as criminal background and credit checks.  However, another screening trend appears to be surging, especially within the retail industry.  Retailers worried about “sticky fingers” are utilizing specialized retail theft databases to screen potential applicants.  These databases potentially offer another layer of security because they are meant to detect employees with theft histories, whether they have been convicted or not.  This is information that traditional background checks do not necessarily provide because many employers often do not pursue criminal charges against employees who engage in theft.  Further, fearing defamation claims, former employers may not be willing to share the real reason that an employee was terminated.

How does it work?  Basically, these databases are repositories where employers regularly submit information regarding employees who have either been convicted of theft, or, more often than not, who have submitted written statements admitting that they have committed, or participated in, a theft at their workplace.  According to an article by the New York Times, these databases have tens of thousands of subscribers and are used by major retailers like Target, CVS and Family Dollar.

Are these databases legal?  Right now, they are.  Federal legislation does not restrict the use of signed admission statements in making hiring decisions.  Of course, these databases are not immune from controversy.  The New York Times reports that they are facing increasing scrutiny as employment lawyers and federal regulators raise due process issues.  Essentially, they are concerned that the reported information is so broad, that even innocent employees are adversely affected.  They point out that workers may often be coerced into confessing a theft, sometimes even when the workers have done nothing wrong, without understanding that they will subsequently be labeled as thieves.  To further compound the problem, these lawyers and regulators claim that it is very difficult for employees to remove inaccurate or misleading information from the databases.  As a result, potentially qualified employees are blacklisted and unable to procure employment.

Currently, the Federal Trade Commission is examining whether these retail theft databases comply with the Fair Credit Reporting Act, a federal law that regulates the reporting and use of consumer information.  There is also the potential that, like other screening programs such as credit and criminal background checks, these databases will be scrutinized by the Equal Employment Opportunity Commission to determine whether they have an adverse disparate impact on protected classes.

Extra security measures can provide extra reassurance.  However, the bottom line is that, while these databases may be useful for retailers, given the potential for liability, employers should consult with labor and employment counsel to determine how to best use the reported information in their hiring practices.

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