FTC to Examine Employee Theft Databases for FCRA Compliance

Facing a wave of theft by employees, retailers across the country have amassed vast databases of workers accused of stealing and are using that information to keep employees from working again in the industry. According to the New York Times, the Federal Trade Commission (FTC) will examine these databases for compliance with the Fair Credit Reporting Act (FCRA), a federal law protecting consumers from inaccurate information while giving them more control over personal data.

The Times reports the databases have tens of thousands of subscribers and are used by major retailers to combat employee theft, which the National Retail Federation (NRF) estimates accounted for 44 percent of missing merchandise valued at $15 billion in 2011.

The FTC has received complaints about the databases as they contain scant details about suspected thefts and routinely do not involve criminal charges. Employees suspected of theft who submit written statements after being questioned by store security officers have no idea that they admitted committing a theft or that the information will remain in databases, according to interviews conducted by the Times for the story. One lawyer who is representing a former store clerk who is in the database for being fired for allegedly not ringing up a former employee’s purchases of $34.97 said, “The database is a secret blacklist. The employees don’t know about it until they have already been hurt.”  

The NRF’s vice president for loss prevention told the Times that retailers use employee theft databases because they “don’t want to take a chance on hiring somebody that they might have a problem with” and although “stores carefully train loss-prevention officers to ensure the admissions are accurate” and databases re-verify the information, if a suspected worker gives an inaccurate statement about the alleged theft the “options for getting it out of a database are slim.”

The Employment Screening Resources (ESR) News reported the NRF released a survey in October 2011 titled “Background Screening: Protecting Retailers and Consumers” that found nearly all retailers polled—96.6 percent—used background checks during the application, hiring, and employment process. The NRF survey completed by retail executives from leading department stores, mass merchants, discounters, drug stores, grocery stores, and restaurants, is available at http://www.nrf.com/backgroundscreening.