Modern Day Blacklisting? Retail Databases Under Scrutiny

Angela Preston

Criminal Record Database

 

 

 

 

 

 

 

Shrinkage is a funny word. In the retail world, it has nothing to do with laundry. Rather, it’s another way of referring to internal employee theft, a huge concern for any retailer — and with good reason.  Workplace theft costs retailers about $15 billion per year according to the  National Retail Federation. They estimate that 44 percent of missing merchandise is due to employee theft. It’s not surprising that employers are taking the lead to protect themselves at a time when margins are thin and the economic recovery is still sluggish.

The New York Times recently reportedon a little known source used by some retailers—an extensive database that keeps track of employees who have confessed to or have been accused of stealing from their employers. The database called out by the New York Times is unique. It is not used in a traditional background check. It is a proprietary tool called Esteem that is owned by a private company and was built by contributions from the retailers themselves. It does not contain information from the public record; it is made up of self-reported incidents that are usually collected by a store’s loss prevention team. It does not replace a traditional employee background check, and most background screening companies do not have access to the database. Even if they could access it, I would guess that many companies would be reluctant to use it.

While I have not viewed an Esteem report, to the casual observer it sounds like something hatched from a Hollywood crime drama, where investigators type in a name, and up pops a photo with pages of information. While that image is not realistic, it has more than a few consumers, attorneys, and advocacy groups concerned. The database on its face is legal, but the more I understand about how the information is gathered and then used, the more questions I have.

FCRA Compliance and Accuracy
One of my main concerns about this type of database is the accuracy of the information. Consumers who are being turned down for jobs are claiming that the information is incorrect—that they were coerced into making false statements in exchange for being released from and criminal charges. The circumstances that would lead to such a scenario are not hard to imagine. True or not, the ability to verify the accuracy of a statement that may have been submitted under duress is problematic, at best. In addition, consider this–a retail theft database is tool designed specifically for employment screening. When an employer uses a third party resource, like a retail theft database, to screen candidates, the FCRA and all of the consumer protections that follow kick in.

I sympathize with employers and the desire to weed out repeat offenders.  Some organizations are in real need of information like this—but only if it can be done legally and without violating consumer rights. So, some questions for employers who are using or considering these databases:

  • Are contributors aware that the information may be used in future hiring situations?
  • Are the employees or applicants who are disqualified based on the information in the database sent pre-adverse and adverse action notice?
  • Are they being sent a copy of the report?
  • Do consumers have a mechanism to dispute the accuracy of the report?

If the answer to all of that is yes, I would also have some concerns about the re-verification of information. If a candidate actually does have a chance to dispute the report, and contacts the background screening company to re-verify the report, how is that accomplished? Re-verifying a written statement is quite different from verifying the existence of a public record. Verification of a court record is a relatively objective exercise—is there a conviction or not? As I see it, the subjective nature of these statements would be very difficult to report with confidence that they are within the legal standard of “maximum possible accuracy.”

Discrimination, Privacy and Due Process

The other concerns I have relate more to privacy and discrimination. The EEOC objects to the use of criminal court records in employment based on disparate impact theory.  The EEOC guidance on the use of criminal records in employment is designed to protect job applicants from unintended discrimination. I have to believe that they would object to the use of retail databases–I’m not sure how such a tool would pass the guidance. Particularly without building in some “appeal process” that would afford a candidate the chance to explain the circumstances and make a case as to why the information should not be used against them. The potential misuse of retail databases may also raise serious privacy concerns for employees who are named and identified in written statements. The potential lack of due process leaves a bad taste in the mouth.

I guess what it comes down to is making sure that the potential benefit to the employer does not outweigh the possible violation of individual rights. The goal is to make sure that the right person gets the job, right? Not, as some would say, to “blacklist” those who may or may not have done something wrong. Especially when the process of using the tool may lead to other legal complications down the road. With any database, accuracy concerns need to be addressed as the consequences are serious, and they can cost someone the job.

Angela Preston
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Angela Preston

Vice President of Compliance & General Counsel at EmployeeScreenIQ
Angela Preston has more than 20 years as a licensed attorney and over 10 years in the background screening area. She serves on the Board of Directors of the National Association of Professional Background Screeners (NAPBS), is a member of the NAPBS Background Screening Credentialing Council (BSCC), and is actively involved in the Society for Human Resource Management (SHRM) and ASIS International. Angela is also a member of the Ohio State and Columbus Bar Associations. Angela has direct oversight and management of compliance programs, and will provide guidance in complex legal matters including state and federal legislation, EEO law, client education, adjudication, pre/adverse action process, NAPBS Accreditation and client and vendor contract management.
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  • Trish Dehmel

    I was a resources protection manager at a n international retail chain in my younger years. One of the things I changed when I got there was the policy of not charging thieves. In my opinion it is not my call as to who should be charged – that is the police officer’s job and the crown’s job to determine did the retail loss prevention team gather enough evidence. Management was not happy with my policy at first -especially when one of the first to fall was a longtime staff member and personal friend. But within a few months they had all come around to the No Deals policy. This would appear to be an invaluable tool for retailers – but no one should avoid charges in exchange for an admission of guilt

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