Private Retail Theft Databases

Employers can and do run background checks, including criminal and credit checks, on certain potential employees. But, there is another data source that many retail employers are utilizing that could cause trouble.

Many large retailers are providing data to and utilizing private databases that include information regarding employees who are suspected of or who may have admitted to thefts.  Often these alleged thefts do not correspond with criminal charges.

Retail Theft is Big Business

Retail theft by store employees accounts for 44% of missing merchandise and is valued at $15 billion according to the National Retail Federation.  This type of shrinkage is no small potatoes so retailers have a genuine interest in avoiding bad apple employees.


Is the Data Accurate?

One of the reasons that the Federal Trade Commission is investigating background-check data companies is due to the risk that the data provided by the participating retail companies is not always accurate.  Furthermore, employees who are faced with admitting a theft rather than facing a potential police investigation may opt for an admission even if not true.  Additionally, employees who are making these admissions, accurate or not, have no understanding and are generally not advised that this information will follow them for the rest of their retail life.  Finally, there are very limited avenues for challenging inaccurate information contained within these private databases.

Secret Blacklist?

Many states, including Florida, prohibit “blacklisting” of employees.  As a result, employers who participate in these private employee theft databases need to tread with care.  Loss prevention employees should be carefully trained and statement/admission forms should include a warning that any statement by the employee will be shared with the retail theft database.


What’s An Employer To Do?

I recently assisted a client with a criminal background check question.  There are a series of steps that employers must follow in order to not run afoul of the Federal Credit Reporting Act (“FCRA”).

Before You Get a Consumer Report:

  • Tell the applicant or employee that you might use information in their consumer report for decisions related to their employment.  This notice must be in writing and in a stand-alone format.
  • Get written permission from the applicant or employee.  This can be part of the document you use to notify the person that you will get a consumer report.
  • Certify compliance to the company from which you are getting the applicant or employee’s information.You must certify that you:
    • notified the applicant or employee and got their permission to get a consumer report;
    • complied with all of the FCRA requirements; and
    • will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.

Before You Take an Adverse Action:

  • Before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, you must give the applicant or employee:

After You Take an Adverse Action:

  • If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact.  It is best to provide notice in writing so you have a record of the notice.
  • An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information.  The notice must include:
    • the name, address, and phone number of the consumer reporting company that supplied the report;
    • a statement that the company that supplied the report did not make the decision to take the unfavorable action and cannot give specific reasons for it; and
    • a notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.


Dori K. Stibolt is a senior associate with the law firm of Fox Rothschild LLP. Dori defends and counsels management in labor and employment litigation matters pertaining to wage and overtime claims, discrimination, harassment, retaliation, leave/restraint, and whistle-blower claims.  You can contact Dori at 561-804-4417 or