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One of the main causes of inventory shrinkage is employee theft. According to the National Retail Federation, employee theft accounts for about $15 billion in shrinkage every year.  Retailers across the country have banned together to combat this common problem.  Retailers now provide data on workers accused of stealing; this data is housed in a network of employee databases.  This information is used to keep employees from working again in the industry.  Retailers like Target, CVS, and Family Dollar are just some of the companies using these databases to curb employee theft.

However, some databases like First Advantage Corporation’s Esteem database, often contain very few details about the actual crime charged against the employee and often do not include criminal charges.  Yet, just by virtue of being included in the database, potential employees’ job opportunities are thwarted.

Some information included in these databases comes from employees who write written statements after being questioned by retail security officers.  Often, they have no idea that they are admitting to committing a crime or that the information will remain in databases to be used against them.

These databases are legal, but are facing increased scrutiny from labor lawyers and unions that claim that innocent employees can be harmed and often workers are coerced into confessing when they haven’t done anything wrong.  The Federal Trade Commission has reported complaints about the databases and is also investigating whether or not the databases are in compliance with the Fair Credit Reporting Act.  Last year, the F.T.C. settled charges with HireRight, a retail-theft database.  The FTC said that HireRight’s records were inaccurate and that the company’s regulations made it difficult for employees to dispute the claims.  Furthermore, LexisNexis recently agreed to pay $13.5 million to 31,000 people that accused LexisNexis of violating consumer protection laws by selling information to debt collectors.  However, retail theft databases like Esteem, HireRight and GIS, admit to no wrong doing.  The information these companies collect is from retailers. The retailers assert that the loss-prevention officers are carefully trained and the database companies reverify information.

One employee, Keesha Goode, asserts that $34.97 of missing merchandise was enough to destroy her career.  When she worked at Forman Mills, she was accused of not ringing up a former employee’s purchases.  She agreed to write up a statement because she was worried she would be sent to jail.  She had no idea that the statement would be shared in a database.  She recently received a letter from Dollar General that she had been turned down for a job because of her listing in retail theft database, Esteem.    She is now suing Lexis Nexis (parent company of Esteem).

Discussion Question:

What are the advantages and disadvantages of using databases that supposedly keep track of employee theft?


SOURCE: Stephanie Clifford and Jessica Silver-Greenberg, New York Times, April 2, 2013