Retailers Use Employee-theft Databases to Combat Shrink

To counteract big losses from employee theft, some loss prevention experts in the retail industry are turning to mammoth databases to track employees accused of stealing retail merchandise. While information and background check companies are the custodians of the information, it is retailers themselves who amass the data and submit it to such companies when an employee or consumer commits retail theft. In 2011, employee theft drained an estimated $15 billion from the retail sector and comprised about 45% of total retail “shrink,” according to Rich Mellor, vice president of loss prevention at the National Retail Federation. These figures have compelled some retailers to use the databases to weed out potentially problematic employees from the industry. Currently, an estimated 10,000 retailers (only 20-30% of all retailers) use employee-theft databases to verify if a prospective employee has been terminated or prosecuted for a previous instance of retail theft. While governed by the rules and regulations of the FCRA, the databases, despite having compliance guidelines, have not been immune to criticism, or in some cases, legal action. For retailers, legal risk is non-existent as long as they comply with these guidelines.

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