What started out years ago as an informal way local retailers could share information on employees separated for a security-related reason to avoid hiring them elsewhere has turned into a viable third-party business. And one that is now under attack by labor lawyers, federal regulators and job candidates who say the data could be incorrect, misleading or unfair as well as difficult to challenge and correct.

For a fee, retailers join these so-called mutual associations and input information regarding those who have admitted to employee theft, shoplifting and other specific retail crimes. These retailers then can access the database as a pre-hire screening tool in order to determine if candidates have a known history of employee theft.

The challenge is that the databases often go beyond convictions to include separations through “admission” statements. For example, some employees, who submit written statements after being questioned by store security officers or store management, have little inkling they admitted committing a theft or that the information will remain in databases.

The databases are legal; some services even claim they are Fair Credit Reporting Act (FCRA) compliant. Still, they are facing scrutiny through litigation and from federal regulators, who contend they may be so sweeping that innocent employees can be harmed. In some court filings, it is contended that workers are often coerced into confessing, sometimes when they have done nothing wrong, without knowledge that the information will be stored in these databases and mined by other potential employers.

The Federal Trade Commission has fielded complaints about the practice, investigating whether the services comply with the FCRA. No doubt, almost all retailers perform some level of background checking, according to the National Retail Federation. But some background check companies are wary of the theft admissions that lack convictions while others offer it as a choice among their more traditional services. A number of other firms offer “mutual association” database services as their sole business.