May 4, 2010

The HR Space is edited by: Dominique Launay, Karen M. Sargeant and Brian P. Smeenk.

By: Lorene A. Novakowski 

Employers are often tasked with creating systems to reduce employee theft or fraud. Such systems can include many things, including credit checks on potential employees. Recently, Mark's Work Wearhouse in Alberta was stunned to learn that such credit checks were not permissible in the circumstances. Even when a number of other measures had failed. As such, it agreed to stop conducting pre-hiring credit checks.

The Facts

Faced with in-store theft or fraud, national retail chain Mark's Work Wearhouse instituted a series of measures to deter employees. When other measures were not successful, it started collecting credit check information on its applicants. When one applicant was not hired as a sales associate, he made a complaint to the Alberta Information and Privacy Commissioner that Mark's Work Wearhouse was collecting personal information from applicants that was not reasonable given the job requirements. In response, a delegate was assigned to conduct an investigation.

The Investigation

In a previous investigation of a similar issue, another delegate in Alberta determined that a pre-employment credit check for a clerical position was not reasonable. In that case, the employee was not going to be directly handling cash. Because an organization can usually successfully defend itself against this kind of complaint on the basis that harm existed and that it is trying to ameliorate the harm in the least privacy-intrusive way possible, one would have thought Mark's Work Wearhouse was on solid ground. There was harm – the in-store theft problem. The employee would have been handling cash. And Mark's Work Wearhouse was able to show that it had taken less privacy-intrusive steps:

• since 1996/97, employees were prohibited from processing their own sales, or from keeping large amounts of cash in the cash terminals; 
• in 2003/04, all employees were required to acknowledge that they had received a security and crime prevention booklet and required to agree to abide by it; 
• in 2005, it implemented a business conduct hotline and website for anonymously reporting issues including in-store thefts; and 
• close-circuit TV cameras were installed in the majority of corporate stores.

Despite the sales associates' cash handling duties, the in-store theft problem, and the less privacy-intrusive steps already taken, the delegate determined that:

• the collection of the credit check information was not reasonably related to assessing how applicants would handle financial responsibility and tasks associated with their duties as sales associates; 
• a credit report may be influenced by outside circumstances unrelated to the ability to work as a sales associate; 
• sales associates did not appear to have discretionary power over allocation of cash. All money handled by a sales associate was thoroughly documented and closely supervised by management; and 
• there were less intrusive means by which to assess an applicant's abilities, such as making inquiries with references about skills and past performance in a work related environment.

The delegate was not convinced that personal credit information reasonably evaluates employees' likelihood to commit theft or fraud. In the three years since pre-employment assessment included the collection of personal credit information, there had been no significant decrease in the number of in-store theft or fraud cases. Needless to say, this was not a helpful fact for Mark's Work Wearhouse.

The delegate's investigation concluded that Mark's Work Wearhouse failed to establish any reasonable connection between collecting the personal credit information and its stated purposes for collecting the information. Therefore, the requirements of the Alberta Personal Information Protection Act had not been met.

To resolve the violation, Mark's Work Wearhouse agreed to stop collecting personal credit information from sales associate applicants as part of the hiring process.

Alert: Shocking Arbitration Decision in Ontario

By: Donna J. Gallant

$500,000 is the latest price tag for terminating an employee based on inadequate investigation and preconceived notions of guilt. In a searing decision, an Ontario Arbitrator found that the Greater Toronto Airports Authority ("GTAA") failed to take reasonable steps to ascertain the truth about an employee's medical condition before it fired her for alleged sick leave fraud. According to the Arbitrator, the GTAA's high handed and capricious conduct amounted to a breach of trust and the GTAA was held accountable for the devastating effects the termination had on the Grievor's mental and financial wellbeing. After 15 days of hearing, Arbitrator Shime ordered the GTAA to pay its former employee more than five years of lost earnings to the date of the award, as well as $100,000 in damages for mental stress and punitive damages. He also said that the Grievor would likely have stayed with GTAA until retirement at age 55, and awarded damages to compensate her for the $30,000/year drop in her earning potential until then. The GTAA has applied for judicial review of the award. Regardless of the outcome on judicial review, there are some good lessons for all employers in this decision. Stay tuned for our publication in three weeks when we will be discussing the case in more detail.