...SSN--when they steal personnel files, they away with 10, maybe 100 names and numbers (Wells, 2002, p. 33). This paper will examine the potential legal and employee relations consequences associated with the theft of employer records and identity fraud, what employers can do to prevent theft of employer records, and what employers can do to minimize the negative consequences associated with their records being utilized in identity fraud.

INTRODUCTION

"The workplace is the source of most records used in identity theft and financial fraud" (Payroll Managers Report, 2006).

In May of 2006, the United States Department of Veterans Affairs (VA) reported that identifying information for up to 26.5 million veterans was part of the take in a burglary of one of it's employees homes. The stolen data was stored in a laptop computer and external hard drive the employee had taken home. The employee, a data analyst with the agency, was not authorized to take the data home and his behavior was in violation of VA policies (FirstGov, 2006). The (VA) incident is the largest and one of the latest in a long list of recent security breaches to make headlines. The incident also highlights the role of employer records in this regard. Wells, citing a 2002 report by TransUnion, one of the U.S.'s three credit bureaus, reported that "the No. 1 underlying source of identity fraud is theft of employer records" (Wells, 2002, p. 33). Human Resource (HR) departments are particularly rich sources of information that can be utilized in identity fraud. Personnel files that include payroll, benefit, and tax data, contain pieces of information that can facilitate the identity thief's objective and often are secured under the auspices of the HR function.

HR is a big target ... When someone steals a wallet, they get one
name, one SSN. When they steal personnel files, they get away with
10, maybe 100 names and numbers (Wells, 2002, p 33).


In this paper, the potential legal and employee relations consequences associated with the theft of employer records and identity fraud are examined. In addition, what employers can do to prevent the theft of employer records, and what employers can do to minimize the negative consequences associated with their records being utilized in identity fraud are presented.

BACKGROUND ON THE PROBLEM

The genesis of the problems associated with identity theft and fraud can be traced to the passage of the Social Security Act in 1936. Initially, an individual's Social Security Number (SSN) was to be utilized to track workers' contributions to the social security fund. Marc Rotenberg, in his statement and testimony before the subcommittee on Commerce, Trade, and Consumer Protection Committee on Energy and Commerce in May of 2006 noted that "public concern over the potential abuse of the SSN was so high that the first regulation issued by the new Social Security Board declared that the SSN was for the exclusive use of the Social Security system" (Rotenberg, 2006). Eventually, legislation was enacted that allowed the SSN to be utilized for other purposes, including the authorization granted to the Internal Revenue Service to use SSNs as taxpayer identification numbers in 1961 (Rotenberg, 2006). Rotenberg further cited a U.S. Department of Health, Education & Welfare report prepared in association with the enactment of the Federal Privacy Act of 1974 that

"outlined many of the concerns with the use and misuse of the Social Security Number that show a striking resemblance to the problems we face today". "Although the term "identity theft" was not yet in use ... the report that provided the basis for comprehensive privacy legislation in 1974, described the risks of a "Standard Universal Identifier," how the number was promoting invasive profiling, and that many of the uses were clearly inconsistent with the original purpose of the 1936 Act (Rotenberg, 2006).

While Congress recognized the potential problems associated with the use of SSNs as a universal identifier in 1974 and a Senate Committee identified its use as "one of the most serious...

NOTE: All illustrations and photos have been removed from this article.



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