The Consulting Association, which sold over 3,000 workers' personal data, is to be prosecuted for breaching the Data Protection Act.
The Information Commissioners Office (ICO) revealed The Consulting Association, personal data, including employment history and trade union activity, to building firms without their consent.
The firms paid an annual fee of £3,000 and then £2.20 details on each potential employee, the ICO said.
The secret system has been running for 15 years and allows building firms to illegally vet job applicants. The ICO is also considering action against the firms that purchased the data for The Consulting Association.
It is reported that around 40 construction companies subscribed to the scheme that would send lists of prospective employees to The Consulting Association, who would then warn them about potential troublemakers.
"Trading people's personal details in this way is unlawful and we are determined to stamp out this type of activity," said deputy information commissioner David Smith.
Smith told the BBC: "The construction companies that were his [The Consulting Association's owner] customers, we have to investigate and find out just what their involvement is. But what we're looking to do there is issue enforcement proceedings against those that were involved and that'll put them essentially on notice that if they get involved in this illegal trade again, then they will face prosecution."
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