The information watchdog has shut down a company which it says sold workers' confidential data, including union activities, to building firms.
A raid on The Consulting Association in Droitwich, Worcs, revealed a serious breach of the Data Protection Act, the Information Commissioner's Office said.
The ICO said a secret system was run for over 15 years enabling employers to unlawfully vet job applicants.
Action is being considered against more than 40 firms who used the service.
Past and present customers included Taylor Woodrow, Laing O'Rourke and Balfour Beatty, the ICO added.
The Consulting Association's owner would also be prosecuted, it said.
"He should have been notified, registered with our office and he wasn't and that's a criminal offence and that's a clear prosecution," said deputy information commissioner David Smith.
The information commissioner will need to look into this further to see whether these practices are more widespread and take the appropriate action.
"The construction companies that were his 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."
Business Secretary Lord Mandelson said he was "sorry the practices have taken place" and welcomed the intervention of the information commissioner.
"He will need to look into this further to see whether these practices are more widespread and take the appropriate action, as he's already done in this case," the minister added.
Not only was the database held without the workers' consent, but the existence of it was repeatedly denied.
Following the raid on 23 February, investigators discovered that The Consulting Association's database contained the details of some 3,213 workers, the ICO said.
Data included information concerning personal relationships, trade union activity and employment history, it added.
Comments included "lazy and a trouble stirrer", "Ex shop steward. Definite problems. No Go" and "Communist Party".
Trading people's personal details in this way is unlawful and we are determined to stamp out this type of activity
Deputy Information Commissioner
Employers paid £3,000 as an annual fee, and £2.20 for individual details, the ICO said.
Invoices to construction firms for up to £7,500 were also seized during the raid.
The ICO said it had served an Enforcement Notice ordering The Consulting Association's owner to stop using the system, and expected the company to cease trading by the end of the week.
It added that the owner had failed to notify the ICO as a data controller.
Mr Smith said: "Trading people's personal details in this way is unlawful and we are determined to stamp out this type of activity."
Alan Ritchie, general secretary of building workers union Ucatt, said: "Take one of the issues that we have in the construction industry: we have just under two people killed every week through bad health and safety practices and if a whistleblower then raises these issues, then obviously he has found his name on this list.
"He has never had the chance to challenge it.
"He has never been able to turn around and say, 'You are classing me as lazy. How can that be?'"
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