Sucheta Dalal :Confidential information
Sucheta Dalal

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Confidential information  

Aug 2, 2004


The booming software sector has led to a constant churn of experienced engineers, programmers and marketing executives. And since the industry is also beset by problems of low productivity, dishonesty about employment and education records and low productivity, a reference check of potential employees is almost mandatory. This task has spun-off a growing out-sourced business for consultants doing pre-employment verification of qualifications and references. Unfortunately, much of this too is being handled with the same incompetence as finance company call centres, with the result that a few companies are beginning to rebel. Exasperation levels are evident by this telling comment by a reputed Bangalore-based IT chief. He says, ‘‘I think reference checks are fine, but the manner in which they must be done is the issue...and I am sick of underpaid, under-aged girls sounding gauchely intrusive while pretending to be courteous, slogging inefficiently for bosses who thrive on the arbitrage and function like parasites while assuming themselves to be entrepreneurs. Home loans, credit cards, employee checks, country club memberships...the list is long.’’ The quote aptly captures the reaction of most people who are pestered by tele-marketing calls from banks and financial service companies, but the issues of out-sourced reference checks has some legal dimensions for software companies in particular.


Fiduciary responsibility


Software job applicants are invariably required to permit potential employers to reference check their submissions. This is necessary and legitimate and most employers have recognised the need for cooperation about providing references on a principal-to-principal basis, even when they lose valuable employees. However, outsourcing of this task to ‘pre-employment verification services’ has raised some interesting legal and monetary questions. For one, the consultant doing the check has no specific authorisation or liability waiver from the applicant. Secondly, as the head of a Pune-based software multinational says, ‘‘Why should I provide a free reference if the ‘pre-employment verification service’ consultant converts it into a paid service? At the least, I must get a free reference done in return’’. The third issue is confidentiality of information. What is the guarantee that the verification service will not use the information collected to create a database that could be repeatedly or selectively sold to headhunters for another fee? Wouldn’t this amount to invading individual privacy without permission? The software industry, which is a big user of such references, needs to deal with the issue before it turns ugly.


Individual records


A completely different aspect of this issue pertains to individual credit records collated by the newly set up Credit Information Bureau of India Ltd. (CIBIL). Competition among personal finance providers has been so intense that consumers who have a dispute with banks or a credit card issuers over wrong billing have been able to switch to another issuer without always resolving it. Not anymore. Over the last two months, members of CIBIL with access to individual credit histories are starting to refuse loans to those with a history of deliberate defaults. On the positive side, CIBIL’s entry forces people to be more meticulous about loan repayments. But what happens when individuals have genuine problems with lenders on account for faulty billing? Will their credit histories be wrecked for no fault of theirs? CIBIL says no. When the dispute is resolved either by the lender or through the order of a court or an ombudsman, the credit history will be corrected. However CIBIL will not, on its own, flag disputed cases or accept individual submissions. While sticky disputes may be the exception, for consumers the inability to file complaints with a clearly designated authority will obviously be a problem. The Tarapore committee looking into issues related to banking services may want to anticipate this problem and help create a mechanism for resolving complaints.


SAT orders


While transparency and disclosure is the touchstone of capital market regulation, the regulators clearly don’t practice what they preach. For instance, the Securities and Exchange Board of India (SEBI) has yet to start putting up adjudication orders on its website, even though some of these cases pertain to serious offences and the penalties run into crores of rupees. If SEBI is dragging its feet on adjudication orders, then the Securities Appellate Tribunal (SAT) which hears appeals against SEBI orders, is setting a worse example. Since January this year, SAT has stopped SEBI from uploading its orders on its website. Ironically, the decision to be less transparent about its order has come about after some key amendments has expanded and upgraded SAT. SAT now has three members (instead of one earlier) and is headed by a retired judge. What is unacceptable is that a healthy convention of allowing open access to orders could be discarded without so much as a debate. The Finance Ministry and the Law Ministry probably need put to do some talking.


Email: [email protected]

-- Sucheta Dalal