A man who sold secret information about thousands of workers to construction companies to help them to vet staff was warned today to expect a heavy penalty.

Ian Kerr, who ran the Consulting Association, kept an illegal database of workers’ personal lives and trades union activities, prompting fears that many were being “blacklisted” from building sites.

Magistrates in Macclesfield, Cheshire, told his counsel that the maximum fine of £5,000 for breaking data protection laws was inadequate in his case. There was applause from workers in the public gallery as the case was sent for sentencing to a judge who possesses wider powers.

After the hearing the Information Commission made it clear that it intended to move against those construction companies who used the information to vet employees. Some of Britain’s biggest companies can expect enforcement action.

The court action, which was regarded as a test case, came after a raid by the Information Commission on Kerr’s offices in Droitwich, Worcestershire, last March. They found details on 3,213 workers that were being used by 40 companies to vet employment on their building sites.

The database went far beyond factual details of a worker’s employment record to include political persuasions and sensitive personal details. The files included comments such as “Communist party”, “ex-shop steward, definite problems, no go”, “do not touch”, “orchestrated strike action” and “lazy and a trouble stirrer”.

Kerr, who had been operating the files for 15 years, pleaded guilty in his absence to failing, as the data controller, to register the database under the Data Protection Act.

Amina Khan, for the Information Commissioner, said that during the search they found that Kerr was processing personal information that would require entry on the data protection register.

Construction companies would pay an annual subscription of £3,000 plus quarterly charges for the information. Some were paying up to £20,000 a year.

Ms Khan said: “This information was being used covertly in that the individuals were not aware that the data was being used in this way. So they would be unable to exercise their rights under the Act to have the information erased.” She added that the business was wound up following an enforcement notice.

James Strong, for the defence, suggested that Kerr, who has two children at university, was effectively only an employee of the Consulting Association, which acted as a trade association rather than a business. He was paid a salary of £47,000.

Adrian Long, the chairman of the bench, said that the judge will require much more information about the structure, ownership, membership and finances of the association before sentencing. He said: “Our powers to fine Mr Kerr a maximum of £5,000 are hopelessly inadequate.”

After the hearing Mick Gorrill, assistant information commissioner, said: “This was a flagrant abuse of the individuals’ rights because this was a covert database. We were not made aware of its existence so we were not in a position to make any checks on its accuracy or functions. Now Mr Kerr has pleaded guilty it is likely we will take further action against a number of construction companies.”

The judgment was greeted with delight by “blacklisted” workers. Outside the court Steve Acheson, 55, an electrician and a member of the Unite union, said that he had been employed as a supervisor on prestige projects including the Channel Tunnel. He complained that he had only worked 36 weeks in the past nine years in his chosen profession.

He waved passages from his secret file which suggested that he had been the ringleader in a dispute on a site owned by the pharmaceutical giant Pfizer in Kent in 2000. Although he subsequently won his case before an employment tribunal, he has been unemployed for four of the past six years.

Mr Acheson, of Denton, Greater Manchester, said: “This has had an immense impact on my family. It makes me angry that Mr Kerr was able to make a comfortable living purely by denying others the right to the same.”

Jim Woods, 60, a joiner and member of the Ucatt union, said that Mr Kerr’s activities had deprived thousands of workers of jobs.

“The lives of myself and many others were adversely affected without being given the opportunity to challenge the information,” he said. “Most people who were blacklisted on the building sites were only trying to defend the terms and conditions of their fellow workers.”

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