Not happy about this
I understand that employers do not want to go through the hassle of lodging a formal complaint against an employee. They would lose more time than it is worth.
But if you're not confident enough to go to the police, you should not be able to put an employee on this database. Especially for something as flimsy as "Causing a loss to the company or a supplier". What does it mean?
"Oh, the sales are lower than before you arrived (which happened to be Christmas season), so you must be the cause we are losing money now. Get out, you're on the list".
If you put somebody on the list, you should be ready to show proof of the employee dishonesty (and being lazy or inefficient is NOT being dishonest) in front of a judge.
Also, the employee should be told. I understand there is a risk the employee might attempt to retaliate by burning the shop down, but it is unacceptable to make it impossible for people to find a job without their knowledge.