LinkedIn has a service called a LinkedIn Reference Search that allows someone to search for people who worked at the same companies that you did at the same time you did. While LI does not give employers direct access to those people who worked with you, they do “recommend” that prospective employers use the LinkedIn tools to connect with those people to get information from them.
Some people weren’t too happy with LinkedIn about this and sued them, suggesting that what they were doing was providing a consumer report as defined in the Fair Credit Reporting Act or FCRA (see LinkedIn is not a reporting agency says court).
The court took apart the claims about what LinkedIn does and said, basically, that it is not illegal.
One thing that LinkedIn does NOT do is tell you when someone runs a reference search on you, which would be nice.
So, the moral of the story is that networking has its positives and negatives and this might be a negative if you are looking for a job.