NSW's medical watchdog is under fire for hiring a convicted sex offender to investigate patient complaints, potentially including sexual misconduct by doctors.

Key points: No action was taken by the HCCC against the staffer when his criminal history was uncovered

No action was taken by the HCCC against the staffer when his criminal history was uncovered But two employees were fired after uncovering the offender's HR records

But two employees were fired after uncovering the offender's HR records NSW Health Minister has demanded a further investigation into the employment screening process

Sources say the staffer was hired by the Health Care Complaints Commission (HCCC) in December 2017, but a background check was not done until May 2018.

The HCCC is required to run police background checks before hiring new staff.

The sex offence was then noted on an HR database, but no action was taken against the employee or those involved in the recruitment process.

Two other HCCC employees who subsequently accessed the HR file were sacked for breaching data privacy rules.

Sex offenders are typically unable to work as police officers, lawyers or in roles involving children, but there is no specific law which prevents the HCCC from employing someone who has committed a sex offence.

The situation has upset experienced staff who handle medical complaints.

"I personally feel it is not an appropriate workplace for a sex offender," one insider said.

"Would you send your child to a school if you knew the cleaner was a convicted sex pest?" another said.

"I think victims would be reluctant to share their story with the Commission if they were aware of the offender's background."

In a statement a spokesperson for the HCCC confirmed that required background checks of the employee were delayed.

He said a "risk assessment" was later undertaken but found "no concerns which would raise questions" about the hiring decision.

Staffer exposed himself to young woman

The ABC has confirmed the offence happened at a beach carpark near Cronulla in August 2000.

At the time, the offender held an investigatory role with a government agency.

The NSW Local Court heard the offender parked alongside a young woman's vehicle and made eye contact in an "uncomfortable" way before exposing himself.

He was found guilty of wilful and obscene exposure in a public place.

During sentencing, the magistrate said he understood the offender faced dismissal from his government career, and imposed a fine of $500.

Do you know more about this story? Email miskelly.greg@abc.net.au.

As the sex offence became a "badly kept secret" at the HCCC, those who raised concerns felt targeted.

"Staff were singled out if they took matters further," an employee told the ABC.

"[But] how can a sexual offender be trusted to manage a complaint about a predatory doctor, nurse or psychologist?"

The two employees who uncovered the file were accused of wrongfully accessing private records and terminated, according to sources.

Health Minister Brad Hazzard has demanded a further investigation. ( ABC News )

The ABC understands the concerns of HCCC staff have now been reported to ICAC, which declined to comment on the matter.

A Health Ministry spokesperson also declined to comment, except to confirm Minister Brad Hazzard had demanded the HCCC provide "a full report of the circumstances" surrounding the man's employment.

The HCCC said in response it would now investigate a "formal statement made by the officer with the conviction" and examine "deficiencies" in its screening processes.

Patient advocate Lorraine Long from the Medical Error Action group said the revelations could discourage victims of sexual misconduct from reporting.

"I find it untoward, and highly irregular that someone with that sexual offence history should be at the HCCC," she said.

"Why on earth would this person be employed in an investigative position?"

Ms Long called for an inquiry into the matter.

"I've thought for some time there should be a Royal Commission into the HCCC. I think it's gone beyond the Health Minister."

Shadow Health Minister Ryan Park said an independent investigation was needed and that "brave whistleblowers" deserved bi-partisan support for exposing "troubling issues that shouldn't be occurring".