CCPA Amendment Progress Report: July Update

As we reported in April, May and June, a number of potentially significant amendments to the California Consumer Privacy Act (CCPA) continue to make their way through the state legislative process. Below we provide a summary of recent developments from earlier this month, including changes that may materially affect how businesses approach their CCPA compliance efforts.

Bills That Passed With Amendments

AB 25: Changes to the Employee Exception

This bill has been closely watched since its introduction, as the inclusion of employees in the definition of “consumers” covered by the CCPA could represent a serious compliance burden for certain companies. Initially, the bill would have amended the definition of “consumer” to exclude job applicants, employees, contractors and agents whose personal information was collected and used in the context of the employment relationship, essentially removing HR data from the scope of the CCPA. That exception has now been limited, and it will expire entirely following a one-year grace period. Specifically:

  • The exception does not apply to the private right of action set forth in Section 1798.150. Employees may bring civil actions for data security breaches affecting personal information maintained by their employers.
  • The notice requirement in Section 1798.100(b) will apply to these individuals as of January 1, 2020.
  • The entire exception will become inoperative as of January 1, 2021.

Accordingly, businesses must prepare to provide their employees with CCPA-compliant notice regarding the collection and use of personal information as they would for any other consumer. It appears the delay with respect to other CCPA requirements was inserted in the latest amendments to allow stakeholders time to address concerns regarding employee surveillance. Continue Reading

EU Updates: ePrivacy Regulation Inches Forward, EDPB Issues Guidance on Interplay Between GDPR and ePrivacy Directive

Adoption of the ePrivacy Regulation

Introduced in 2017, and originally slated to go into effect with the GDPR (on May 25, 2018), it now appears the ePrivacy Regulation will not be implemented before late 2021. With the Romanian Presidency’s oversight of the Council of the European Union passing to Finland as of July 1, and in view of forthcoming EU parliamentary elections and procedural considerations, it is possible that the adoption of the ePrivacy Regulation may be delayed even further.

Key concepts currently up for debate and the subject of amendments in the Regulation’s latest draft include:

  • Conditioning access to website content on a user consenting to advertising cookies: The current draft states this would not be “disproportionate” unless the site is provided by public authorities. Notably, this position contradicts those taken in Article 29 Working Party Guidance from April 2018, and in enforcement actions by supervisory authorities (see our post here on the UK ICO’s enforcement in this regard).
  • No consent needed to process electronic communications data for information security reasons: Previous drafts would not have provided as much leeway on this point as the current draft allows.
  • To what extent metadata can be processed by end users after receipt, or by a third party entrusted by them, without consent: One practical implication of this is that it may regulate aggregated and anonymized data that some companies rely on for analytics. Otherwise, this type of data may fall outside the scope of regulation (i.e., GDPR) since it may not be considered personal data.
  • Expansion of the definition of “direct marketing communications”: The proposed definition would cover communications using new technologies (including voice over IP calls and electronic message applications), bringing these and other popular mobile applications within the scope of the ePrivacy Regulation.
  • How the ePrivacy Regulation will interact with new technologies, in particular in the machine-to-machine, “internet of things” and artificial intelligence contexts.
  • Enforcement by supervisory authorities: The latest draft requires cooperation with other supervisory authorities, as under the GDPR.

For more information, view the Romanian Presidency’s May 22, 2019 Progress Report. The Council of the European Union only briefly discussed the ePrivacy Regulation during its meeting on June 6 and 7, 2019.

We will continue to monitor and provide updates on the progress of the ePrivacy Regulation.

EDPB Opinion on the Interplay Between the ePrivacy Directive and the GDPR

In an opinion adopted on March 12, 2019, the European Data Protection Board (EDPB or the Board), in addition to urging EU legislators to intensify efforts toward adoption of the ePrivacy Regulation, discussed the interplay between the ePrivacy Directive (and Member State implementing laws) and the GDPR.

Under EU law, although Directives must be implemented through legislation at the Member State level, Regulations are binding across all Member States as of their effective date. Accordingly, until the ePrivacy Regulation is effective, organizations must grapple with existing Member State laws issued further to the 2002 ePrivacy Directive as they work to comply with new requirements effective as of last May under the GDPR. The overlap in subject matter between the two has given rise to a number of potential complications.

The Board addressed the following issues as they concern personal data processing activities that may trigger both the ePrivacy Directive and the GDPR:

  • The competence, tasks and powers of data protection authorities (DPAs), and how these may be affected when a data processing activity triggers both the ePrivacy Directive and the GDPR
  • Application of the GDPR’s cooperation and consistency mechanism
  • The extent to which processing can be governed by both the ePrivacy Directive and the GDPR

The Board’s findings are discussed in detail below.

Competence, tasks and powers of data protection authorities

Here, the EDPB addressed whether the fact that certain personal data processing triggers both the GDPR and the ePrivacy Directive could somehow limit a DPA’s enforcement authority under the GDPR. The Board stated that, as an initial matter, the DPA’s power must derive from the Member State’s law implementing the ePrivacy Directive – that is, the DPA cannot automatically rely on its powers under the GDPR to enforce national ePrivacy rules. Assuming the relevant Member State’s law provides the requisite backing, a DPA may scrutinize subsets of processing governed by that law. That said, DPAs can enforce the GDPR even if a subset of the problematic proceassing falls within the scope of the ePrivacy Directive. In short, the Board found that DPAs can enforce both the GDPR and the ePrivacy Directive, but the latter must be under the auspices of applicable implementing law.

Application of the GDPR’s cooperation and consistency mechanism

The GDPR’s Article VII cooperation and consistency mechanism requires, in essence, that national authorities cooperate with one another in the course of investigating potential violations. The Board discussed that, to the extent that any enforcement action relates solely to a Member State’s ePrivacy implementing law, the DPA need not adhere to the GDPR’s cooperation and consistency principles. As soon as the enforcement concerns matters falling within the scope of the GDPR, however, DPAs must follow the default “line of communication” and other aspects of the cooperation and consistency mechanism under the GDPR. In practice, this may mean that few privacy enforcement actions will be undertaken without consideration of the GDPR’s cooperation requirements, but it is possible under certain circumstances.

Processing that may be governed by both the ePrivacy Directive and the GDPR

The Board relied heavily on ePrivacy Directive provisions that reference the GDPR’s predecessor 1995 Data Protection Directive, as well as provisions in the GDPR that specifically refer to the ePrivacy Directive. In particular, Article 1(2) of the ePrivacy Directive states that “the provisions of this Directive particularise and complement Directive 95/46/EC [the Data Protection Directive].” Given that the GDPR indicates that references to the Data Protection Directive shall be read as referring to the GDPR, the ePrivacy Directive is read to “particularise and complement” the GDPR. The Board also focused on Article 95 of the GDPR, which addresses specific requirements under the ePrivacy Directive as they relate to the GDPR.

Where the ePrivacy Directive “particularises” the GDPR

In applying the lex generalis-lex specialis principle, the Board found that where the ePrivacy Directive “particularises” or sets forth more specific rules than the GDPR, the ePrivacy Directive’s specificity shall take precedence over the GDPR’s generality. For personal data processing activities not subject to specific obligations under the ePrivacy Directive, the GDPR controls.

The EDPB provided several practical examples applicable to a wide range of organizations, including processing involving website traffic data, location data, direct marketing and cookies.

  • With regard to website traffic data, the Board discussed that, because Article 6 of the ePrivacy Directive explicitly limits the conditions under which website traffic data, including personal data, may be processed, controllers may not rely on alternative legal bases for processing under Article 6 of the GDPR.
  • As to Articles 9 and 13 of the ePrivacy Directive, which regulate location data and direct marketing, the Board pointed out that where the ePrivacy Directive requires consent for the specific actions described, the controller must obtain a data subject’s consent and cannot rely on some other GDPR Article 6 legal basis, such as legitimate interests.
  • Regarding cookies, the Board gave the example of a data broker profiling data subjects using internet browsing information collected by cookies, but which may also include personal data obtained from other sources. In this instance the Board pointed out that the use of cookies must comply with Article 5(3) of the ePrivacy Directive (as transposed in the relevant Member State’s law), which requires consent for the placement or reading of cookies. Any subsequent processing of personal data obtained by cookies must be performed under a legal basis set forth in Article 6 of the GDPR.

Article 95 of the GDPR

Article 95 of the GDPR states that the GDPR “should not impose additional obligations on natural or legal persons in relation to processing in connection with the provision of publicly available electronic communications services in public communication networks in the Union in relation to matters for which they are subject to specific obligations with the same objective set out in Directive 2002/58/EC” (emphasis added). According to the EDPB, the intent of Article 95 is to “avoid the imposition of unnecessary administrative burdens upon controllers who would otherwise be subject to similar but not quite identical administrative burdens.”

To illustrate the impact of Article 95, the Board considered personal data breach notification obligations, which are imposed by both the ePrivacy Directive and the GDPR. The Board indicated that data controllers that notify authorities of a personal data breach in compliance with applicable national ePrivacy legislation are not required to separately notify data protection authorities of the same breach pursuant to Article 33 of the GDPR.

In conclusion, the Board’s opinion makes clear that organizations must continue to comply with the ePrivacy Directive and its implementing laws in EU Member States; the GDPR does not override these requirements by virtue of having been adopted more recently. The Board emphasized that its opinion is without prejudice to the outcome of the current negotiations of the ePrivacy Regulation, the most recent draft of which was issued a day after the Board’s opinion.

FTC Announces Enforcement Action, Warning Letters for Companies Falsely Claiming Privacy Shield Participation

Press enter button on the keyboard computer Shield cyber Key lock security system abstract technology world digital link cyber security on hi tech Dark blue background, Enter password to log in. lock finger KeyboardThe Federal Trade Commission (FTC) recently announced a compliance sweep of companies claiming to be in compliance with the U.S.-EU Privacy Shield and U.S.-Swiss Privacy Shield Frameworks. The U.S.-EU Privacy Shield and the U.S.-Swiss Privacy Shield programs enable companies to self-certify that they have adopted a number of data protection practices to bring their businesses in line with European data protection law. Because the U.S. lacks a generally-applicable federal data protection law, and because the standards for data protection in the U.S. are less stringent than those in the EU, the U.S. is considered to be an “inadequate” jurisdiction under European law, and data transfers to the U.S. are generally barred. However, if a company adopts data protection practices consistent with the requirements of European law, it may self-certify compliance with the U.S.-EU Privacy Shield and U.S.-Swiss Privacy Shield with the U.S. Department of Commerce. Adherents to the Privacy Shield frameworks can then represent their data protection practices as “adequate” under EU law, enabling free and legal transfer of personal data regarding EU data subjects to the U.S. under the European Union’s General Data Protection Regulation and Swiss Data Protection Act. Continue Reading

Texas Moves Forward With Updates to Breach Notification Law and Institutes Privacy Council to Study Data Privacy Legislation

Texas is one of the many states that looked to be following in the footsteps of California’s enactment of a broad consumer privacy law (the California Consumer Privacy Act), which has far-ranging implications for businesses and consumers. Two comprehensive data privacy bills, HB 4390 and HB 4518, were filed and heard at the last legislative session. HB 4518, also known as the Texas Consumer Privacy Act, proposed overarching consumer protection legislation that closely resembled the California Consumer Privacy Act. HB 4518 stalled in the Texas House of Representatives in favor of HB 4390. HB 4390, also known as the Texas Privacy Protection Act, was introduced as comprehensive data privacy legislation, but was significantly less detailed than HB 4518. HB 4390 went through several rounds of revisions in both the Texas House and Senate until it was whittled down to the final version, which revises the notification requirements of the Texas Identity Theft Enforcement and Protection Act and creates the Texas Privacy Protection Advisory Council in order to develop recommendations for future data privacy legislation. HB 4390 has passed both the Texas House and Senate and is awaiting signature from the governor to be enacted. Continue Reading

Attempt to Expand CCPA Private Right of Action Fails, While Bills Exempting Employee Data and Otherwise Refining CCPA Advance

Over the past several weeks, the California State Assembly has voted in favor of advancing to the California Senate bills that would narrow the reach of the California Consumer Privacy Act (CCPA). Senate bills did not fare as well and have died. Two of the CCPA amendment bills moving forward have the potential to greatly benefit businesses by providing exemptions for employee data and loyalty programs. These bills will become law if passed by the California Senate and ultimately signed by the governor.

As we have previously reported, California legislators have introduced numerous bills to amend the CCPA since it first passed. The “house of origin” deadline – the last day for each house to pass bills introduced in that house – was May 31, 2019. Most significantly, AB 25 proceeded forward, clarifying that the definition of a consumer does not include employees, and SB 561 died, ending (for now) the notion of an expanded private right of action. We will continue to monitor the bills that are proceeding. A summary of what has happened with CCPA amendment bills follows below. In addition, we note the status of several bills that are not CCPA amendments but address privacy issues. Continue Reading

Nevada Adds “Do Not Sell” Requirement to Privacy Law

Last week, Nevada Governor Steve Sisolak signed new privacy legislation into law in Nevada. Senate Bill 220 (SB-220) updates Nevada Revised State 603A to provide consumers a new right to opt out of the sale of their data. Effective Oct. 1, 2019, the new law will come into effect prior to the more comprehensive California Consumer Privacy Act (CCPA). Accordingly, the Nevada law will be the first law in the United States granting consumers the right to opt out of data sales. Continue Reading

Ad and Publishing Industries Confront CCPA Challenges While Congress Considers Privacy

Sacramento California outside the capital buildingThe California Consumer Privacy Act (CCPA), effective Jan. 1, 2020, will require more privacy transparency and choice for consumers than they have ever had under U.S. law, but its approach to providing consumers with the right to opt out of a sale of their personal information threatens to disrupt the third-party digital advertising ecosystem. Most consumers are aware that adtech has evolved to enable tracking technologies to monitor online usage across time and sites in order to build interest profiles tied to pseudonymous identifiers and thereby permit advertisers to send ads tailored to likely interests. Consumers benefit from getting more relevant ads, which advertisers will pay more to place, which in turn generates more revenue for publishers, thereby fostering free, ad-supported content that also benefits consumers. Win-win, right? Not so fast, some say; tracking and targeting is intrusive, or at least creepy, and consumers should have a choice about who can learn what about them and use that information to advertise to them. In response to that consumer concern, the U.S. advertising industry developed a transparency and choice paradigm that relies on notices and opt-outs. (Learn more about that here and here.) In addition, users of online services can employ techniques such as using ad blockers and limiting cookies. Google recently announced that it will ban device fingerprinting for ad personalization, citing lack of user transparency and control, and will enable users to block third-party cookies, a typical adtech tool, while permitting first-party cookies, a typical publisher tool. However, the CCPA is poised to upset this approach to consumer choice through its “do-not-sell” right, which provides an opt-out choice for consumers age 16 and older, but requires opt-in for youth between 13 and 16, and parental consent for children under 13. Continue Reading

Deeper Dive: GLBA-Regulated Financial Institutions Reduce Your Cybersecurity Risk With Rigorous Oversight of Third-Party Service Providers

Financial institutions that are subject to the Gramm-Leach Bliley Act (GLBA) can find practical tips that address their unique data security challenges in the 2019 Data Security Incident Report (DSIR). It appears that money remains a strong motivating force for many threat actors. According to the 2019 report, finance and insurance remain among the sectors most heavily impacted by data security incidents, with 19% of data at risk involving a financial account. Phishing (responsible for 37% of all incidents, according to our DSIR) and credential stuffing are among the primary ways that hackers can obtain the keys to a consumer’s financial kingdom – the username and password to an individual’s financial accounts. Armed with these credentials, threat actors can purchase goods or wire, transfer or otherwise move funds out of those accounts with remarkable speed and efficiency. Although multifactor authentication has become increasingly standard for money movement and other higher-risk financial account activity at major financial institutions, as reflected in GBLA regulatory guidance relating to authentication in an internet banking environment, threat actors have proven increasingly cunning, often taking over email accounts and spoofing mobile device IDs where financial institutions send one-time-PIN codes, in order to render these multifactor safeguards ineffective.  Continue Reading

Deeper Dive: Security Incident Mitigation Strategy: Effective Negotiation of Technology Contract Limitations of Liability

There is always significant negotiation around caps on liability when negotiating a contract with a technology vendor. If the vendor will have access to the personal information of its customers’ end users (regardless of whether the end users are employees or customers), treatment on caps on liability take on heightened importance. In fact, limitations of liability are a key indicator of the allocation of risk between the parties. Both parties are seeking to insulate themselves from liability and minimize the financial harm in the event of a data security incident. Vendors have become increasingly reluctant to provide unlimited liability to protect customers against harms caused by security incidents, going to great lengths to narrowly tailor the situations under which the vendors will bear risk. Customers have been increasingly reluctant to have a data security incident classified as a regular contract breach and subject to regular contract damages. The resulting compromise, in many instances, is the “super cap.” The super cap is a number greater than the general cap on liability, but less than unlimited liability. It can exist in many forms; for example, as a multiple of fees paid, a multiple against 12 months’ fees paid, a number tied to insurance coverage or a flat dollar amount. Continue Reading

Washington Privacy Act Dies in the House While California Continues to Consider Refinements to the CCPA

Computer security concept. Others in this series.After passing the Senate nearly unanimously, the Washington Privacy Act (SB 5376) has stalled in the House of Representatives. The bill failed to achieve passage out of committee by the April 17 deadline for consideration of bills originating in the opposite house, and was returned to the Senate on April 28. As a result, SB 5376 is unlikely to pass this year.

SB 5376 gained early support from Washington’s technology industry, which helped it achieve easy passage in the Senate. Upon reaching the House, however, the bill met with strong resistance from individual rights groups. The Washington ACLU announced that it would make privacy legislation a focus of the group’s 2019 legislative agenda, sponsoring legislation to place limitations on the use of automated decision-making systems employed by public agencies (see HB 1655 and SB 5527). The group opposed SB 5376 after the ACLU’s legislation failed to gain traction, arguing that exemptions in the bill would create loopholes that would render the legislation’s privacy protections toothless. Opponents also took issue with the fact that the bill lacked a private right of action, leaving enforcement authority exclusively with the Attorney General’s Office. Additionally, detractors worried that the bill’s protections for facial recognition technology were insufficient, noting that the use of facial recognition could lead to law enforcement inequities due to the fact that such technologies can have disparate results when applied to different racial and ethnic groups. Just a day before SB 5376 died in committee, the ACLU, the Electronic Frontier Foundation and four other civil liberty groups issued a joint statement opposing the legislation. Continue Reading