Sanctions for Lazy Disposal Require Drug Store Chain to Re-"Rite" its Data Security Policies and Procedures

Rite Aid has agreed to pay $1 million to resolve allegations that it violated the Health Insurance Portability and Accountability Act (“HIPAA”) by pitching pill bottles and prescription information into publicly accessible dumpsters near Rite Aid stores. According to the Department of Health and Human Services’ resolution agreement, released on July 27, Rite Aid must implement a three-year corrective action program, which includes the adoption of revised policies and procedures concerning the disposal of sensitive health-related information, employee training programs related to the revised policies and procedures and penalties for employees that fail to comply with them.

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Massachusetts Data Security Regulations: Your Company May Not Be Located There, But If Your Customers Are, You Need to Comply

As we've discussed in prior posts, newly effective regulations promulgated under Massachusetts’ recent data security law, Mass. Gen. Law ch. 93H, have raised the bar for data security compliance, and they have a long reach.  The regulations are national and international in scope, as they apply to all companies – wherever located-- using personal data of Massachusetts residents.

Although the deadline for compliance with the Regulations – March 1, 2010 – has come and gone, many companies – both within Massachusetts, but particularly outside of Massachusetts – are not yet, in fact, compliant. These companies are finding themselves in a position of playing "compliance catch-up." Even companies that were compliant with applicable law prior to the enactment of the Regulations are obligated to review where they stand in light of these new requirements. 

In an article just published by the Washington Legal Foundation, we review the requirements of the Massachusetts law and Regulations, including the required written information security program, constraints on third-party providers and vendors, and enforcement mechanisms, among other topics.  "The Bay State Raises the Bar on Personal Data Security: Are You in Compliance?," by Jeffrey D. Neuburger and Natalie Newman is available here.
 

Everybody Likes Free Stuff: Draft Privacy Legislation Seeks To Enhance Consumer Protections Without Disrupting Ad-Supported Internet Business Model

A draft Congressional bill released Tuesday, May 3 aims enhance consumer privacy protections both online and offline and establish a national framework for the collection, use and security of consumer information, superseding state law requirements regarding the collection, use and disclosure of the information it covers.  The draft legislation, sponsored by Congressmen Rick Boucher (D, Va.) and Cliff Stearns (R, Fla.), recognizes the importance of online advertising in supporting free online content and services and attempts to extend privacy protections without disruption of this business model.  The bill's sponsors have requested comments on the draft by June 4th, and stakeholder meetings may also be scheduled to discuss the draft and receive comments.

Click here to learn more about the draft legislation, and stay tuned for updates as the comment period proceeds.

Application of New Massachusetts Data Security Regulations to Out-of-State Businesses

Massachusetts’s new data security regulations, effective as of March 1, 2010, currently set forth the country’s most stringent requirements for protecting data. Extending beyond what is required by other states, Massachusetts specifies that, for example, covered entities must implement a written information security program and must encrypt personal information that will be transmitted over the Internet, or that is kept on laptops and other portable devices. Massachusetts regulators and enforcement agencies would likely make the following three arguments that out of state entities must also comply with the new regulations.

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French Data Protection Agency Issues Recommendations Regarding Employees' Personal Data that Companies in France May Collect To Minimize the Impact of Swine Flu on Business Continuity

In anticipation of the Swine Flu and the consequences that it may have upon the continuity of the business of companies, the French Data Protection Agency (known under the acronym "CNIL") recently issued recommendations regarding employers’ collection of employee data in connection with their swine flu business continuity programs.

The French government has strongly recommended that companies set up a plan for the continuity of their businesses in case of pandemic flu. Indeed, in case of pandemic, the French authorities anticipate significant degrees of absenteeism among employees and a possible paralysis of certain companies if they are not sufficiently prepared. 

 

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Massachusetts' Revised Data Security Regulations Extend Deadline (Again) and Soften Some Requirements

Undersecretary Barbara Anthony, of the Massachusetts Office of Consumer Affairs and Business Regulation, announced today revisions to Massachusetts' data security regulations, as well as an extension of the applicable compliance deadline from January 1, 2010 to March 1, 2010.  (Previous to an earlier extension, the compliance deadline was May 1, 2009.)

The revised regulations emphasize their “risk-based” approach, enabling persons covered by the regulations to tailor their information security programs to their size, scope, type of business, resources, amount of personal information, and need.  These changes were primarily intended to ease the burden of the regulations on small businesses that may not handle a significant amount of personal information, or may not have the resources to develop a sophisticated security program.  That said, the changes apply to all business, not just small businesses.

 

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European Privacy Law And Social Networking

 

With social networking sites proliferating across international boundaries, privacy and data protection concerns are becoming increasingly relevant. With these concerns in mind, the Article 29 Working Party, an independent European advisory body on data protection and privacy, adopted an opinion on online social networking on June 12, 2009.

As noted by the Working Party, the personal information a user posts online combined with the data outlining the user’s actions and interactions with other people can create a rich profile of that person’s interests and pose major risks such as identity thefts, loss of employment or business opportunities.  In this new era of social networking, no longer are even the most secretive organizations free from the public eye. Just last Sunday, a British tabloid published revealing photos, taken off of a social networking website, of the soon-to-be chief of the country’s foreign intelligence service, MI6.

 

The opinion focuses on how the operation of social networking sites can meet the requirements of EU data protection legislation, and advises social network service (hereafter “SNS”) providers what measures must be in place to ensure compliance. Companies that make applications for or utilize social networking sites should be mindful of their obligations under EU law, as well.

 

An SNS is defined as an online communication platform which enables individuals to join or create networks of like-minded users. Usually, these services invite users to provide personal data, post their own material, and interact with other contacts who use the service. Well-known examples would include Facebook, Twitter, and MySpace. Under the EU’s 1995 Data Protection Directive (95/46/EC) (the "Directive), SNS providers are considered data controllers, which are subject to several of the Directive’s provisions, even if their headquarters are outside the European Economic Area. Among their obligations:

 

Security and Default Privacy Settings – Data controllers must take technical and organizational measures that will maintain the security of the users.  The Working Party recommends that SNS providers offer default privacy settings that restrict viewing the user’s profile to self-selected contacts.

 

Information to be Provided by SNS – SNS providers must inform users of their identity and their purposes in using personal data. The Working Party recommends that providers inform users of the privacy risks both to users and third parties of uploading information.  If third party information or pictures are uploaded, it should be done with that individual’s consent. They should also provide information and adequate warning to users about privacy risks when uploading data on the SNS.

 

Sensitive Data – Data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, union membership, health, or sex life may only be published with the explicit consent from the data subject or if he has made the data public himself. It is therefore incumbent upon the SNS to make it clear that answering any questions regarding such sensitive data is completely voluntary.

 

Processing Data of Non-Members – SNS providers may not use independently gathered information to create profiles for those who are not members of the service.

 

Third Party Access – When SNS providers offer additional applications on their service by third parties, or make their service available on third party hardware (mobile phones) or software (outside websites), they should ensure that the third parties only have access to necessary personal data and provide a mechanism whereby users can report concerns about applications.

 

Legal Grounds for Direct Marketing – Marketing activity by SNS providers is permissible, but it must comply with the Data Protection and ePrivacy Directives.

 

Retention of Data – Personal data of users should not be kept after their accounts are deleted.  When a user is inactive for a period of time, his profile should become invisible to the outside world and eventually the user should be notified that the data will be deleted.

 

Respecting the Rights of Users – Members and non-members whose information is processed by an SNS should have rights to access, correct, and delete their data. Further, because data is not to exceed the purposes for which it is being collected, SNS providers should consider giving users the choice of using pseudonyms in place of their real names.

 

Protecting Children – SNS providers should be especially attentive to protecting the data of minors. The Working Party recommends not asking minors for sensitive data in subscription forms, not directly marketing to minors, ensuring the prior consent of parents before subscribing, having suitable degrees of separation between communities of children and adults, and providing adequate age verification software.

 

Users of social networking sites are considered data subjects rather than data controllers, so they are generally exempt from the above responsibilities. However, this is not always the case. When a user processes personal data for more than purely personal or household activity, he or she is no longer covered by the so-called “household exemption” that excepts him or her from the Directive’s mandates. Examples of non-personal activity are using the SNS on behalf of a company or association, using the SNS mainly as a platform to advance commercial, political, or charitable goals, or having a high number of contacts, some of whom he may not actually know. When this occurs, the user assumes the full responsibilities of a data controller.

 

Thus, companies that do not operate an SNS may still governed by the Directive merely by virtue of using the service. Where the company is collecting personal information (e.g. through applications or otherwise), it should take heed of the foregoing recommendations, such as getting consent from parties before publishing their personal information and images, only using necessary personal data, deleting personal information after an account has been removed, and having a mechanism users can employ to voice privacy concerns about the application.

 

Proskauer summer associate Adam Freed contributed to this post.

FTC Tells Sears That Consumer Disclosures Must be More Conspicuous

Over the course of the last decade, many companies have become accustomed to notifying consumers of their data collection practices in their online privacy policy.  However, in a recent proposed settlement, the FTC indicated that, at least under the facts before them, disclosures that were “buried” in a privacy policy were not sufficient.

On June 4, the FTC reported a proposed settlement with Sears Holding Management Corporation of a complaint that Sears had failed to meaningfully disclose to customers the extent of the information it was collecting through its online market research software.  The FTC claimed that this failure to disclose constituted an “unfair or deceptive act” under the Federal Trade Commission Act. 
 

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What Happens in Vegas Really Does Stay in Vegas (Unless It Is Encrypted)

A new Nevada law, S.B. 227, will require entities doing business in that state to beef up their protections of personal information. Previously, we wrote about Nevada’s personal information encryption law. See our blog post here. The current law requires encryption of any personal information transmitted electronically (other than by facsimile). But S.B. 227, which becomes effective on January 1, 2010, will require encryption of all personal information leaving the “logical or physical controls of the data collector,” including electronic data on a “data storage device.”

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UK Data Protection Authority Publishes Draft Guidelines for Implementing Privacy Policies

The UK Information Commissioner Office ("ICO", the UK data privacy agency) has recently issued an informative code of practice to assist companies collecting personal data so that they can better draft clear privacy notices to data subjects about how the company intends to use personal data, and especially when such data is considered to be of a confidential or sensitive nature. The published guidelines are subject to a consultation period and will be finalized after the consultation period ends, on April 3, 2009.

In issuing the guidelines, the ICO made clear that privacy polices were essential to reassure companies’ potential and existing customers that that the privacy of their data is taken seriously.

The principal purpose of the guidelines is to remind companies that they must inform all data subjects about:

  • the transfer of data to other companies and overseas;
  • the duration of storage;
  • the measures taken to ensure the security of the personal data;
  • the possibility to object to direct marketing;
  • who to contact if there is a complaint.

In promulgating the guidelines, the ICO reminded the companies of their obligations under the EU Data Protection Directive of 1995, which provides that all personal data must be processed "fairly and lawfully."

At a time when data breaches and online marketing have become increasingly common, it is essential that UK companies issue transparent policies about the collection, use, sharing, and security of personal data.

Jeremy Mittman in Proskauer's Los Angeles office contributed to this post.

Massachusetts Regulators Postpone Compliance Deadline and Issue Revised ID Theft Regulations

On Thursday, the Massachusetts Office of Consumer Affairs and Business Regulation (“OCABR”) revised and postponed -- for the second time -- its comprehensive data security regulations. The new deadline for all covered entities to achieve full compliance with the Massachusetts regulations is January 1, 2010. This fixed deadline replaces a tiered-compliance schedule established by OCABR in November 2008 that would have given covered entities until May 1, 2009 to install certain data security safeguards, including encrypting personal information on laptops, and until January 1, 2010 to implement more aggressive security measures. (See our prior post here.)

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MA Delays Implementation of Information Protection Standards

Businesses holding personal information of Massachusetts residents have at least one thing to be thankful for this holiday season.  As reported here, Massachusetts earlier this year established strict standards for protection of personal information about Massachusetts residents. Those standards include encryption of electronic data when stored or transmitted and were set to take effect January 1, 2009.

In light of current economic conditions, the Massachusetts Office of Consumer Affairs and Business Regulation (OCABR) delayed the general compliance deadline until May 1, 2009 – the same date the FTC’s new red flag rules take effect (as reported here, here and here).  The OCABR also extended a number of other related deadlines, which are listed in the OCABR’s announcement available here.

MA Issues New Rules for the Protection of Personal Information

The September 2008 issue of "A Moment of Privacy," a monthly e-newsletter brought to you by the Privacy and Data Security Practice Group of Proskauer Rose, LLP, has been released. 

This month's question was "I understand that Massachusetts’ new information security rule reaches beyond what other states require. What do these new rules mean for my company?'"

Past issues of A Moment of Privacy are also available.

Leaving Las Vegas . . . IF Encrypted

A Nevada law requiring encryption of customer personal information goes into effect on October 1, 2008. See Nev. Rev. Stat. § 597.970 (2007). While the legislation is short in length, it is potentially wide-ranging in scope. In particular, the legislation requires any "business in this State" to encrypt an electronic transmission (other than via facsimile) of "any personal information of a customer" to "a person outside of the secure system of the business unless the business uses encryption to ensure the security of the electronic transmission." Id.

 

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CT's New SSN Law Is Third 0f Its Kind

A host of state laws require that companies take measures to protect the confidentiality of the Social Security Numbers that they possess regarding employees and consumers. But Connecticut’s new law, “AN ACT CONCERNING THE CONFIDENTIALITY OF SOCIAL SECURITY NUMBERS,” requires more. 

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New Connecticut Law Threatens $500,000 Penalty for Privacy Violations

On June 10, Connecticut Governor M. Jodi Rell signed into law a bill to safeguard Social Security numbers and other personal information. The law imposes a civil penalty of up to $500,000 on violators. The new law takes effect October 1, 2008. 

The new law penalizes any individual or business that intentionally fails to protect personal information.  “Personal information” includes Social Security numbers, driver’s license numbers, and account numbers for insurance policies, credit card numbers and bank accounts. Individuals and businesses are subject to civil penalties of $500 per violation, up to $500,000 for any single event. The law imposes the same penalty for intentional failure to “destroy, erase or make unreadable” personal information during disposal of records. It does not, however, impose fines on negligent or unintentional violators, nor does it apply to public entities.        

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SEC Seeks to Better Protect Investors' Privacy With Proposed Amendments to Regulation S-P

In light of growing concerns over identity theft, data breaches, and the hacking of online brokerage accounts, the Securities and Exchange Commission (“SEC”) has recently proposed new amendments to Regulation S-P – the SEC’s existing privacy rules mandated under the Gramm-Leach-Bliley Act. The SEC’s unanimous approval of these proposed rules signals the Commission’s desire to more closely align its privacy guidelines with those of the Federal Trade Commission (“FTC”) and the Federal Banking Agencies, which adopted data breach notice rules in 2005. For regulated companies, however, the amendments could mean additional costs and liabilities. Continue Reading...

Proskauer's Tanya Forsheit Gives Web Exclusive Interview on Pending Data Breach Legislation

http://www.csoonline.com/article/217027/CSO_Disclosure_Series_What_s_Next_with_Disclosure_Legislation_

 

Focus on the EU and France -- Can US Employers Collect Sensitive Data about Their Employees Resident in the EU?

US employers are sometimes required for diversity purposes to collect data regarding the race and ethnicity of their employees.  However, collection of such “sensitive” data may infringe EU data protection laws under Article 8 of the EU Data Protection Directive.  This blog post is designed to provide some basic information about Article 8 and its exceptions.  It relates only to the collection of sensitive data from EU-based employees and does not address cross-border data transfer issues.

 

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French Data Protection Agency Rules that Employees Are Entitled to View Their Evaluations

 

Earlier this year, CNIL, the French Data Protection Agency, issued a ruling that changed the confidentiality treatment accorded to employee evaluations under French law. CNIL ruled that employees must be able to review any evaluations written about them by their employers. The CNIL issued the ruling after receiving several complaints from employees of an (anonymous) multinational company, which refused to divulge the employees’ evaluations to employees upon request.

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Proposed California Legislation Would Require Retailers to Dispose of Personal Information Within 90 Days

Under legislation recently proposed in California, retailers doing business in the state would be subject to enhanced data destruction requirements, and all businesses would be affected by new data breach notification requirements.  In the wake of the TJX Companies data breach, which may have affected more than 46.2 million credit and debit cards, California Assemblyman Dave Jones introduced revised A.B. 779.  That legislation reiterates that retailers are subject to the same data safeguard requirements as other businesses that maintain customer records or own or license personal information, while significantly truncating the period of time retailers may retain personal information of customers.  The bill also would revise the data breach notification laws applicable to all businesses that own or license personal information.  

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