Articles Posted in California Law

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In 2018, the California Legislature adopted the California Consumer Privacy Act (CCPA) and became the first state to enact a comprehensive law designed to protect the privacy of consumers’ personal information. Businesses that are subject to the CCPA are required, among other things, to respond to consumers who wish to view the personal information collected by the business, delete personal information, and opt-out of the sale of personal information. The CCPA was amended in 2020 when California voters approved the California Privacy Rights Act of 2020 (CPRA), which added additional requirements and restrictions regarding the collection, use, sale and sharing of personal information.

Employee and Business Personal Information

While the CCPA is aimed at protecting consumers’ personal information, the terms of the law extend to the personal information of employees and business contacts. The California legislature reacted by exempting employment information and “business to business” (B2B) personal information from many of the provisions of the CCPA until January 1, 2021, which was extended in the CPRA to January 1, 2023.

The Exemption and its Demise

The broad consensus after the adoption of the CPRA was that the California legislature would extend the exemptions of employee and B2B personal information. While there were a number of attempts to come to an agreement, ultimately, the California Legislature adjourned on August 31, 2022 without adopting an extension. As a result, it is a certainty that full consumer rights will apply to personal information obtained from employees or as a result of a B2B relationship.

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The California Attorney General’s Office has finalized additional regulations implementing the California Consumer Privacy Act of 2018 (the CCPA). The new regulations, found here, are the most recent in a series of regulations that build on the rules last adopted in August 2020. The new regulations have a number of developments that companies doing business in California need to consider:

  • Do Not Sell Button. The regulations introduce, but do not require, the use of a blue opt-out icon designed by Carnegie Mellon University’s Cylab and the University of Michigan’s School of Information. While earlier versions of the regulations discussed placement of the icon, the only mandates that remain are that the icon is the same size as others on the web page. Businesses can download the icon here. Importantly, the icon may be used in addition to, but not in place of, the existing do not sell procedures.
  • Ongoing Enforcement. While the Attorney General has not been active in bringing enforcement actions for violations of the CCPA, the Attorney General’s office has actively issued notices to cure violations. The press release accompanying the new regulation notes that there has been “widespread compliance … especially in response to notices to cure.” Last year, Supervising Deputy AG Stacey Schesser told the IAPP, the International Association of Privacy Professionals, that enforcement targeted online businesses that were missing key privacy disclosures or “Do Not Sell” links, and came in response to consumer complaints, including on social media.

    The future of enforcement will depend on a number of factors, including the impact of the newly formed California Privacy Protection Agency and the Governor’s nomination of Rob Bonta as Attorney General to succeed Xavier Becerra, who was recently confirmed as U.S. Secretary of Health and Human Services.

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Just as we were getting used to the California Consumer Privacy Act of 2018 (the “CCPA”), Californians voted to approve Proposition 24, the California Privacy Rights Enforcement Act of 2020 (the “CPRA”). For now, the CCPA is still with us – the CPRA becomes effective on January 1, 2023 – but companies that do business in California need to address the new industry requirements, consumer privacy rights, and enforcement mechanisms as far in advance as possible.

The CPRA, like the CCPA, is a consumer-focused law with the goal of expanding consumer knowledge about and control over the types of personal information businesses collect about consumers and how that personal information is used, sold, or shared. To that end, the CPRA introduces a new class of information, sensitive personal information. Companies that collect sensitive personal information are required to follow disclosure requirements and implement additional protections and rights for California residents. In order to comply with the new law, a critical first step for businesses is to understand the data and personal information they collect about consumers and whether they collect any sensitive personal information under this new definition.

What is sensitive personal information?

The CPRA’s approach to sensitive personal information generally tracks the European Union’s General Data Protection Regulation’s definition of Special Category Data, but adds data elements commonly viewed in the U.S. as sensitive, and introduces a new twist by including the contents of a consumer’s mail, email, and text messages. Specifically, the CPRA defines sensitive personal information as:

  • social security, driver’s license, state identification card, or passport number;
  • account log‐in, financial account, debit card, or credit card number in combination with any required security or access code, password, or credentials allowing access to an account;
  • precise geolocation;
  • racial or ethnic origin, religious or philosophical beliefs, or union membership;
  • the contents of a mail, email and text messages;
  • genetic data;
  • biometric information for the purpose of identifying a consumer;
  • personal information collected and analyzed concerning a consumer’s health, sex life or sexual orientation.

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Many races and initiatives that California voters considered on November 3 are still undecided, but Proposition 24, the California Privacy Rights Act of 2020 (the “CPRA”) isn’t one of them. The California electorate approved Proposition 24 by a comfortable margin – 56% of Californians voted in favor.

Like its predecessor the California Consumer Privacy Act of 2018 (the “CCPA”), the impact of the CPRA won’t be felt immediately. It goes into effect on January 1, 2023, and many of its provisions are unclear and will require study. But all businesses that have a presence in California will need to consider its requirements, and given the scope of the law, addressing its requirements early will be essential.

New Sheriff in Town

Perhaps the most significant development in the CPRA is the establishment of a new agency, the California Privacy Protection Agency, dedicated to handling enforcement and compliance with privacy regulations. This makes California the first state with an agency focused solely on enforcing privacy laws. This new agency will replace the California Attorney General in interpreting and enforcing the CCPA. The ultimate impact of the agency will develop as its members are selected and interpret its mandate, but it is clear from the CPRA that it has broad authority to bring civil and criminal actions.

Select Key Provisions

The CPRA is not an entirely new law – it is an extension and modification of the CCPA. It adds a number of new definitions and provisions that, in some cases, extend the scope of the CCPA and, in other cases, clarify the requirements of the CCPA. The result is that companies that already comply with the CCPA will need to revisit their policies and procedures to ensure compliance with the CPRA. Key provisions include:

  • Sensitive Data. The CPRA adds a definition of “sensitive data,” which includes government-issued identifiers, account log-in credentials, financial account information, precise geolocation, contents of certain types of messages, genetic data, racial or ethnic origin, religious beliefs, biometrics, health data, and data concerning sex life or sexual orientation, and allows consumers the ability to limit the use and disclosure of sensitive data.
  • Data Breach Liability. The liability for data breaches under the CCPA has been expanded to include a private right of action for unauthorized access or disclosure of an email address and password or security question that would permit access to an account if the business failed to maintain reasonable security. These kinds of breaches are common and raise the stakes for companies doing business in California. The CPRA also eliminates the 30-day cure period for bringing private actions – something that was more confusing than effective.
  • Annual Audits and Risk Assessments. Under regulations to be adopted by the new Agency, businesses that undertake high-risk processing will be required to have annual audits and regular risk assessments. In particular, such regulations would require businesses whose processing presents significant risks to consumer privacy or security to perform a thorough and independent cybersecurity audit annually.
  • Automated Processing Limitations. A new concept of “profiling” has been added to the CCPA, consisting of “any form of automated processing of personal information, . . . to evaluate certain personal aspects relating to a natural person, and in particular to analyze or predict aspects concerning that natural person’s performance at work, economic situation, health, personal preferences, interests, reliability, behavior, location or movements.” The Privacy Agency is required to develop regulations addressing access and opt-out rights for this kind of technology, similar to the requirements of the EU’s General Data Protection Regulation.
  • Right to Correct Inaccurate Data. The CPRA adds the right to correct consumer data to the existing rights of notice and deletion.
  • Limits on Sharing Personal Information. In addition to restrictions on the sale of personal information, the CPRA extends many of those limits to the “sharing” of personal information. This change will expand the obligations of companies to comply with opt-out and similar requests.
  • Data Minimization. Similar to the GDPR, the CPRA adds concepts of data minimization, requiring companies to limit the personal information they collect to the type of information that is necessary for their operations, and to inform consumers of the length of time the business intends to retain each category of personal information and sensitive personal information, or the criteria used to determine that period.
  • Service Providers, Contractors and Third Parties. The CPRA places new contractual and direct obligations on service providers, contractors and third parties. In particular, the CPRA adds and revises existing definitions in the CCPA, and adds a new definition for contractors, which focuses on the business providing data pursuant to a written contract, prohibiting the contractor from sharing or selling the personal data, processing it for any purposes other than those specified in the contract or combining it with data received or collected through other means, with some limited exceptions. Moreover, the CPRA contractually extends the data protection obligations of the act to service providers, contractors and third parties, and requires service providers and contractors to cooperate with and assist businesses in providing requested personal information in response to consumer requests, and complying with correction or deletion requests. As we learned from the CCPA, an effective date in two years is a short time when it comes to compliance with complex privacy laws. Companies that have taken steps to comply with the CCPA will need to take concrete steps to comply with the CPRA, including:

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On September 29, California Governor Gavin Newsom signed an amendment (AB 1281) that extends the California Consumer Privacy Act (CCPA) partial employee and business-to-business exemptions through December 31, 2021. The extended exemptions may provide some relief to businesses struggling to comply with changing local, state and federal COVID-19 requirements.

Partial Employee and B2B Exemptions

The amendment extended the exception for businesses from complying with certain CCPA requirements with respect to the personal information of California employees, applicants and business contacts.

The partial employee exemption specifically exempts personal information that is collected by a business about a person in the course of the person acting as a “job applicant to, an employee of, owner of, director of, officer of, medical staff member of, or contractor of” the business to the extent that the personal information is collected and used solely within the employment context. The exemption also applies to personal information used for emergency contact purposes, as well information that is necessary to administer employment benefits.

Under the exemption, employers are still required to inform employees and applicants, at or before the time of collection, of the categories of personal information to be collected and the purposes for which the information will be used (i.e., a “notice at collection”). Further, employers are not exempt from the “duty to implement and maintain reasonable security procedures and practices.” And employees and applicants retain the private right of action in the event that certain of their personal information is subject to a data breach.

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As a privacy and cybersecurity lawyer, I’m often asked by clients and potential clients about preparing a privacy policy – whether they need one, and how much it costs. And underlying the question is an assumption – privacy policies are really just formalities, and all they need to do is find the right form, or a competitor’s model, make sure to change the name and contact information, and they’re done.

They are right about one thing – any company that collects any kind of personal information needs a privacy policy. Laws throughout the world – not just in the United States, but in the European Union, Canada, Australia and elsewhere – have laws that require a privacy policy, some in great detail, others more generally. The California Online Privacy Protection Act, which went into effect in 2004, began this trend, and the advent of the General Data Protection Regulation (GDPR) in the European Union and the California Consumer Privacy Act (CCPA) in California increased the details for privacy policies of companies under their jurisdiction, by requiring greater detail on the types of data collected, the uses of the data, and how consumers can limit the use of personal data.

There are also third parties that require privacy disclosures, including Google Analytics, a ubiquitous feature of commercial websites.

But they are wrong about what it takes to create a privacy policy. Using another company’s policy might be a starting place, but it takes much more. Assuming that all privacy policies are alike is a dangerous practice – if a company does not take the steps to ensure that the policy is accurate and complete, it increases, rather than limits, its liability. Companies must analyze their data collection practices and make sure that reality is reflected in the policy.

What is Included in a Privacy Policy?

While there are a wide variety of policies, they generally include some key elements:

  • Information about the business, including contact details;
  • The types of personal data that is collected;
  • How the data is used;
  • Whether and how it is shared with third parties; and
  • What does the company do to protect personal information?

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There’s no question that this is one of the most difficult times we have faced. The turnaround from nearly full employment to 3,000,000 new unemployment claims, the sequestration of two-thirds of the population, the closing of restaurants, entertainment venues, places of worship, mass furloughs and layoffs, the elimination of the social interactions which we thrive on – these are not normal times. And, moreover, the world that emerges from the Covid-19 pandemic will be very different from the world that preceded it.

So with all of this going on, when many of you are simply trying to see how you can survive and emerge from this crisis, why should you worry about privacy and security?

Things Will Return to Normal

Eventually – and hopefully not terribly long from now – life will gain a new normality. It won’t necessarily be business as usual, but it will be some kind of business, and one thing that will return are the laws and regulations that govern us now. Just as the California Attorney General has decided (as of now) not to delay enforcement of the California Consumer Privacy Act, the other strictures regarding privacy and security aren’t going away. The crisis will not cause the FTC to stand down on its enforcement of claims of unfair and deceptive trade practices, the Department of Health and Human Services will continue to enforce HIPAA, the federal banking regulators will enforce the Gramm-Leach-Bliley Act, and as soon as they can meet, electronically or in person, state (and perhaps even federal) legislatures will press for more stringent privacy and security laws and regulations.

Some Changes will be Permanent

One change that is likely to stick beyond the end of the crisis is the move to remote working. Many workers will find that they like to work at home. Many businesses will realize that keeping their workforce in offices is less productive and costly. The possibility that waves of Covid-19 or other viruses may continue will make working remotely more common. And the success of online meeting tools – Zoom, Webex and others – will make both workers and companies realize that while in-person meetings are important, they aren’t always necessary.

A side effect, and one that we are already seeing, is the need to protect the expanding edge of network environments. As networks expand from the physical dimensions of an office to homes, security profiles change. Firms will need to consider how to maintain a secure computing environment when they have less control over that environment.

Security and Privacy is an Asset

An effective and compliant privacy and security program is a valuable asset that can differentiate a firm from its competitors. Clients and customers are increasingly sophisticated and recognize that a company whose privacy policy is dated before 2020 has not addressed the new obligations of companies to protect the personal information of its clients, customers, employees and others is behind the times.

Moreover, there are increasing liabilities associated with poor security and non-compliance. It is unlikely that any entity that does business in California is unaware of the private right of action that the California Consumer Privacy Act grants to individuals whose personal information has been compromised because a company failed to maintain “adequate security,” and that individual plaintiffs may be awarded between $250 and $750 for failure to maintain adequate data security. Many other state proposals, as well as federal initiatives, include a similar private right of action. In the absence of a data breach, the CCPA includes an enforcement mechanism giving the California Attorney General the ability to seek damages of between $2,500 and $7,500 for each violation of the CCPA. The stakes for companies are high, and getting higher.

What to Do?

In a crisis, companies should take the time to prepare for the aftermath. Many firms should see how they can adapt their business operations to take advantage of new opportunities and fend off threats. Companies now have the ability to allocate resources to protect themselves from breaches and establish compliance programs, which they will not as business eventually ramps up again. Companies that look forward to the new business environment and prepare for it will survive and thrive; those that do not will be left behind.

The JMBM Cybersecurity and Privacy Group assists clients both in complying with laws and achieving real data and information security. For more information, contact Robert Braun (RBraun@jmbm.com) or Michael Gold (MGold@jmbm.com).

Robert E. Braun is the co-chair of the Cybersecurity and Privacy Law Group at Jeffer Mangels Butler & Mitchell LLP. Bob helps clients to develop and implement privacy and information security policies, negotiate agreements for technologies and data management services, and comply with legal and regulatory requirements. He helps clients to develop and implement data breach response plans, and he and his team respond quickly to clients’ needs when a data breach occurs. Contact Bob at RBraun@jmbm.com or +1 310.785.5331.

JMBM’s Cybersecurity and Privacy Group counsels clients in a wide variety of industries, including accounting firms, law firms, business management firms and family offices, in matters ranging from development of cybersecurity strategies, creation of data security and privacy policies, responding to data breaches and regulatory inquiries and investigations, and crisis management. The Cybersecurity and Privacy Group uses a focused intake methodology that permits clients to get a reliable sense of their cybersecurity readiness and to determine optimal, client-specific approaches to cybersecurity.

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Amended CCPA Regulations – Key Takeaways

On February 7, 2020, the California Attorney General issued a second draft of the regulations implementing the California Consumer Privacy Act of 2018 (the “CCPA”).  Interestingly, while the Attorney General had earlier stated that the final regulations would be substantially the same as the original regulations, the Attorney General has made a number of significant changes.

The amended regulations are a mixed bag.  In a number of areas, the regulations as initially proposed went beyond the scope of the CCPA; that has, in a number of cases, been rectified.  However, the amended regulations do retain the do-not-sell signal requirement and add restrictions on how service providers handle personal information.

Here are some key takeaways:

  • Notice Provisions. The “at collection” notice requirements, which have been problematic for many companies, have been expanded.  The amended regulation requires notices on “all webpages where personal information is collected,” as well as both on a mobile app download page “and within the app,” such as through the app’s download page or settings menu.  At the same time, the regulation answers a common question – oral notice would be allowed when information is collected in person or over the phone. The amended regulations add a requirement for a “just-in-time” notice for collection of personal information on mobile devices if “the consumer would not reasonably expect” the collection.  Compliance with this requirement will be challenging, and companies will need to consider what a consumer would reasonably expect.
  • Deletion Requests. The original regulations treated an unverified request to delete as a request to opt-out of sales.  The amended regulations allows companies to ask a consumer that has made an unverified request to delete if they would like to opt out of the sale of the personal information. Businesses would also be permitted to retain a record of a deletion request for the purpose of ensuring the consumer’s personal information remains deleted from the business’s records. And the new regulation also provides much-needed guidance regarding the deletion exception for data stored on backup systems; personal information does not need to be deleted unless the data in the backup system is restored to an active system or is accessed or used for a sale, disclosure or commercial purpose.

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The FTC Speaks

On January 6, 2020, the Director of the Federal Trade Commission’s (FTC) Consumer Protection Bureau published a blog post with changes to the FTC’s approach to its orders and settlements of data breach enforcement actions.  One of the key elements of the report was a revision to the FTC’s routine enforcement practice to ensure that its remedial data security orders include greater specificity about compliance expectations for companies subject to enforcement action and for third-party assessors engaged to conduct FTC-mandated monitoring and audits of targeted companies’ data security practices.

Beyond greater detail guiding data security requirements, the blog post highlights that a core element of the FTC’s model for remedial orders is that senior management, on at least an annual basis, present the company’s written information security program to the board or other governing body for oversight and review, and that management certify to the FTC that the company has complied with data security obligations.

The Growing Role of Managers and Boards in Data Security

The decision by the FTC reflects a growing consensus about the roles and responsibilities of management and boards for the adequacy of enterprise programs to identify, evaluate, and manage data and information security risks.  While this is not the first time boards of directors have been held accountable for the security practices of the companies they represent, it shows that this obligation has become mainstream and should be noted by all companies, whether they are the victim of a breach or not.

The FTC’s endorsement of data security-related corporate governance approaches, safeguards, and third-party monitoring methods is likely to impact enforcement expectations of other regulators, whether state, federal or local, responsible for administering data security compliance and breach notification regulations.

Impact on Business

Businesses regularly collect vast amounts of personal information, and often are unaware of the extent, location and accessibility of that information.  Moreover, businesses rely on third parties to collect, store, and process data, and the responsibility for the protection of personal data – customer, client and employee data – is a hot potato.  Companies are only now reviewing their internal operations, as well as their relationships with vendors, to inventory their data and data collection practices.  The FTC’s rule makes it clear that the responsibility for the protection and privacy of personal information will reach to the top of the business. Continue reading

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CCPA: Hotel Loyalty Programs, Data Retention and the Brave New World of Privacy

By Robert E. Braun

This article first appeared in the Hotel Business Review and is reprinted with permission from www.HotelExecutive.com.

The California Consumer Privacy Act (the “CCPA” or the “Act”) is a piece of consumer privacy legislation which was signed by California Governor Jerry Brown on June 28, 2018, and goes into effect on January 1, 2020. The Act is, far and away, the strongest privacy legislation enacted in the United States at the moment (although there are a number of contenders for that honor), giving more power to consumers to control the collection and use of their private data, and is poised to have far-reaching effects on data privacy.

What is the CCPA?

It is estimated that more than 500,000 companies are directly subject to the CCPA, many of them smaller and mid-size business, where the detailed requirements of the Act – disclosure and notice procedures, opt-out rights, updating privacy policies, and revising vendor agreements – is daunting. As discussed below, many hotels and hotel companies will be directly impacted by the Act, either because their qualify as a “business” as defined in the CCPA, or because they are associated with companies – brands and management companies – that are subject to the Act. Hotel owners, managers and brands that have not grappled with the requirements of the CCPA need to move quickly to do so, or risk potential liability under the penalty provisions of the Act.

Where did the Act Come From?

In early 2018, Alistair McTaggart, a California real estate developer, led an effort to include a new privacy law – the Consumer Right to Privacy Act of 2018 – on the November 2018 California ballot. By June 2018, supporters of the initiative had gathered enough signatures to earn a place on the November ballot. In response, California legislators, working with California businesses and other interest groups, negotiated and passed a substitute bill – the CCPA – in exchange for an agreement to drop the more restrictive text in the Consumer Right to Privacy Act from the November ballot.

The Act is aggressive, and cites the March 2018 disclosure of the misuse of personal data by Cambridge Analytica, as well as the congressional hearings that followed which highlighted the fact that any personal information shared on the internet can be subject to considerable misuse and theft. This prompted the California legislature to move rapidly to protect Californians’ right to privacy by giving consumers much more control of their personal information.

Because the Act was adopted so quickly, and because it was driven by the original proposition, the Act, as entered into law, does not have the kind of guidance that helps us understand how to implement the concepts in the Act. The California Attorney General has, as required under the Act, submitted proposed regulations that assist in complying with the Act, but much more needs to be done for businesses to feel comfortable in plotting a means of compliance. It is likely that our understanding of the Act, and how businesses can comply with the Act, will evolve over the coming years.

The Act as Part of a Broader Shift in Consumer Preferences

In order to understand the impact of the Act, and how to address its many changes, businesses need to understand how it reflects an evolution in consumer attitude toward the ownership and use of personal information.

In the United States, there have been few limitations on the collection or use of personal data. There are some exceptions – financial information is regulated under the Gramm-Leach-Bliley Act, health information is governed under the Health Insurance Portability and Accountability Act , and children’s information is addressed under the Children’s Online Personal Privacy Act. But in general, personal information – names, addresses, and other identifying information – may be collected and used without significant restriction, and consumers did not typically object.

The advent of computers and the increased ability to collect, store, process and monetize information, has changed consumers’ attitudes. Companies increasingly base their business models on the ability to collect and utilize information. This is not limited to firms like Facebook and Google; a variety of firms monetize the information they collect, both by direct marketing and by sharing, or selling, the data to others. Along with the “legitimate” use, came less savory forms, like credit card fraud and identity theft. As a result, individual consumers are increasingly concerned about how their personal data is shared.

Hotels should be particularly aware of this shift, since hotels are among the businesses most targeted by bad actors, and reports of data theft are regularly reported.

Behind these changes is a significant shift in the treatment of personal information. Increasingly, the belief is that an individual should have control over his or her identifying data, and not just a limited selection of financial data, but a broad array of information – essentially, anything that could be used to identify an individual. This would include not just names, addresses and other obvious data points, but also biometric and location data, of which many of us are unaware are being collected.

Do Hotels Need to Comply with the Act?

The Act is applicable to many businesses, whether located inside or outside California.? The Act applies to for-profit entities that both collect and process the personal information (as defined in the Act) of California residents and do business in the State of California – ?a physical presence in California is not a requirement to becoming subject to the Act. Additionally, the business must meet at least one of the following criteria: Continue reading