2018 has so far been a year that will long live in the memory of workplace privacy lawyers.  Over the past eight months, lawyers for multinational corporations have had to familiarize themselves with a range of new laws, including the European Union’s General Data Protection Regulation (GDPR); the GDPR-styled California Consumer Privacy Act; and new data breach notification laws in South Dakota and Alabama.  As we enter the final few months of the year, additional privacy laws and developments sit on the horizon.  This article focuses on three more developments that privacy lawyers and employment counsels should be aware of heading into the final months of 2018.

1.  Colorado’s Data Privacy Law (House Bill 18-1128)

Effective September 1, 2018, companies that operate in Colorado and store paper or electronic documents containing personal identifying information will be required to comply with heightened data protection obligations.  The new requirements stem from House Bill 18-1128 (the “Bill”), which was signed into law by Colorado Governor John Hickenlooper on May 29, 2018, and amends the Colorado Consumer Protection Act (C.R.S.A. § 6-1-101 et seq).  Although the Bill was captioned “Concerning Strengthening Protections for Consumer Data Privacy,” it defines a “covered entity” as a corporation, business or other legal or commercial entity that, in the course of its business, “maintains, owns, or licenses personal identifying information.”  Colorado employers will therefore be required to comply with the Bill’s requirements.       

The Bill introduces three new data protection requirements:

1. Paper & Electronic Document Destruction Schedule:  Employers that are not regulated by state or federal law must maintain a written destruction schedule for paper and electronic documents that contain personal identifying information and are “no longer needed.”  Personal identifying information is defined to include a Social Security number, driver’s license number, military identification number, personal identification number (such as for a financial account), and employer identification number. ​
2. Establish Data Security Procedures:  Employers must “implement and maintain reasonable security procedures and practices that are appropriate to the nature of the personal identifying information and the nature and size of the business and its operations.”  The Bill does not provide minimum standards that the security procedures must satisfy, but the language in the Bill makes clear that the legislature does expect employers to tailor their security programs to their business.
3. Vendor Contracting:  Employers must require third-party service providers that store or process employees’ personal identifying information to “implement and maintain reasonable security procedures."  The Bill does not require employers to enter into contractual agreements with service providers documenting these security procedures in the way that the GDPR and the Health Insurance Portability and Accountability Act (HIPAA) do.  Nevertheless, depending on the reputation and size of the service provider, and the employer’s access to information about the service provider’s security safeguards, employers may wish to obtain the protection of a contractual agreement.

The Bill also amends Colorado’s security breach notification law.  These amendments are significant for any business that maintains the personal information of Colorado residents, even if the business is not located in Colorado, because it has become customary for organizations to comply with the laws of each state where affected individuals reside when responding to a security breach.  The key amendments for employers are as follows:

• Addition of Medical Information, Biometric Data, and Health Insurance Identification Number to the Definition of “Personal Information”:  Among others, the Bill adds each of these categories of information to those that, if affected by a breach, will trigger a notification requirement (“trigger data”).  Significant to employers, biometric data is defined as that which is used when an individual “accesses an online account.”  As a result, the Bill does not cover biometric data that may be stored on an employer’s or a service provider’s servers in connection with a biometric timeclock or access device.
• Thirty-Day Notification Requirement:  Employers that suffer a data breach are now required to notify Colorado residents of the breach within 30 days of the date on which the employer determines the breach occurred.  Companies do not need to notify Colorado residents of a breach if the employer’s investigation determines that a “misuse of information” about a Colorado resident “has not occurred and is not reasonably likely to occur.”
• Content of Notification:  Employers that suffer a breach are now required to deliver to affected Colorado residents a notice that states: the date of the breach; a description of the trigger data involved in the breach; contact information the Colorado resident can use to obtain more information about the breach; the toll-free numbers and websites for consumer reporting agencies and the Federal Trade Commission (FTC); and a statement that the Colorado resident can obtain information from the FTC and credit reporting agencies about fraud alerts and security freezes.
• Attorney General Notification Requirement:  Employers that suffer a breach that affects at least 500 Colorado residents must now notify the Colorado Attorney General of the breach.  An employer is not required to notify the Colorado Attorney General if the company’s investigation determines that misuse of the breached data has not occurred and is not reasonably likely to occur.

2.  New Wave of Biometric Privacy Class Actions

The avalanche of class action lawsuits filed under the Illinois Biometric Privacy Act (“BIPA”) over the past year has forced employers to pay attention to this once ignored law.  Until recently, the lawsuits involving employers were predicated on the employers implementing biometric timeclocks without first satisfying BIPA’s notice and consent requirements.  The rash of filings came to an end when, on December 21, 2017, the Illinois Appellate Court ruled in Rosenbach v. Six Flags Entertainment Corp., No. 2-17-0317, 2017 IL App (2d) 170317), that this is insufficient to maintain a claim under BIPA.  Unfortunately for employers, recent developments could lead to a new wave of BIPA class actions.

On May 31, 2018, an Illinois federal judge ruled in Dixon v. Washington and Jane Smith Community, No. 17C8033, 2018 WL 244592 (N.D. Ill. May 31, 2018), that a plaintiff’s allegation that her employer failed to inform her that her biometric data would be disclosed to the provider of the biometric timekeeping system was enough to maintain an action under BIPA.  The court explained that this allegation distinguished the plaintiff’s case from those alleging a mere violation of BIPA’s notice and consent provisions, as “obtaining or disclosing a person’s biometric identifiers or information without her consent or knowledge necessarily violates that person’s right to privacy in her biometric information.”  Unfortunately for employers, the court’s ruling has already been recognized by other Illinois federal courts and seized upon by plaintiff’s lawyers; since the ruling at least 20 class actions have been filed alleging that employers violated BIPA by failing to notify employees that their biometric data is being disclosed to the provider of the biometric timekeeping system.  However, the court’s ruling in Dixon should be questioned because the disclosure of biometric data in that case was to a service provider subject to contractual limitations on its use and further disclosure of the biometric data, and not to a non-agent third party that could use the biometric for its own purposes.

And more class actions may follow.  On May 30, 2018, the Illinois Supreme Court agreed to accept the appeal of the Illinois Appellate Court’s ruling in Rosenbach.  The Illinois Supreme Court will decide whether to plead a claim under BIPA an individual needs to allege more than that their biometric data was collected without notice and consent.  If the Illinois Supreme Court were to rule that a failure to obtain notice and consent is enough to allege a violation of BIPA, employers could see a lot more BIPA class actions being filed.  

3.  Ohio’s New “Legal Safe Harbor” For Companies Subject To Tort-Related Litigation Stemming From A Data Breach

From November 2, 2018, employers that maintain a “cybersecurity program” and suffer a data breach involving the Personal Information (defined below) of Ohio residents will be able to avail themselves of a new “safe harbor,” intended to provide an affirmative defense to any tort action stemming from the breach.  The safe harbor was included within Ohio Senate Bill 220 (“Bill 220”), which was signed into law by Ohio Governor John Kasich on August 3, 2018. 

To be eligible for the safe harbor, an employer must implement a written cybersecurity program that conforms to an “industry recognized cybersecurity framework” and is designed to do all of the following:

1. Protect the security and confidentiality of all electronically stored records that contain an employee’s social security number, driver’s license number, state identification card number, account number or credit or debit card number in combination with any required security code, access code, or password, or any records that contain any of this information in combination with an employee’s first name or first initial and last name (“Personal Information”);
2. Protect against any anticipated threats or hazards to the security or integrity of the information; and
3. Protect against unauthorized access to and acquisition of the information that is likely to result in the employee being exposed to a material risk of identity theft or other fraud.

A cybersecurity program will be deemed to satisfy industry standards if it conforms to the current version, or a combination, of any of the following publically available frameworks:

1. The cybersecurity program reasonably conforms to National Institute of Standards and Technology’s (NIST) Framework for Improving Critical Infrastructure Cybersecurity;
2. NIST special publication 800-171;
3. NIST special publications 800-53 and 800-53a;
4. The Federal Risk and Authorization Management Program (Fed RAMP) Security Assessment Framework;
5. The Center for Internet Security Critical Controls for Effective Cyber Defense;
6. The International Organization for Standardization/International Electro technical Commission 27000 Family – Information Security Management Systems;

Employers that are regulated by HIPAA, The Health Information Technology for Economic and Clinical Health Act (HITECH), the Gramm-Leach Bliley Act, or Federal Information Security Modernization Act of 2014, or the PCI Data Security Standard must conform their cybersecurity programs to the security requirements in those laws.  If any of these framework documents are revised, an employer has one year from the date of publication of the revised framework document to update its cybersecurity program.

Until the safe harbor is tested in litigation, the strength of this new affirmative defense remains to be seen.  For now, however, the safe harbor presents employers with an ostensible incentive to reevaluate their information security policies in advance of the November 2 effective date.

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Reprinted with permission from the September 13, 2018 issue of Corporate Counsel. ©2018 ALM Media Properties, LLC. Further duplication without permission is prohibited.  All rights reserved.