Digital Privacy Act Mandatory Data Breach Response Obligations: 5 Key Focus Areas For Your Compliance Plan
August 20, 2018
By David Fraser, Privacy Lawyer | Partner at McInnes Cooper,
Sarah Anderson Dykema, CIPP/C, Lawyer at McInnes Cooper
Every organization subject to Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA) – every organization that collects, uses and discloses personal information in the course of commercial activity in Canada – must ensure they comply with the Digital Privacy Act’s new mandatory data breach response requirements as of November 1, 2018 – or face significant non-compliance consequences.
Basic data breach risk management planning, including steps to reduce the risk of breaches in the first place and creating action plans to ensure readiness for when breaches do occur, are key to ensuring compliance in this evolving legal landscape. But complying with these new obligations won’t happen overnight: the new record-keeping, reporting and notification rules are strict and onerous and the advance preparation necessary to reduce the associated liability and reputational risks when a breach does occur requires time and coordination of external expertise and internal stakeholders.
Here are five key areas to focus on when preparing to comply with the Digital Privacy Act’s mandatory data breach response requirements.
- Understand the New Obligations – Well
In preparing for compliance as of November 1, 2018, it’s critical that organizations understand what the requirements are and when the new obligations – record-keeping, reporting and notification – are triggered. Organizations will then need to implement policies and procedures aligned with the law. A thorough privacy gap analysis of existing policies and procedures will allow organizations to identify where risks are, and where to focus compliance efforts.
The Digital Privacy Act’s new data breach reporting and notification obligations are only triggered when there’s a “breach of security safeguards” involving personal information under an organization’s control, where it’s reasonable in the circumstances for the organization to believe the breach creates a real risk of significant harm to an individual. But the new record-keeping obligation is triggered when there’s any “breach of security safeguards” – no matter how trivial or insignificant the breach is. The new regime includes some old and some new terminology – and the meanings aren’t always defined or intuitive. Key terms include:
“Sensitivity of information”. The obligation of organizations to protect personal information by security safeguards “appropriate to the sensitivity of the information” against loss or theft, unauthorized access, disclosure, copying, use or modification, isn’t new. Neither the Digital Privacy Act nor the Breach of Security Safeguard Regulations define “sensitivity”. However, PIPEDA does offer some examples, noting that while “some information (for example, medical records and income records) is almost always considered to be sensitive”, organizations must be aware that “any information can be sensitive, depending on the context. For example, a person’s name on a list of people who went to a hockey game isn’t likely “sensitive”; their name on a list of people being treated by a psychiatrist likely is.
“Appropriate” safeguards. When considering what safeguards are “reasonable” and appropriate to the sensitivity of the information, organizations should use common sense and risk management concepts, and consider the possible harm of a breach: more sensitive information should be safeguarded by a higher level of protection. When determining what this means practically, consider the “standard of care” that has developed in your organization’s industry, adopt that – and then go one better. Imagine a customer’s lawyer cross-examining you in a lawsuit and asking, “why didn’t you do [insert a reasonable and appropriate safeguard option here]?”
“Breach of Security Safeguards”. What amounts to a “breach of security safeguards” under the Digital Privacy Act doesn’t necessarily align with the general understanding of security or privacy breaches: the definition is very broad, capturing “breaches” that are commonplace and that most wouldn’t consider to amount to a “data breach” justifying action. The Act defines (and adds this definition to PIPEDA’s definitions) a “breach of security safeguards” as “the loss of, unauthorized access to or unauthorized disclosure of personal information resulting from a breach of an organization’s security safeguards that are referred to in clause 4.7 of Schedule 1 [the existing safeguarding obligations], or from a failure to establish those safeguards.” In short, there must be a loss of, unauthorized access to, or unauthorized disclosure of, personal information that’s either caused by a breach of security safeguards, or that’s the result of not having safeguards in place. Under this new definition of a “breach of security safeguards”, each of these common scenarios is a breach of which the organization must make and maintain a record, and evaluate for purposes of reporting and notification:
- An employee violates the employer’s “clean desk policy”, and a co-worker from another department sees a customer record.
- An employee allows their child to use their smart phone, which also contains customer information.
- An employee flying on a business trip decides to use the plane time to work on a report, and the passenger behind them can see the employee’s laptop screen.
“Real risk” of “significant harm”. The Act’s mandatory reporting and notification obligations are only triggered when there’s a “breach of security safeguards” involving personal information under an organization’s control, where it’s reasonable in the circumstances for the organization to believe the breach creates a real risk of significant harm to an individual. The Breach of Security Safeguards Regulations define “significant harm” to include bodily harm, humiliation, damage to reputation or relationships, loss of employment, business or professional opportunities, financial loss, identity theft, negative effects on the credit record and damage to or loss of property. However, they don’t offer guidance to help organizations determine when there’s a “real risk” of such harm. When assessing whether it’s reasonable to believe a “breach of security safeguards” involving personal information creates a “real risk” of significant harm to an individual, consider the sensitivity of the personal information involved in the breach and the probability that the personal information has been, is being, or will be misused. For example, compare the accidental loss of an encrypted hard drive to an intentional theft of data: where the information was targeted, it’s more reasonable to believe malevolent intent and a high likelihood of misuse – and thus a “real risk” of significant harm.
- Deal With Third Party Contractor Risks
Review key third party contracts to ensure they include accountability mechanisms for enabling, monitoring and verifying their compliance with the new requirements. This is an often overlooked – but critical – step in preparing for compliance with the Digital Privacy Act and mitigating the risks of non-compliance: under the Digital Privacy Act, an organization could be responsible for any breaches by a third party in relation to personal information to which that third party has access or with which the third party is dealing on the organization’s behalf. And if the third party might subcontract with another party, and that subcontractor will have access to the data or personal information collected on the organization’s behalf, the organization should endeavor to negotiate the requirement that such subcontracting is subject to the organization’s consent and agreement, and ideally require the subcontractor to enter into an agreement directly with the organization subjecting it to the same security obligations and breach consequences as those applicable to the third party.
- Deal With Employee Risks
An organization’s weakest link in terms of privacy vulnerability and liability exposure is its own employees. Organizations (and the media) often place the data security focus on “outside” security threats: an external third party accessing an organization’s data, and particularly the personal information of its customers and employees, in highly publicized “cyber-attacks”. There’s no doubt this is a risk that organizations must be aware of and that they must mitigate against. But in fact, most data breaches are caused by an organization’s own employees, whether accidental (such as forgetting their laptop on a bus) or malevolent (such as intentionally browsing or accessing data for no work-related reason). Therefore, implementing a plan to avoid and handle data breaches by its own employees is an important aspect of an organization’s data breach risk mitigation plan generally. But it’s particularly important under the Digital Privacy Act’s new data beach response requirements because more employee “breaches” are likely to occur: the new definition of a “breach of security safeguards” means the reporting obligation (and analysis for reporting and notification purposes) will be triggered for common scenarios that organizations might not ordinarily consider privacy breaches requiring action, such as an employee allowing their child to use their smart phone that contains customer information, violating a “clean desk” policy, or using their a laptop in a public space. This means organizations must pay close attention to an employee action plan in preparation for the new mandatory data breach response obligations, including:
- Training & Policies. Organizations must ensure their employee policies and training reflect the definition of a “breach of security safeguards” in an effort to reduce the frequency of trivial breaches occurring – and the administrative costs they will create due to the new record-keeping, reporting and notification obligations.
- Internal breach reporting. Similarly, organizations must develop a culture that allows employees to report breaches without unreasonable fear of reprisals or discipline, helping to ensure accurate internal reporting and recording of such breaches.
- Vicarious liability. More lawsuits for alleged data breaches are on the horizon. Employers are vicariously liable for the acts of their employees in the course of their employment – including data breaches. And even if the employer had insured against such a liability claim, no organization can insure against the reputational damage that would result.
- Paper Trail
The new record-keeping and reporting requirements will translate into a significant change in procedures and resource-allocation for many organizations. Documentation can be a complex task in itself. And organizations should keep in mind that when planning for compliance and when complying, they are creating a discoverable (that is, materials that must be disclosed) paper trail for future litigation. When preparing for the paperwork under the Act, consider:
- Resources. The new record-keeping obligations are onerous: the broad definition of a “breach of security safeguards” means there will be more breaches and the record-keeping obligation means the organization must record them all – every single one, no matter how trivial. For some organizations, this will require significant resources – and organizations must take care to allocate sufficient resources to this function.
- Form of Records. The Regulations don’t specify what information a record must contain. But based on the fact the Regulations say a report to the Privacy Commissioner can be used as a record of the breach, it seems reasonable to conclude the record should include the information the report to the Privacy Commissioner must contain, plus a full analysis of how the organization concluded the particular breach doesn’t result in a “real risk of significant harm”. Creating a standardized template form will help ensure complete record-keeping – and proof of compliance, should litigation arise.
- Form of Privacy Commissioner Reports. The Privacy Commissioner has a preferred reporting form. However, legal advice is strongly encouraged before filing such a report because the report will likely be evidence in any subsequent lawsuit and you want to avoid inadvertently waiving legal privilege.
- Protect Your Legal Privilege
The mandatory notification requirements will place more organizations under public scrutiny – and likely accelerate the upward trend in data breach class action lawsuits. It’s imperative that an organization make every effort to protect all if its preparatory materials, especially those that identify any privacy and security risks in their organization, by legal privilege. If not, the materials the organization creates to understand their risks will be available to the Privacy Commissioner in any investigation – and can be used against the organization in a civil lawsuit.
Simple “confidentiality” isn’t the same as “privilege”, and in a lawsuit the parties must disclose to the other party(ies) all relevant confidential – but not privileged – records. And merely marking a document “privileged” doesn’t make it so; legal privilege arises where the communication record, work product, and so forth is created for one of these purposes:
- Obtaining legal advice from a lawyer (called “legal advice privilege”).
- Preparing for actually anticipated litigation (called “litigation privilege”).
If an organization retains a lawyer for assistance in preparing to comply with the new Digital Privacy Act obligations, it’s important to frame the retainer as one seeking legal advice about legal risk and legal compliance. Consultants can’t provide privilege, but their work product might be privileged – if it’s prepared on behalf of their client for the purpose of seeking legal advice. If an organization retains a consultant, retain them for this purpose. There’s no guarantee taking these steps will protect the materials with legal privilege, but they will at least position the organization to argue that it does.
Please contact your McInnes Cooper lawyer or any member of the Privacy Law Team @ McInnes Cooper to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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