August 3, 2018
As of November 1, 2018, organizations in Canada subject to the Personal Information Protection and Electronic Documents Act (PIPEDA) will face strict and onerous new privacy breach response requirements with respect to any data security safeguard breach. Under the Digital Privacy Act, every organization that collects, uses and discloses personal information in the course of commercial activity in Canada (with a few exceptions) must follow new mandatory data breach record-keeping, reporting and notification rules – or face significant non-compliance consequences.
Here are the answers to five frequently-asked questions about the Digital Privacy Act and its new data breach response requirements.
The Digital Privacy Act is a federal law that amends PIPEDA to mandate a response to data breaches that includes three key new obligations: record-keeping, reporting and notification.
Existing Safeguarding Obligation. Canadian law already obligates organizations to protect personal information with security safeguards appropriate to the sensitivity of the information, with more sensitive information safeguarded with a higher level of protection. These security safeguards are required to protect personal information (regardless of the format it is in) against loss or theft, unauthorized access, disclosure, copying, use or modification, and can be physical, organizational and technical in nature.
Threshold for New Data Breach Response Obligations. 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 record-keeping obligation is triggered when there’s any “breach of security safeguards” – no matter how trivial or insignificant the breach is.
“breach of security safeguards” means the loss of, unauthorized access to or unauthorized disclosure of personal information resulting from a breach of an organization’s security safeguards … or from a failure to establish those safeguards.
Practically, this means any of the following “internal” security breach scenarios could amount to a “breach of security safeguards” – and trigger the mandatory data breach response obligations: 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 containing customer information, and the passenger behind them can see the employee’s laptop screen.
New Data Breach Response Obligations. The Digital Privacy Act implements three new obligations when there’s a “breach of security safeguards”:
The Digital Privacy Act applies to every organization to which PIPEDA applies. Effectively, that’s every private sector organization that collects, uses and discloses personal information in the course of commercial activity in Canada, with the exceptions of Quebec, Alberta and British Columbia which all have provincial legislation that’s substantially similar to PIPEDA. The Act also applies to “foreign” organizations that do business in Canada – even if they aren’t based in Canada: most breach notification laws depend on the place of ordinary residence of the individual the breach affects.
While most of the Digital Privacy Act took effect in June 2015, its mandatory data breach response sections did not. On March 26, 2018, Canada’s federal government proclaimed the Digital Privacy Act’s mandatory data breach response requirements will take effect on November 1, 2018 and subsequently finalized the Breach of Security Safeguard Regulations that detail the new data breach response requirements.
Because the consequences of failing to do so are significant. They can include:
Exposure of organizations – and directors personally – to fines of up to $100,000. Failure to comply with any aspect of the mandatory data breach reporting and notification requirements can lead to quasi-criminal liability under the Act for organizations – and for their directors personally. This means it’s not a criminal offence, but it’s subject to a penalty similar to a criminal offence. Failure to meet any of these obligations exposes your organization to fines of up to $100,000 – per violation.
Civil Lawsuits. It goes without saying: a single civil lawsuit can be enough to shutter a small organization, and can put a good dent in a large one. An individual or organization that suffers a loss as a result of a data security breach can sue the organization. These lawsuits are already common in the U.S. and are increasingly common in Canada. The latest trend: data breach class action lawsuits. Regardless of the outcome, the organization will incur significant legal costs to defend any lawsuit(s); win or lose, litigation consumes enormous financial and other resources and is highly public. And many businesses discover – too late – that “ordinary” insurance doesn’t cover this. The only real way to reduce the risk of liability is to reduce the risk of data breaches in the first place.
Investigation. Based on our extensive experience with PIPEDA, most breaches reported to the Privacy Commissioner will result in an Office of the Privacy Commissioner investigation: a time-consuming, laborious – and often public – process that frequently costs more than proactive, preventative measures would have cost.
Reputational Damage. In today’s climate of heightened awareness and fear about cyber security and the prevalence of digital and social media, a data breach – particularly one that’s not handled well – can cause an organization immeasurable, and sometimes fatal, reputational damage.
Breaches happen – but advance preparation can significantly reduce the liability and reputational risks if such a breach occurs. Every organization subject to PIPEDA must act now to ensure it’s ready to comply with the mandatory privacy breach response requirements on November 1, 2018. Effective data breach risk management planning includes taking steps to reduce the risk of a breach in the first place and creating action plans to ensure preparation for when breaches occur – and this requires time and coordination of external expertise and internal stakeholders. Basic data breach risk management planning steps are key for ensuring compliance in this evolving legal landscape. Five key areas on which to focus when preparing to comply with the Digital Privacy Act’s mandatory data breach response requirements are:
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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