We published an article with NYSBA Labor and Employment Law Journal, titled “Employee Threats to Critical Technologies Are Best Addressed Through a Formalized Insider Threat Risk Assessment Process and Program.” With the New York State Bar Association’s permission, we have linked it here.
Following is an excerpt:
The National Institute of Standards and Technology (“NIST) has announced that it will be seeking industry input on developing “use cases” for its framework of cybersecurity standards related to patient imaging devices. NIST, a component of the Department of Commerce, is the agency assigned to the development and promulgation of policies, guidelines and regulations dealing with cybersecurity standards and best practices. NIST claims that its cybersecurity program promotes innovation and competitiveness by advancing measurement science, standards, and related technology in ways that enhance economic security and quality of life. Its standards and best practices address interoperability, usability and privacy continues to be critical for the nation. NIST’s latest announcement is directed at eventually providing security guidance for the healthcare sector’s most common uses of data, inasmuch as that industry has increasingly come under attack. …
The European Union’s (“EU’s”) General Data Protection Regulations (“GDPR”) go into effect on May 25, 2018, and they clearly apply to U.S. companies doing business in Europe or offering goods and services online that EU residents can purchase. Given that many U.S. companies, particularly in the health care space, increasingly are establishing operations and commercial relationships outside the United States generally, and in Europe particularly, many may be asking questions akin to the following recent inquiries that I have fielded concerning the reach of the GDPR:
What does the GDPR do? The GDPR unifies European data and privacy protection laws as to companies that collect or process the personally identifiable information (“PII” or, as the GDPR calls it, “personal data”) of European residents (not just citizens).
Who must comply? The GDPR applies to any company that has personal information of EU residents or citizens or that conducts business in the EU, regardless of its home country.
What is the risk of non-compliance? The GDPR mandates documented compliance. The regulations provide for substantial fines of up to €20 million or 4 percent of global revenues for noncompliance. Willful non-compliance is most heavily fined under this tiered system.
How far along are most companies as to compliance? The consulting firm Gartner estimates that more than half of the companies that are subject to the GDPR will not be in compliance throughout this year. They will be at risk.
Who will adopt the regulations? All 28 EU members, plus Iceland, Norway, and Liechtenstein (collectively known as the “European Economic Area”), and likely the United Kingdom, will adopt the regulations.
Will the regulations be enforced extraterritorially? The GDPR applies worldwide as to any company that offers goods or services (even if they are free) within the EU or collects, processes, or maintains (anywhere) personal data about European residents (again, not just citizens).
How is “personal data” defined? The definition includes any information as to a human being (called a “data subject”) that can directly or indirectly identify him or her, including, but not limited to, names; birthdates; physical addresses; email and IP addresses; and health, biometric, and demographic information.
What constitutes compliance? In general terms, a subject company must limit the use of the retained personal data and maintain it securely.
- Explicit consent is required for each processing activity as to any covered datum.
- Access, free of charge, must be afforded to any data subject on request to a “data controller” (a person at the company charged with maintaining data), who, in turn, must assure that any “data processor” (any person or company that takes data from consumers and manipulates or uses it in some way to then pass along information to a third party) is compliant as to the requested action.
- Data subjects have the right to be “forgotten, i.e., to have their data expunged, and may revoke consent at will.
What does the GDPR require if there is a data breach? Data breaches that “may” pose a risk to individuals must be notified officially within 72 hours and to affected persons without undue delay.
This, of course, is only an outline of GDPR requirements and procedures. Any specific advice only can be provided knowing an individual company’s circumstances and needs. One does note that, as is the case in other regards, for example, antitrust, the assumptions prevalent within the EU are decidedly different from those in the United States. As a number of commentators have observed, while there is no defined “right of privacy” in the United States, a company is required to preserve information, including PII and personal health information, or PHI, in the event of litigation. In Europe, which has very limited litigation discovery, there is a defined right of privacy and individuals can cause data describing them to be erased (“forgotten”).
Many of you know also that there is a case pending a decision in the Supreme Court of the United States involving whether the U.S. government can compel Microsoft to produce PII that is collected and stored outside of the United States. An affirmative decision might create a conflict of law that will complicate the data retention abilities of American companies doing business overseas. So stay tuned.
As 2017 comes to a close, recent headlines have underscored the importance of compliance and training. In this Take 5, we review major workforce management issues in 2017, and their impact, and offer critical actions that employers should consider to minimize exposure:
- Addressing Workplace Sexual Harassment in the Wake of #MeToo
- A Busy 2017 Sets the Stage for Further Wage-Hour Developments
- Your “Top Ten” Cybersecurity Vulnerabilities
- 2017: The Year of the Comprehensive Paid Leave Laws
- Efforts Continue to Strengthen Equal Pay Laws in 2017
Employers continue to incorporate the use of biometric information for several employee management purposes, such as in systems managing time keeping and security access that use fingerprints, handprints, or facial scans. Recently, Illinois state courts have encountered a substantial increase in the amount of privacy class action complaints under the Illinois Biometric Information Privacy Act (“BIPA”), which requires employers to provide written notice and obtain consent from employees (as well as customers) prior to collecting and storing any biometric data. Under the BIPA, the employer must also maintain a written policy identifying the “specific purpose and length of term for which a biometric identifier or biometric information is being collected, stored, and used.” 740 ILC 14/15(b)(2).
Although the BIPA was enacted almost 10 years ago, individuals did not start filing lawsuits until 2015. Since September 2017, there have been over twenty-five new filings in Illinois state courts including class actions against prominent international hotel and restaurant chains. These lawsuits tend to target employers utilizing finger print recognition machines as part of their time keeping systems. Where the employer uses a third-party supplier for its time-tracking system, the claims have also included allegations that the employer improperly shared the biometric information with the supplier without obtaining the proper consent. In these cases, the claims generally allege that the employer failed to provide proper notice.
Though there is no definitive reason for the increase in filings over the past months, the claims may be related to the increased use of biometric information in the workplace since the initial case filings in 2015. While Texas and Washington also have laws governing employer use of biometric information, Illinois is the only state that currently provides a private right of action, including class actions. Additionally, potential damages associated with BIPA violations, particularly for class actions, can be extensive, including liquidated damages of $1,000 per negligent violation (or the amount of actual damages, whichever is greater), liquidated damages of $5,000 per intentional or reckless violation (or the actual damages, whichever is greater) and attorney’s fees.
What Can Employers Do?
- Prior to collecting or storing biometric data, employers in Illinois should: (1) create a written policy regarding the retention and destruction of biometric data; (2) obtain written acknowledgment and release from the employees; and (3) store the biometric information securely, similar to other confidential information, such as personal health information or personally identifiable information.
- Employers who use a third party to assist with the collection or storage of biometric data should include the third party in the acknowledgement and release, which employees execute.
- Employers also should be aware that most states, including Illinois, have legislation governing how employers respond to data breaches and the required notifications to employees. If a data breach occurs, employers are advised to immediately contact counsel to devise and implement a response plan.
- In the event of litigation, employers should remove BIPA cases to federal courts when possible, particularly where the allegations focus on notice and consent issues, as employers can argue that plaintiffs cannot establish the necessary harm to establish standing as required by the Supreme Court case Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (requiring more than a “bare procedural violation” to establish harm). Because employees likely will have difficulty establishing actual harm where the biometric data was stored in a confidential and secure manner, employers may be successful in getting such claims dismissed.
As the laws regulating biometric data continues to evolve, employers should monitor this issue closely and consult with counsel as further developments occur to ensure compliance with any relevant regulations.
It is highly likely that the National Association of Insurance Commissioners (“NAIC”) will adopt a model data cyber security law premised largely on the New York State Department of Financial Services (“NYSDFS”) cyber security regulations. Recently, we discussed the NYSDFS’ proposed extension of its cyber security regulations to credit reporting agencies in the wake of the Equifax breach. New York Governor Andrew Cuomo has announced, “The Equifax breach was a wakeup call and with this action New York is raising the bar for consumer protections that we hope will be replicated across the nation.” Upon adoption by the NAIC, the NYSDFS regulations requiring that NYS financial organizations have in place a written and implemented cyber security program will gain further traction toward setting a nationwide standard for cyber security and breach notification. Indeed, although there are differences, the NAIC drafters emphasized that any Licensee in compliance with the NYSDFS “Cybersecurity Requirements for Financial Services Companies” will also be in compliance with the model law.
The NAIC Working Committee expressed a preference for a uniform nationwide standard: “This new model, the Insurance Data Security Model Law, will establish standards for data security and investigation and notification of a breach of data security that will apply to insurance companies, producers and other persons licensed or required to be licensed under state law. This model, specific to the insurance industry, is intended to supersede state and federal laws of general applicability that address data security and data breach notification. Regulated entities need clarity on what they are expected to do to protect sensitive data and what is expected if there is a data breach. This can be accomplished by establishing a national standard and uniform application across the nation.” Other than small licensees, the only exemption is for Licensees certifying that they have in place an information security program that meets the requirements of the Health Insurance Portability and Accountability Act. According to the Committee, following adoption, it is likely that state legislatures throughout the nation will move to adopt the model law.
The model law is intended to protect against both data loss negatively impacting individual insureds, policy holders and other consumers, as well as loss that would cause a material adverse impact to the business, operations or security of the Licensee (e.g., trade secrets). Each Licensee is required to develop, implement and maintain a comprehensive written information security program based on a risk assessment and containing administrative, technical and physical safeguards for the protection of non-public information and the Licensee’s information system. The formalized risk assessment must identify both internal threats from employees and other trusted insiders, as well as external hacking threats. Significantly, the model law recognizes the increasing trend toward cloud based services by requiring that the program address the security of non-public information held by the Licensee’s third-party service providers. The model law permits a scalable approach that may include best practices of access controls, encryption, multi-factor authentication, monitoring, penetration testing, employee training and audit trails.
In the event of unauthorized access to, disruption or misuse of the Licensee’s electronic information system or non-public information stored on such system, notice must be provided to the Licensee’s home State within 72 hours. Other impacted States must be notified where the non-public information involves at least 250 consumers and there is a reasonable likelihood of material harm. The notice must specifically and transparently describe, among other items, the event date, the description of the information breached, how the event was discovered, the period during which the information system was compromised, and remediation efforts. Applicable data breach notification laws requiring notice to the affected individuals must also be complied with.
New York State has issued proposed regulations extending existing regulations requiring banks and other financial institutions to have in place a comprehensive cybersecurity program to credit reporting agencies. Governor Mario Cuomo announced that “The Equifax breach was a wakeup call and with this action New York is raising the bar for consumer protections that we hope will be replicated across the nation.”
Under the proposed regulations, every consumer reporting agency that assembles, evaluates or maintains a consumer credit report on NYS consumers must register with the State by February 1, 2018 and have in place a written cybersecurity program by April 4, 2018. The program must identify and assess internal and external cybersecurity risks that may threaten non-public information, including personally identifying consumer information. The program must include provisions that address data governance and classification, asset inventory and device management, access control and identity management, systems and network security and monitoring, as well as other mandated areas.
Because the elements required to be addressed in the program are comprehensive, credit reporting agencies should begin the process of developing the program now to meet the April 4, 2018 deadline. Once the program is in place, moreover, the regulations also mandate phase in implementation dates for additional minimum protective standards that must be met. These include requirements for annual penetration testing, bi-annual vulnerability assessments, limitations on data retention, encryption of non-public information and system generated audit trails to detect and respond to cybersecurity events.
Each agency must conduct a risk assessment of its information systems to include criteria for the evaluation and categorization of identified internal and external threats facing the organization. The risk assessment must describe how identified risks will be mitigated or accepted and how the program will address those risks. Significantly, the risk assessment must not only address external hacking threats, but also require the identification and mitigation of risks posed by employees and other insiders, such as trusted vendors and independent contractors. For example, employees who remotely access internal networks must be subject to multi-factor authentication or other “reasonably equivalent or more secure access controls.”
Each organization must also designate a qualified person as a Chief Information Security Officer responsible for implementation and enforcement of the program. The CISO will ultimately be responsible for responding to requests for “examination by the Superintendent of Financial Services as often as the Superintendent may deem it necessary.” There are also breach notification requirements, as well as a mandate that the Board of Directors or a Senior Officer annually certify compliance with the cybersecurity regulations. Failure to comply may result in revocation of the agency’s authorization to do business with New York’s regulated financial institutions and consumers.
Stay tuned to whether New York State’s call to action takes hold across the nation. In the meantime, you may find the governor’s press announcement by clicking here.