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Lock It Up (Encrypt)

In honor of National Cybersecurity Awareness Month, we’re sharing our top practical tips for small businesses to keep their data secure.  Tip #1 is encryption.  The National Institute of Standards and Technology (NIST) defines encryption as “the process of transforming plaintext into ciphertext using a cryptographic algorithm and key.”  In plain terms, encryption is the process of securing data by using a digital lock and key. 

The premise behind encryption is pretty simple.  If you want to keep private papers from prying eyes, how would you do it?  You could put the papers in a safe.  Only someone who knows the combination to the safe can open it and access the papers inside.  Encryption does the same thing to data, except using digital methods.  Encryption essentially “locks” data by scrambling it so it becomes unintelligible to anyone who doesn’t have the “key” necessary to unscramble it.  The idea is that scrambled data is useless to anyone who can’t unscramble it.  It doesn’t matter if the encrypted data falls into the hands of a hacker or is released to the public due to a data security breach.  Data that looks like gibberish isn’t very useful.

Understanding this principle is the key to minimizing legal liability under data privacy laws.  Take Hawaii’s data breach notification law, for example.  The breach notification requirements of Hawaii Revised Statutes chapter 487N-2 apply when a “security breach” has occurred.  The term “security breach” refers to “an incident of unauthorized access to and acquisition of unencrypted or unredacted records or data containing personal information where illegal use of the personal information has occurred, or is reasonably likely to occur and that creates a risk of harm to a person.”  Did you catch the reference to “unencrypted” records?  If data that is the subject of a breach incident acquisition is encrypted, then a “security breach” did not happen for purposes of HRS 487N-2, and compliance with the breach notification requirements of the statute is unnecessary.

The California Consumer Privacy Act (CCPA) that will take effect on January 1, 2020 is another example.  A business can be sued by a consumer whose “nonencrypted or nonredacted personal information” is subject to unauthorized access and is copied, transferred, stolen, or disclosed due to the business’s failure to use reasonable security procedures.   Want to reduce exposure to private lawsuits under the CCPA?  Encrypt consumer data.

The General Data Protection Regulation (GDPR) isn’t quite as black-and-white in carving out liability for encrypted data, but the law certainly incentivizes encryption.  For example, Article 34 of the GDPR provides a safe harbor from the data breach notifications where “the controller has implemented appropriate technical and organizational protection measures, and those measures were applied to the personal data affected by the personal data breach, in particular those that render the personal data unintelligible to any person who is not authorized to access it, such as encryption.”  (Emphasis added.)  While encryption won’t guarantee exemption from the GDPR’s data breach notification requirements, failure to encrypt data almost certainly would trigger the requirements.

It should be fairly obvious by now that encrypting sensitive data is a highly recommended, if not mandatory, cybersecurity measure.  How encryption fits into your cybersecurity program depends on your organization’s IT system, the type of data at issue, operational needs, and cost, among other factors.  Encryption can deployed at different stages of the data lifecycle.  Encryption can also be paired with other data security practices such as pseudonymization and anonymization.  Consult a cybersecurity expert and privacy lawyer to determine how best to use encryption to secure your data and minimize legal liability.

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A sea change in data protection law in the European Union (EU) is about to take place, and your organization doesn’t have to be based in the EU to feel its impact.  The General Data Protection Regulation (GDPR) will take effect on May 25, 2018.  The GDPR applies not just to EU Member States, but also to U.S. organization with EU-based employees.  Any U.S. organization that has a branch, office, affiliate, franchise, or agent based in the EU should check if it must comply with the GDPR.  Failure to comply with the GDPR can lead to fines of up to 20 million euros or 4% of annual global turnover (revenue), whichever is higher.

The GDPR regulates how “personal data” of EU citizens is collected, stored, processed, and destroyed.  The GDPR definition of “personal data” has a broader meaning than how U.S. laws usually define the term.  In addition to typical identifying information (e.g., name, address, driver’s license number, date of birth, phone number, or email address), “personal data” under the GDPR includes more expansive categories of data such as salary information, health records, and online identifiers (dynamic IP addresses, cookie identifiers, mobile device IDs, etc.).  The GDPR also provides heightened levels of protection for special categories of employee data, including racial and ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, data concerning an employee’s health, sex life, or sexual orientation, and biometric and genetic data.

The GDPR has wide-ranging effects on data collection, use, and retention.  Some of the data practices regulated by the GDPR include:

  • Data processing – Consent is one legitimate basis for processing personal data of employees, but the GDPR requires that consent be freely-given, specific, informed, and revocable. This means most blanket consent provisions typically found in employment contracts are not valid.  If obtaining consent according to GDPR requirements isn’t practical, an employer might need to rely on other legal bases for processing employee data.  Processing employee data is legal if it is necessary for the performance of the employment contract, required by law, or in the employer’s legitimate interests which outweigh the general privacy rights of employees.
  • Employee monitoring – The GDPR limits what employers may do with data obtained through employee monitoring.
  • Notification – The GDPR specifies what information employers must include in notices informing employees about the kind of personal data that will be collected from them.
  • Right to be forgotten – Under certain circumstances, data subjects have the right to require data controllers to erase their personal data.
  • Data portability – A person is entitled to transfer their personal data from one electronic processing system to another without being prevented from doing so by the data controller.
  • Data breach – The GDPR governs the procedures and substantive requirements for giving notification of a personal data breach.

Now is the time to revisit your employment contracts and policies with privacy counsel to ensure compliance with the GDPR.

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Digital privacy versus national security. That’s how scores of articles have framed the controversy over Apple Inc.’s refusal to cooperate with the FBI in bypassing the security features of an iPhone used by Syed Farook, one of the deceased shooters in the San Bernardino terrorist attack. Largely overlooked is the fact that Farook’s employer could’ve prevented the whole controversy had it installed common software on the phone.

Syed worked for the County of San Bernardino as a health inspector. The county issued the iPhone in question to Farook to help him do his job. Farook signed an agreement giving the county the right to search the contents of the phone, but the county did not take measures to ensure its could enforce that right. Employers who allow their employees to use mobile devices for work typically install mobile device management (MDM) software on the device. MDM allows the employer to unlock a mobile device phone remotely, wipe the contents of the device, push software updates, and track the device’s location. According to an AP report, the county had a contract with a MDM provider, but it never installed the MDM software on Farook’s phone. The MDM service costs $4 per month per phone.

There are HR and IT lessons to be learned from this incident. One lesson is that employees should be required to grant their employers access to their mobile devices as a condition of using them for work-related purposes. Specifically, management should obtain an employee’s signed written agreement authorizing the company to access the contents of a mobile device that is connected to the company network. The County of San Bernardino did it at least obtain this kind of authorization.

A second lesson is that the right to access an mobile device is useless if you have no practical way of gaining access. This is where technology like MDM software is useful. Installation of MDM controls should be standard operating procedure in any Bring Your Own Device program. MDM software doesn’t have to be expensive either. Popular email server platforms like Microsoft Exchange have MDM controls built in. For more robust functionality, consider investing in specialized MDM solutions.

It shouldn’t take the prospect of a terrorist attack to highlight the importance of taking these lessons seriously.

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Your employees may return to the office after the holidays with new gadgets strapped to their wrist. Wearable devices like the Apple Watch, Android Wear smart watch, and FitBit are some of the hottest holiday gifts of 2015. Or maybe your company gave wearable devices as gifts to its employees. Either way, wearables are showing up more and more in the office. With that trend come a slew of legal concerns. Here are some of the legal issues created by wearables to be aware of:

Privacy

Wearable devices make it easier to violate privacy rights. If the wearable device is employer-issued, it could be used to track and monitor employees. Be sure to give notice to employees before doing that, and obtain their written consent to having their activity monitored. Employees should be told what information the company collects and how it will be used. If your workforce is unionized, use of wearables for monitoring purposes may be a point for collective bargaining.

Then there’s the privacy of co-workers. Some wearables can record audio and video, but they’re generally less detectable than smartphones and cameras. An employees’ ability to record interactions with co-workers and customers without their knowledge raises a variety of legal challenges. Workplace policies should explain the circumstances under which certain categories may or may not be used and describe the kind of notice employees who use wearables in the workplace must give to co-workers and customers.

Data Security

If a wearable device is allowed access to the company network, it should be subject to BYOD policies like use of encryption, strong password requirements, device locks, etc. Don’t let wearables be an undetected hole in your network’s security. Also be sure to preserve the right to collect work-related information stored on your employees’ wearable devices, as such access might be necessary to comply with information requests in an investigation or litigation.

Productivity

Smartphones and web browsers already give employees plenty of opportunities to engage in distractions that kill productivity, and wearables make that problem even more challenging. Consider modifying your workplace policies to address the use of company resources and company time to engage in personal activity using wearables.

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A recent National Labor Relations Board Shore Point Advisory Letter gives a bit of good news to employers who want to use modern monitoring technology to monitor employees that they suspect are breaking work rules. On November 2, 2015, the NLRB concluded that an alcoholic beverage distributor (Shore Point), did not violate labor laws by failing to negotiate with its employees’ union before installing a GPS tracking device on an employee’s company truck. Shore Point suspected that the employee was stealing time while on his work routes. Shore Point’s collective bargaining agreement contains rules against stealing time.

Shore Point hired a private investigator to follow the employee to collect evidence for disciplinary purposes, an established practice the union had not objected to in the past. The investigator placed a GPS tracking device on the employee’s truck to maintain and regain visual contact.  The GPS was only installed on the employee’s vehicle on the days when the investigator was following the employee, and was used as a backup method in case the investigator lost visual sight of the employee and his truck. Based on the investigator’s observations of the employee engaging in misconduct, Shore Point terminated the employee. The union filed a charge alleging that the employer unilaterally engaged in electronic surveillance without bargaining in violation of the National Labor Relations Act.

The NLRB determined that Shore Point did not have an obligation to bargain over the installation and use of the GPS device. Although the use of the device was a mandatory subject of bargaining, it did not amount to a material, substantial, and significant change in the terms and conditions of employment.  Shore Point had an existing practice of using a personal investigator to monitor employees suspected of misconduct. Using a GPS tracking device was just “a mechanical method to assist in the enforcement of an established policy,” and therefore was not a material, substantial, or significant change in policy.  The NLRB also noted that the GPS device only added to information that the private investigator had collected through personal observation, did not increase the likelihood of employee discipline, and did not provide an independent basis for termination.

At least two lessons can be learned from this case. First, when crafting employee work rules subject to bargaining, build in flexibility to allow for use of technological advances in enforcement methods. Second, disciplinary action against an employee should be supported with various types of evidence if possible. Just relying on evidence collected with a controversial or untested method is risky because if the use of the method is determined unlawful, the basis for the disciplinary action disappears.