Beyond the Privacy Policy: Toward Effective Data Governance

Foley Hoag LLP - Privacy & Data Security
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Foley Hoag LLP - Privacy & Data Security

Shifting how businesses think about privacy.

Let’s stop thinking about privacy policies alone, and let’s start thinking about data governance plans.

For the ordinary business trying to generate revenue and minimize risk, having to think about data privacy can be both a nuisance and a headache.  Generally, it’s easy to want to think about privacy as something that can be dealt with using minimal resources—by updating a template privacy policy and posting it on a website, for example.  But since the implementation of the European Union’s General Data Protection Regulation (the GDPR) in May 2018, there has been a marked shift in thinking about privacy:  that is, good privacy practices should be thought of as moving away from cabining privacy to a technical issue reserved for specialists (conflating privacy with mere technical security), and toward risk management and governance for which there is, or ought to be, enterprise-wide awareness and accountability.

Why has the GDPR affected such a change?  There are two clear and overlapping reasons.  The first is that the GDPR introduced many U.S. businesses to a comprehensive data privacy regime with teeth.  U.S. data privacy law is notoriously sector-specific and fragmented.  There are divided opinions on whether this is a virtue or a vice, but the bottom line is that organizations in heavily-regulated industries, like health care, have had to meet a different set of regulatory expectations in handling and protecting personal information than have other kinds of businesses.  But the GDPR has made much more universal the reach of robust data privacy compliance rules, requiring a number of businesses for the first time to consider the complexities of their data flows.  Understanding something as basic as what data is collected and where it goes is fundamental to being able to comply with the heart of the GDPR:  effectuating individual data privacy rights, which in the EU (in contrast to the U.S.) are thought of and treated as human rights.

The second reason is that other legal regimes are following suit, and businesses can see the obvious trend toward clearly-defined data privacy rights zealously enforced.   Brazil, for example, passed a comprehensive data privacy regulation similar in many respects to the GDPR, which becomes effective in 2020.  Japan, in order to make data flow between it and the EU easier (since the GDPR has restrictive cross-border data transfer rules), recently passed rules increasing protections relating to data transfers and entered into a reciprocal data-transfer arrangement with the EU.

And in the U.S., California passed a comprehensive law (the California Consumer Privacy Act, or CCPA) that goes into effect in 2020, also defining clear data privacy rights similar to the GDPR.  (We have written and talked about the CCPA extensively elsewhere.)  While the CCPA is alone among states for now, it will not be alone for long.  New York and Washington recently tried (and failed) to pass similar laws, and states like Massachusetts have such laws winding through their legislatures.  California has long been a trend-setter when it comes to data privacy; it is poised to continue in that role.

The practical importance of privacy policies.

To understand what this all means as a practical matter, let’s return to the privacy policy.  Privacy policies are statements to consumers about an organization’s privacy practices.  They are ubiquitous in the U.S., and they have some important legal features.  One important legal feature is that they can be legally binding instruments on consumers.  In the U.S., a consumer can implicitly consent to an organization’s set of privacy practices simply by using the services, without needing to manifest such consent (such as through a checkbox saying “I have read and understood your privacy policy”).  So simply by logging onto a website, a consumer can be deemed to have agreed to the website owner’s use of cookies and the capturing and sharing of an IP address, which can be valuable information to businesses seeking to analyze consumer behavior (and advertise to consumers).  The more information that is shared, the more a business can analyze or share itself.

Another important legal feature is that privacy policies can be legally binding instruments on businesses.  With some exceptions, privacy policies are essentially the manifestation of a self-regulating privacy regime in the U.S. that focuses on privacy as a question of consumer fairness.  So consumer protection entities, like the Federal Trade Commission or state attorneys general, can use privacy policies as a hook for investigative activities and enforcement actions in the event of a data breach or other instance in which consumer personal information has been at the center of some consumer harm.  But the key question is what the privacy policy has promised.  Companies will be held to their promises and the obligations they themselves have held out.  Again, allowing for specific exceptions (such as children’s data, which is specifically protected by federal statute), it is the profession of a specific promise that will make the company liable, and not an independent data privacy right.

To see why this is changing, think about how a privacy policy works within the GDPR regime.  If every individual has a bundle of data privacy rights guaranteed by statute (specifically, the right to have access to one’s data, to have that data correct, to have that data deleted, as example), then a privacy policy is no longer a self-regulating instrument, but a statement of rights that acts as a reminder to the consumer (and provides an important roadmap for effectuating those rights).  Like an OSHA posting in an employee cafeteria, it is an important reminder of one’s rights, but the rights exist independently of the statement.  Moreover, there is no such thing as implicit consent under the GDPR; as consumer expectations fall in line with manifest and informed consent, then placing a privacy policy through a link at the bottom of a website will no longer do.  If the GDPR is just the beginning of a flood of such changes to what privacy rights and how they must be handled, then the privacy policy is soon to undergo a dramatic shift.

Toward effective data governance.

The truth is, given the complexity, ubiquity, and importance of personal data to global commerce, no single document can capture all that is important to managing a company’s use and management of personal data.  A policy, in the end, is a statement of practices.  In order to be meaningful (and, by the way, in order to minimize legal liability), data privacy practices must be considered and developed carefully, and as part of an overall data management structure that incorporates best risk management and governance practices.  In short, it’s not a privacy policy you want, it’s a data governance plan.

When clients ask me about making their privacy policies legally compliant, they might be expecting a privacy policy from a template.  While sometimes there is a place for that, what they usually get (and need) is very different:  an inquiry into what their data flow looks like, what their data management practices are, who their internal stakeholders are, what third parties they contract with, who potentially affected individuals are, how they secure their data, what they promise to (and ask of) their employees, and what jurisdictions they operate in.  I am here simplifying my questions.  The end of this process will of course almost always include a privacy policy.  It will also often include an information security policy, a security incident response plan, and an employee privacy notice.  It will usually include the drafting of new contract language, the identification of a cybersecurity firm to handle security and breach response, the vetting (and perhaps replacing or first-time-purchasing) of a cyberinsurance policy, and a public relations strategy to help with business continuity and crisis management.

In other words, thinking about data privacy is thinking top to bottom, inside and out, internally and externally, about a wide-ranging set of practices and risks that increasingly have more to do with how a company holistically operates than simply what document a company puts on its website.  And as more laws look more like the GDPR, the importance of engaging in, and maintaining, these data governance practices will increase and, we might all reasonably expect, become ubiquitous.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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