California Consumer Privacy Act Update: Assembly Approves 12 Amendments - Changes Would Exclude Employees and Vehicle Information, Protect Loyalty Programs

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  • California's protracted legislative and regulatory process has complicated the landscape for businesses needing to implement the operational, technical and procedural changes required by the California Consumer Privacy Act.
  • California lawmakers introduced a series of bills in 2019 to clarify and refine the scope of the Act prior to the effective date of Jan. 1, 2020. One notable proposal to expand the private right of action was blocked during the legislative process. A number of other bills have passed the California Assembly and now are being considered in the Senate.
  • Industry has supported the need to remove certain categories of data, namely employees and contractors, from the scope of the law, as well as the need to protect businesses' disparate treatment of consumers who are part of loyalty programs. Whether those bills will be signed into law, however, may not be clear for several more months.

California enacted the California Consumer Privacy Act (CCPA) last year in an expeditious compromise between consumer privacy advocates, legislators and businesses. In return, advocates agreed to drop a ballot initiative from the November 2018 election that could have resulted in more stringent privacy protections. The final bill reflected the rushed circumstances under which it was passed, and state legislators soon passed a series of amendments to fix key issues in the new law. The private sector nevertheless remained concerned that aspects of CCPA were too vague and broad-based, making any understanding of the Act difficult to implement and complicated for consumers to understand.

The Act directs the California State Attorney General to issue regulations on seven important areas, including potential additional categories of "personal information" within scope of the CCPA, the rules and procedures governing the submission of consumer requests to opt-out of the sale of personal information and businesses' compliance with the same, and certain exceptions to the law. See Civil Code §1798.185.

The Office of the California Attorney General held a series of CCPA public forums where staff indicated that draft regulations can be expected by fall 2019. (See Holland & Knight's alert, "Final Public Forum Held on California Consumer Privacy Act," March 7, 2019.) Given that time frame and the mandatory public comment period on any draft regulations, it is unlikely that the implementing regulations will be finalized prior to the CCPA's effective date of Jan. 1, 2020. Fortunately, the Act provides that the state may not begin any enforcement until six months after final regulations are enacted. Civil Code §1798.185(c). Consumers, on the other hand, can bring a private right of action for violations of the statute's data breach provision or under California's Unfair Competition Law as soon as the Act goes into effect. Complicating businesses' efforts to operationalize the CCPA is the fact that the Act includes a one-year, look-back window, requiring businesses to provide personal information for the prior 12 months in response to consumers' verifiable requests. Civil Code §1798.130.

Against this background, California lawmakers introduced a series of bills in 2019 to clarify and refine the scope of the Act prior to the 2020 effective date. One notable proposal to expand the private right of action was blocked during the legislative process. A number of other bills have passed the California Assembly and now are being considered in the Senate. Industry has supported the need to remove certain categories of data, namely employees and contractors, from the scope of the law, as well as the need to protect businesses' disparate treatment of consumers who are part of loyalty programs. Whether those bills will be signed into law, however, may not be clear for several more months. The California Senate has until Sept. 13, 2019 to bring bills to a floor vote, and Gov. Gavin Newsom must sign or veto legislation by Oct. 13, 2019.

California's protracted legislative and regulatory process complicates the landscape for businesses needing to implement the operational, technical and procedural changes required by the law. This means that privacy and compliance personnel, in consultation with legal and business stakeholders, will need to weigh risk-based decisions involving implementation, as well as take into account the viability of CCPA-like bills in other states and potential federal legislation.

Overview of Bills Passed by California Assembly

A dozen bills have passed in the California Assembly. A series of deadlines exist for the bills to be signed into law, including deadlines to pass in committees, pass a Senate floor vote and to be signed by the governor. How quickly the process will move is unclear. For that reason, it is important for businesses to monitor the direction of bills in order to understand the impact of CCPA, as well as the likely scope of what compliance may mean, come January 2020.

  • AB 25 California Consumer Privacy Act of 2018 [to exclude employees], passed Assembly (61-0) on May 29, 2019. One of the most closely watched bills, AB 25 would amend Section 1798.140(g)(2) of the Civil Code to clarify that the definition of "consumer" does not include job applicants, employees, agents of a business or contractors — defined as a natural person providing services to a business pursuant to a written contract — provided that the individual's personal information is collected and used by the business solely in that context. Although it is considered a significant improvement over the Act's existing language, the bill as currently in print still does not address a variety of business relationships, such as investors, franchisees or authorized dealers/licensees.
  • AB 846 Customer loyalty programs, passed Assembly (50-1) on May 28, 2019. As amended, the bill would add language to the CCPA confirming that a business may charge higher prices or provide a lower level of service to a consumer who exercises rights under the Act, provided that the differential treatment is reasonably related to the value provided to the business by the customer's data, or is in connection with the customer's voluntary participation in a loyalty, rewards or discount program.
  • AB 873 California Consumer Privacy Act of 2018 [to redefine personal information], passed Assembly (56-0) on May 22, 2019. As amended, this bill would 1) revise the definition of personal information [Civil Code §1798.140(o)(1)] to include information that is "reasonably capable of being associated with" a particular consumer or household, as opposed to "capable of being associated with a particular consumer or household" and 2) replace the definition of "deidentified" [Civil Code §1798.140(h)] to, instead, mean information that does not identify, and is not reasonably linkable, directly or indirectly, to a particular consumer, provided that the business makes no attempt to reidentify the information and takes reasonable technical and administrative measures designed to a) ensure that the data is deidentified, b) publicly commit to maintain and use the data in a deidentified form, and c) contractually prohibit recipients of the data from trying to reidentify it. This bill also revises a provision [Civil Code §1798.145(i)] of the CCPA prohibiting the Act from being construed to require a business to reidentify or otherwise link information that is "not maintained in a manner that would be considered personal information" to instead refer to information that is "not maintained as personal information." The bill was referred to the Senate Judiciary Committee on May 29, 2019.
  • AB 874 California Consumer Privacy Act of 2018 [to redefine personal information], passed Assembly (76-0) on May 9, 2019. This bill would redefine "publicly available" personal information [Civil Code §1798.140(o)(2)] to mean information that is lawfully made available from federal, state or local records, and clarify that "personal information" does not include deidentified or aggregate consumer information. The bill has been referred to the Senate Judiciary Committee.
  • AB 981 Insurance Information and Privacy Protection Act, passed Assembly (77-0) on May 22, 2019. Introduced with the aim of wholly exempting insurance institutions, agents and support organizations (collectively, "insurers") from the CCPA, AB 981 was amended in committee and now would excuse insurers subject to the Insurance Information and Privacy Protection Act (IIPPA) from complying with consumers' requests to delete personal information [Civil Code §1798.105] and to opt-out of the sale of personal information [Civil Code §1798.120], but only to the extent necessary to complete an insurance transaction. The exemption would not apply to the limited private right of action for data breaches in the CCPA or business activities not subject to the IIPPA. AB 981 would also harmonize some of the consumer protections contained in the CCPA with the requirements of the IIPPA by updating disclosures and requiring insurers to provide a notice of information practices, including the categories of personal information collected and for what purpose. The bill has been referred to the Senate Insurance and Judiciary Committees.
  • AB 1138 Social media: the Parent's Accountability and Child Protection Act, passed Assembly (41-5) on May 23, 2019. As amended, the bill would restrict children under age 13 from opening a social media account without parental consent, beginning July 1, 2021. The bill would permit a business to use any Federal Trade Commission-approved verification method to certify parental consent.
  • AB 1146 California Consumer Privacy Act of 2018: exemptions: vehicle information, passed Assembly (56-0) on May 23, 2019. As amended, the bill would exempt from the CCPA vehicle information — defined as VIN, make, model, year, odometer reading, and the name and contact information of the registered owners — shared between a new motor vehicle dealer and the vehicle's manufacturer. The exemption applies only, however, if the information is shared pursuant to or in anticipation of a vehicle repair relating to warranty work or a recall. The amendment would not excuse dealers and manufacturers from complying with CCPA's notification [Civil Code §1798.100] and disclosure [Civil Code §§1798.110, 1798.115] requirements. Nor would dealers and manufacturers be protected from civil actions brought under Section 1798.150.
  • AB 1202 Privacy: data brokers, passed Assembly (53-13) on May 28, 2019. The bill would require data brokers to register with the State Attorney General (AG), require the AG to create a public registry of data brokers and grant enforcement authority for violations to the AG.
  • AB 1281 Privacy: facial recognition technology: disclosure, passed Assembly (61-13) on April 25, 2019. This bill would require a brick and mortar business in California to disclose the use of facial recognition technology with a clear and conspicuous sign at the entrance of the location. A business that fails to comply with the provisions shall be liable for a civil penalty of up to $75 per violation but not to exceed $7,500 annually. The bill has been referred to the Senate Judiciary and Appropriations Committees.
  • AB 1355 Personal information, passed Assembly (76-0) on May 9, 2019. As amended, this bill would exclude deidentified or aggregated information from the definition of personal information [Civil Code §1798.140(o)], and clarify that permissible discrimination [Civil Code §1798.125] must be reasonably related to the value provided to the business by the consumer's data. The bill has been referred to the Senate Judiciary Committee.
  • AB 1416 Business: collection and disclosures of consumer personal information, passed Assembly (47-17) on May 29, 2019. This bill would clarify that the CCPA does not restrict businesses' ability to comply with any applicable rules and regulations, and would expand the permissible reasons that a business need not comply with consumers' rights requests. A business would be required to notify a consumer of the reasons for not taking action.
  • AB 1564 Consumer privacy: consumer request for disclosure methods, passed Assembly (65-0) on May 13, 2019. This bill would ease the burden on businesses' handling of consumer rights requests by expanding the permissible methods by which a business may direct a consumer to submit such requests, and clarifying that an online-only business need only provide an email address for requests. The bill has been referred to the Senate Judiciary Committee.

California Bills Introduced But Not Passed

Lawmakers introduced a number of bills to amend CCPA that did not move forward in the legislative process. Many of the bills included key themes that are important to businesses.

  • AB 288 would have required social networking services to provide users who close their account with the option to have their personal information permanently deleted. Set for hearing in late April, it was canceled at the request of Assembly Member Jordan Cunningham.
  • AB 1760, which would have required opt-in consent for the sharing of personal information, was pulled from consideration by Assembly Member Buffy Wicks when it became apparent it lacked the votes to pass out of the Assembly Privacy and Consumer Protection Committee.
  • SB 752 would have clarify the duties and responsibilities of advisory boards and commissions established in the CCPA. The bill failed in the Appropriations Committee.
  • SB 753 would have excluded certain advertising practices from the definition of a "sale" under the Act. The bill was removed from the agenda before its April 23, 2019, hearing in the Senate Judiciary Committee.
  • SB 561 was sponsored by California Attorney General Xavier Becerra to significantly expand civil actions brought under the Act by allowing a consumer to bring a private action for a violation of any provision of the CCPA. The bill also would have eliminated the 30-day window for a business to cure an alleged violation of the Act and reduced the administrative burden on government by removing the ability of businesses to seek the opinion of the AG on CCPA compliance. The Appropriations Committee took the bill under submission, and it was never brought to a vote.

States Across the Country Are Considering Privacy Legislation

Nearly two dozen states introduced substantive privacy legislation in 2019. Many states followed California's lead by introducing sweeping bills akin to CCPA. But few of the broader CCPA-like bills are moving forward. In Washington state, for instance, the Washington Privacy Act promptly passed through the State Senate (46-1) only to fail to come to a vote in the House before the legislative session expired. Bills introduced in Mississippi, New Mexico, Texas and Rhode Island also all appear dead.

On the other hand, more focused legislation has succeed in a number of states. In early May, Hawaii sent a bill to Gov. David Ige that, if signed, would prohibit the sale of location data collected by smartphones without the explicit consent of the user. On May 29, 2019, Nevada Gov. Steve Sisolak signed SB 220, which gives consumers the right to opt out of the sale of covered information by internet service providers and websites. And Maine appears poised to pass legislation that would prohibit internet service providers from selling customers' data without consent. Nevada [Nev. Revised Stat. §205.498] and Minnesota [Minn. Stat. §§325M.01 to 325M.09] already have similar laws to the one being contemplated in Maine.

Privacy Legislation in Congress

There is bipartisan support in Congress, and across the private sector, for federal privacy legislation. Key members of Congress are working on a compromise to address heavily regulated sectors, such as healthcare and the financial industry, as well as the technology sector and other areas that do not currently have significant privacy requirements. Challenges in the legislative process and the need for a bill that can span industry sectors and stand the test of time, however, means that the process may spill into 2020. As a result, it appears unlikely that a federal bill will be signed into the law by President Donald Trump before CCPA's compliance deadline.

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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