In Canada, several federal and provincial laws and regulations govern cybersecurity and data protection, each addressing a particular issue. Due to its complex nature, businesses should ensure they understand what legislation applies to them and identify what their obligations are under the applicable legislation, as failure to comply can result in significant financial and reputational harm. By understanding this governing framework, organizations can be proactive and implement the necessary procedures to ensure they properly protect their business and clients. This article will provide a brief overview of the relevant statutes, regulations and case law relating to data protection and cybersecurity. Following this overview, we will also provide key take-aways and next steps.
There are several federal and provincial privacy laws that regulate the protection of personal information across Canada1. In relation to cybersecurity and data protection, the most relevant pieces of legislation are the Personal Information Protection and Electronic Documents Act2 (PIPEDA) and Canada’s Anti-Spam Legislation3 (CASL).
PIPEDA sets out the privacy obligations that many private sector organizations in control of personal information must adhere to in the course of their commercial activities.4 The provisions set out in PIPEDA relating to data protection and cybersecurity provide that organizations in control of personal information, must implement appropriate security safeguards to protect the sensitivity of the information.5
As of November 1, 2018, PIPEDA was amended to require that all organizations report to the Commissioner of any breach to their security safeguards,6 notify individuals and other organizations of breaches, where appropriate,7 and maintain a record of all security breaches for a two-year period.8 Failure to comply with these provisions could result in a fine of up to CA$100,000. More significantly, organizations face the risk of individual lawsuits or class action lawsuits, which could lead to costly litigation, substantial settlement costs or damage awards, and reputational harm. Consequently, all organizations must ensure they have a designated individual who will ensure the organization’s compliance with the provisions and principles set out in PIPEDA9 to reduce the risk of cybersecurity breaches and resulting liabilities.
CASLregulates the use of commercial electronic messaging, and aims to protect against its misuse, including spam and other electronic threats.10 Specifically, CASL restricts the ability to send electronic messages,11 or install programs on computers and networks, without express consent of the recipient.12 This includes malware, spyware, and viruses in computer programs, spam messages, or downloaded content through infected web links. Failure to comply with these provisions could result in a fine of up to CA$1 million for individuals, and up to CA$10 million for corporations, per violation.13 Under the private right of action, CASL also allows organizations to be sued by anyone claiming to have been affected by an act or omission that violated CASL.14 CASL applies to all individuals and business who are located in Canada. It is, therefore, important that organizations ensure compliance with these provisions to avoid potential fines or lawsuits that may arise.
A list of industry regulators—including the Office of the Superintendent of Financial Institutions,15 the Canadian Securities Administrators,16 the Investment Industry Regulatory Organization of Canada,17 the Ontario Privacy Commission,18 and the Mutual Fund Dealers Association of Canada19—have implemented a number of guidelines and tools to assist organizations with addressing cybersecurity-related issues. These guidelines specifically focus on enhancing an organization’s available resources, awareness and understanding of cybersecurity issues, and providing guidance regarding the development and implementation of cybersecurity procedures and controls.
As a result, an industry standard for preventing against cybersecurity risks developed, and the expectation is that organizations should: (i) identify what risks are most applicable to them; (ii) conduct an assessment on their current level of preparedness if a breach were to occur; (iii) develop and maintain an appropriate and effective cybersecurity policy based on those results; (iv) consistently review cybersecurity policies to ensure they are still appropriate; (v) continue to educate employees on cybersecurity risks; (vi) have an emergency response plan in the event of a breach or threat; and (vii) purchase new or review existing cybersecurity insurance policies for a last line of defense.
There have been significant developments in the body of case law in Canada relating to privacy violations. One such development is an increase in individual and class action lawsuits against organizations that have suffered a privacy breach because of an employee making an error or “snooping”.20 It is important to note that the courts have left open the possibility for organizations to be vicariously liable for their employees who intentionally violate privacy regulations. Thus, organizations should ensure they have both the necessary employee training to educate their staff on privacy legislation, and have appropriate supervision practices in place.
Another development has been the significant rise in class action lawsuits relating to data breaches by external third parties. These cases have generally been rooted in claims of negligence, breach of contract, breach of privacy, and other statutory breaches.21 Although none of these cases have been decided by the court, a large portion of them have been settled outside of court, and the settlement costs the organizations were required to pay were significant. As a result, it is important for organizations to be aware of the financial and reputational costs they could suffer should they face a data breach.
As illustrated in the class action lawsuits above, cybersecurity attacks and data breaches pose a significant threat to organizations. As cybersecurity attacks continue to occur, organizations should consider them an inevitable business risk they must prepare for. It is, therefore, imperative that businesses understand the governing framework of cybersecurity and data protection, to ensure the applicable requirements and restrictions are adhered to, and the proper protection or procedures are implemented to reduce the risk of financial, reputational and legal harm. Otherwise, organizations face the risk of class action lawsuits, which can result in costly litigation, and substantial settlement costs or damage awards, as demonstrated above.
It is prudent for businesses to keep top-of-mind the legal requirements and industry standards when it comes to protecting the organization and clients from cybersecurity attacks and data breaches. However, even with the most the effective and technologically advanced security safeguards, cybersecurity attacks and data breaches still occur. As a result, even if an organization follows all legal and regulation requirements, it remains at risk of significant financial harm when a breach occurs. To protect the organization from significant financial harm, it is crucial for organizations to purchase and maintain the right cybersecurity insurance policy. The next article will discuss what cybersecurity insurance is, what type of protection it offers, the importance of having it, and the limitations and issues of cyber insurance policies today.
A special thank you to Emeleigh Moulton (summer student) for her assistance with this article.
1 Including: provincial privacy laws governing the protection of personal health information (e.g. Ontario’s Personal Health Information Protection Act, the Bank Act, and the Privacy Act).
2 SC 2000, c 5 [PIPEDA].
3 SC 2010, c 23 [CASL].
4 PIPEDA applies to federally-regulated organizations, and to the protection of personal information in the course of commercial activities in all jurisdictions that do not have substantially similar legislation. British Columbia, Alberta and Québec are the only provinces to have substantially similar legislation. Thus, PIPEDAapplies in all other provinces and territories, including Ontario.
5 PIPEDA, supra note 2 schedule 1, Articles 4.7 Safeguards.
6 Ibid., s 10.1(1). Organizations must report any breach of security safeguards involving personal information under its control if it is reasonable, in the circumstances, to believe the breach creates a real risk of significant harm to an individual. Definition of significant harm is defined in s.10.1(7) as including: bodily harm, humiliation, damage to reputation or relationships, loss of employment, business or professional opportunities, financial loss, identity theft, negative effects on the credit record, and damage or loss of property.
7 Ibid., ss 10.1(3) and 10.2(1). Organizations must notify an individual of a breach involving their person information if it is reasonable to believe the breach creates a real risk of significant harm to the individual. If the organization does notify the individual, they may also have to notify other organizations or government institutions of the breach if the organization believes the other organizations or government institutions may be able to reduce the risk of the harm.
8 Ibid., s 10.3(1).
9 Ibid., Schedule 1, Article 4.1.
10 CASL, supra note 3 s 3.
11 Ibid, s 6.
12 Ibid, s 8.
13 Ibid, s 20(4).
14 Ibid, s 47(1)
15 OFSI regulates federally-regulated financial institutions. They have created a cybersecurity self-assessment guide and an operational risk guideline. Together, the tools allow organizations to identify and implement appropriate cybersecurity procedures/policies according to the characteristics of the organization (e.g., size, structure and risk profile).
16 The CSA is an organization that overlooks provincial and territorial securities regulators. CSA recognizes that cybersecurity is a major concern, and has released staff notices to emphasize awareness of cybersecurity issues, and what measures should be taken to safeguard the company and the company’s clients. See staff notices 11-326 and 11-332.
17 The IIROC implemented a “Cybersecurity Best Practices Guide,” which helps dealer members manage cybersecurity risks. It also implemented a “Cyber Incident Management Planning Guide” to assist dealer members in the effective preparation of internal cyber-incident response plans (for small- and medium-sized dealer members).
18 The OPC implemented a “PIPEDA Security Self-Assessment Tool”, which is a voluntary tool to help organizations achieve compliance with PIPEDA.
19 The MFDA released Bulletin 0690-C: Cybersecurity, to help enhance awareness of cybersecurity-related issues, best practices for implementing cybersecurity procedures, and other available resources.
20 See John Doe and Suzie Jones v. Her Majesty the Queen, 2015 FC 916. Also, the more recent data breach to a retail banking company where an employee released personal information of almost three million members.
21 See Zukerman c. Target Corporation, 2015 QCCS 1285, which dealt with a massive credit card breach of all its customers. Other class action suites include a Canadian online dating service (sensitive information hacked and released to public) filed in 2015 and Marriott Hotel suit in Calgary filed in 2019.