Australia: New mandatory data breach notification laws

Last Updated: 22 May 2017
Article by Dudley Kneller

Australia has recognised the need to manage data breach events more effectively and ensure that affected individuals are notified in relevant circumstances.

Background

On 13 February 2017, the Australian Senate passed the Privacy Amendment (Notifiable Data Breaches) Bill 2016 (Cth) (the Bill). The Governor-General gave formal assent to the Bill on 22 February 2017, which will now see the Bill enacted into law from 22 February 2018.

It has taken some time for Australia to finally introduce a breach notification law. After a series of "false starts" in 2013 and 2014 Australia now has a notification obligation in place for notifying data breaches. Despite updating privacy laws in March 2014, Australia has been lagging behind other countries in relation to data breach notification obligations.

A number of States in the US have had data breach notification laws in place for some time. California, upon which many States have based their own laws, has had legislation in place since 2003. At the time of writing, 48 US States, the District of Columbia, Guam, Puerto Rico and the Virgin Islands have enacted legislation requiring private or governmental agencies to notify individuals of security breaches of information involving personal information.

Whilst there has now been a change in office, in January 2015, then US President Obama proposed a national data breach notification standard in the draft Personal Data Notification and Protection Act. The proposed scheme would require notification if there is any reasonable risk of harm or fraud to individuals following a data breach. It is not clear what plans the current Trump administration has for such a scheme noting it has not been high on the Trump agenda.

The European Union, as well as New Zealand, have both introduced breach notification laws. On 16 June 2015, Canada passed legislation to introduce a national mandatory data breach notification scheme.

It would therefore seem timely that Australia too has now recognised the need to manage data breach events more effectively and ensure that affected individuals are notified in relevant circumstances.

Where does the new data notification law fit in?

The law will complement Australia's existing privacy laws which are set out in the Privacy Act 1988 (Cth) (Privacy Act). The Privacy Act lists 13 Australian Privacy Principles, or APPs, which broadly apply to APP entities and which regulate how those organisations collect, store, manage and disclose personal information in Australia. There are some limited exceptions for organisations with less than $3 million in annual revenue, although the broad nature of the Privacy Act often brings smaller organisations back into play. Those organisations who deal with health related information and those working under Australian Government contracts are necessarily affected.

The details – what, who and how?

What?

The Bill will specifically bolster the operation of APP 11 which requires entities to take such steps as are reasonable in the circumstances to protect personal information they hold from misuse, interference and loss, and from unauthorised access, modification or disclosure.

The Bill is intended to cover data breach events. The Explanatory Memorandum at 7 states that "a data breach arises where there has been unauthorised access to, or unauthorised disclosure of, personal information about one or more individuals (the affected individuals), or where such information is lost in circumstances that are likely to give rise to unauthorised access or unauthorised disclosure."

Who?

As noted above, the law will apply to entities required to comply with the Privacy Act.

How?

An APP entity must notify the Australian Information Commissioner (the Commissioner) and affected individuals once it has reasonable grounds to believe there is an "eligible data breach." An "eligible data breach" occurs when:

  • there is unauthorised access to, or disclosure of, information, and a reasonable person would conclude that the access or disclosure would likely result in serious harm to any of the individuals to whom the information relates; or
  • information is lost in circumstances where unauthorised access to, or unauthorised disclosure of, information is likely to occur and, if it did occur, a reasonable person would conclude that the access or disclosure would be likely to result in serious harm to any of the individuals to whom the information relates.

Entities must consider whether it is likely that the data breach will result in "serious harm" to any of the affected individuals. In assessing this requirement, if a single individual is likely to suffer serious harm, then the entity will be required to notify under the Privacy Act.

There may be some exceptions which will apply, which are discussed further below. In the meantime it is important to understand some of the threshhold issues.

So what does "serious harm" mean?

The Bill's Explanatory Memorandum provides some guidance for affected entities. Serious harm can include the following:

  • serious physical, psychological, emotional, economic and financial harm, as well as serious harm to reputation and other forms of serious harm that a reasonable person in the entity's position would identify as a possible outcome of the data breach (at 9).

The Explanatory Memorandum does attempt to provide some helpful guidance for entities. It states that whilst individuals may be distressed or otherwise upset at an unauthorised access to or unauthorised disclosure or loss of their personal information, this would not itself be sufficient to require notification unless a reasonable person in the entity's position would consider that the likely consequences for those individuals would constitute a form of serious harm.

It seems therefore that some flexibility in determining when to notify is available to entities which was not otherwise a feature of earlier proposed breach legislation.

What should the notification say?

If an entity suspects that an eligible data breach has occurred, it must undertake an assessment into the relevant circumstances. In the event of an eligible data breach, an entity is required to notify the Commissioner and affected individuals as soon as practicable after the entity is aware that there are reasonable grounds to believe that there has been an eligible data breach (unless an exception applies). The notification must include:

  • the identity and contact details of the entity;
  • a description of the serious data breach;
  • the kinds of information concerned, and
  • recommendations about the steps that individuals should take in response to the serious data breach.

Whilst details relating to identity, affected information and contact details may sometimes be readily determined (although not in every case) other details may not be so easily included. When a breach event occurs the reality is far from straightforward. Often there is confusion as the organisation tries to establish the extent of the breach, and respond, minimise damage and restore affected systems. The uncomfortable reality is that breach events can evolve over time with sophisticated hackers often updating their own malware to defeat containment strategies from the affected organisation.

This can make it a challenge to comply with the notification obligations to include required information.

We need to notify, but how do we do it?

So you have determined that you need to notify an eligible breach and you are aware of what information needs to be included. But how do you go about it?

There are three options available to notify affected individuals.

An entity can choose one of the following:

  • if it is practicable to do so, take such steps as are reasonable in the circumstances to notify each of the individuals to whom the relevant information compromised in an eligible data breach relates, or
  • if it is practicable to do so, take such steps as are reasonable in the circumstances to notify those individuals who are considered to be at risk of serious harm from the eligible data breach, or
  • if it is NOT practicable to notify via either of the above methods, notify the individuals by publishing the statement on the entity's website and taking reasonable steps to publicise the statement. Examples of this option may include taking out advertisements in newspapers and online, social media platforms etc.

As you will note from the above, the common consideration is whether it is "practicable" for the entity to notify using the particular option. Consideration such as the cost involved in notifying, time and effort all need to be taken into account.

For data breaches involving a number of affected individuals spread across different states, an organisation may opt to notify via website, print and social media.

For a breach involving a smaller number of affected individuals whom the entity can readily identify as at risk of serious harm the entity is more likely to implement the second option.

In the case of an extensive breach compromising a number of databases containing user or account information it may not be immediately apparent which individuals are impacted. In this case notifying the entire group will allow potentially affected individuals to assess their own situation and take steps to update passwords, retrieve information or close accounts etc.

Every breach situation is likely to be different and it is therefore important that entities have a process in place around effective notification which takes likely breach scenarios into account.

Are there any exceptions to the notification requirements?

The Explanatory Memorandum includes some exemptions which are important to consider.

Certain government agencies including law enforcement bodies will not be required to notify affected individuals if compliance with this requirement would be likely to prejudice law enforcement activities.

If notification would be inconsistent with another Commonwealth law that regulates the use or disclosure of information, an entity will be exempt to the extent of the inconsistency. If compliance would be inconsistent with another law of that kind which is prescribed in regulations under the Privacy Act, an entity will be exempt from the notification requirement.

Finally, to avoid creating a double notification requirement, an unauthorised access, unauthorised disclosure or loss of personal information cannot give rise to an eligible data breach if that access, disclosure or loss has been, or is required to be, notified under the mandatory data breach notification requirement in s 75 of the My Health Records Act 2012 (Cth).

These are fairly limited exemptions. Are there any other exemptions which may be relevant?

Whilst the various exemptions listed above are important and will apply in those limited circumstances, the Bill does include further exemptions which will be of interest to a broader number of entities. An additional exemption applies where entities have taken remedial action following an eligible data breach or potential eligible data breach.

Specifically, this exemption applies where a reasonable person would conclude that, as a result of the remedial action, the unauthorised access or unauthorised disclosure of personal information (including an unauthorised access or unauthorised disclosure following loss of the information) is not likely to result in serious harm to the affected individuals.

An entity that promptly and effectively responds to a data breach through remedial action will not be required to comply with the notification requirements if, as a result of actions taken by the entity, the breach is not likely to, or does not, result in serious harm.

Clearly there is likely to be an inherent tension between entities required to notify under the Bill and the same entities taking all the steps they can to avoid notification by taking remedial action.

It is also open for an affected entity to apply to the Commissioner for an exemption to the notification obligation. Such exemptions are likely to apply in circumstances where an organisation may be assisting a law enforcement body or regulatory body such as the Australian Signals Directorate in relation to enforcement/investigation activities relating to a breach event, or where an organisation is itself working through a complex breach event and where notification may be more prejudicial to affected persons in the circumstances.

Entities may also apply to the Commissioner for an exemption from, or an extension of time to comply with, the notification requirements, and would not be required to comply until the Commissioner has decided the application.

A final exemption will be of interest to entities in a group structure or forming part of a joint venture or similar arrangement. In such circumstances, if more than one entity jointly and simultaneously holds the same particular record of personal information, an eligible data breach of one entity may also be an eligible data breach of each of the other entities. The exemption is intended to assist entities who may be involved in an outsourcing, shared service or joint venture arrangement.

Where one of these affected entities demonstrates its compliance with the assessment and notification obligations in the new Part IIIC, the remaining entities are taken to have also complied.

What are the penalties for failure to comply with the notification requirements?

Failure to comply with an obligation included in the Bill will be deemed to be an interference with the privacy of an individual for the purposes of the Privacy Act.

Such a failure to comply can result in affected individuals filing a complaint with the Commissioner, prompting an investigation of the entity. The Commissioner may also investigate without a complaint being made and may issue a determination requiring the entity to:

  • compensate such individuals for any loss or damage suffered; or
  • take actions to redress any loss or damage or steps to ensure that an entity's conduct is not repeated or continued.

If the failure to comply with notification requirements is "serious or repeated", entities may be liable for penalties of up to $1.8 million ($360,000 for individuals).

Wrap up

The advent of the Privacy Amendment (Notifiable Data Breaches) Act 2017 (Cth) and its incorporation into the Privacy Act tops off a flurry of regulator activity in the privacy space. What began life originally as a Private Member's Bill introduced by Senator Natasha Stott-Despoja in 2007 has evolved over time, been updated, lapsed and subsequently re-introduced, modified and finally passed.

It comes at a time where cyber breach events are on the rise with organisations relying more and more on technology to engage with customers, suppliers and the world at large. With this engagement comes increased responsibility and accountability to manage information securely and ensure it is protected from unauthorised use and disclosure.

The breach notification regime will be a welcome addition to the Commissioner's arsenal. The Australian Privacy and Information Commissioner, Timothy Pilgrim has been waiting patiently. His 13 February 2017 statement is clear in its intent:

The new scheme will strengthen the protections afforded to everyone's personal information, and will improve transparency in the way that the public and private sectors respond to serious data breaches.1

Whilst the Commissioner has been assisting entities to deal with breaches for some time through its "Data breach notification — a guide to handling personal information security breaches"2 and "Guide to developing a data breach response plan"3, we expect such guides to be updated with a new level of vigour. All Australian entities subject to the Privacy Act will need to respond quickly and ensure their processes and procedures adhere to the new notification laws ideally well in advance of the 22 February 2018 date of introduction.

Footnotes

1 Australian Privacy and Information Commissioner, Timothy Pilgrim "Mandatory data breach notification" Statement (13 February 2017), available at < HTTPS://WWW.OAIC.GOV.AU/MEDIA-AND-SPEECHES/STATEMENTS/MANDATORY-DATA-BREACH-NOTIFICATION#MANDATORY-DATA-BREACH-NOTIFICATION > (accessed 3 May 2017)

2 Office of the Australian Information Commissioner Data breach notification — a guide to handling personal information security breaches August 2014, accessed 3 May 2017, www.oaic.gov.au/agencies-and-organisations/guides/data-breach-notification-a-guide-to-handling-personal-information-security-breaches

3 Office of the Australian Information Commissioner Guide to developing a data breach response plan April 2016, accessed 3 May 2017, https://www.oaic.gov.au/agencies-and-organisations/guides/guide-to-developing-a-data-breach-response-plan

Client Disclaimer

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.

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