Canada: Sweeping Federal Privacy Legislation Fully Operational January 1, 2004

Last Updated: October 29 2003

On January 1, 2004, a three year phase-in of Canada’s sweeping privacy legislation will end, and application of the legislation will be extended beyond the federally regulated private sector to most organizations in Canada1. The federal Personal Information Protection and Electronic Documents Act (PIPEDA)2 dramatically modernizes Canada’s privacy laws and may require changes in how organizations collect, use and disclose personal information about individuals in the course of commercial activities, whether in their day-to-day operations or in a significant transaction (such as some business acquisitions).

Essentially, PIPEDA enacts into law the ten general principles (reproduced in the appendix) and commentaries contained in the Canadian Standards Association’s Model Code for the Protection of Personal Information, with some modifications. Among these principles is the core requirement that an individual’s knowledge and consent are required for the collection, use or disclosure of personal information, except where inappropriate. The legislation replaces "inappropriate" with a few detailed exceptions, such as for law enforcement or emergencies, or for statistical, scholarly and research purposes. (The commentaries are not reproduced in the appendix because of their length.) In its decisions to date3, the federal Office of the Privacy Commissioner has indicated that express consent (as opposed to lesser forms of consent such as opting out) is to be obtained in nearly every circumstance where consent is required.

The legislation exempts organizations from compliance if they comply with substantially similar provincial legislation. Quebec has had privacy legislation in place for many years. British Columbia, Alberta and Ontario were expected to have privacy legislation in place by now. Ontario’s draft legislation4, however, was never tabled after being released for consultation in the spring of 2002, and is not anticipated in the near future. The legislation in British Columbia and Alberta has only received first reading, although the bills may become law before the end of the year.

PIPEDA will require organizations to appoint compliance officers responsible for protecting personal information, develop internal guidelines dealing with the accuracy, retention and eventual destruction of personal information, create appropriate safeguards to protect personal information and educate employees in the importance of maintaining the confidentiality of personal information. The federal Privacy Commissioner can audit the practices of organizations to ensure compliance with the legislation’s requirements. Individuals can file complaints for investigation by the Privacy Commissioner, and have the right to apply to court for a hearing and remedies which can include an award of damages (including for humiliation), and punitive damages. Obstructing the Privacy Commissioner’s audit or investigation is an offense punishable by a fine of up to C$100,000.

Personal Information About Employees (Federally Regulated Private Sector Only)

PIPEDA will continue to apply to personal information about employees that any organization collects, uses or discloses in connection with the operation of a federally regulated private sector entity. This covers collection, use and disclosure by, for example, a bank, as well as non-federally regulated third parties that collect personal information from the bank’s employees.

Personal information about employees of non-federally regulated organizations will not be subject to PIPEDA, and will not be covered by privacy legislation until provincial privacy legislation is enacted.

Compliance Challenges

PIPEDA, and interpretations by the Office of the Privacy Commissioner in particular, raise many practical issues, including in the business combinations and the mergers and acquisitions contexts (where due diligence and the transfer of customer lists, for example, may raise issues). Other compliance challenges include the following:

Auditing Current Practices – An internal privacy audit is an excellent, perhaps necessary, starting point. Many organizations may, however, find it difficult to determine what information has been or is being collected and how it is being used and disclosed.

No Grandfathering – PIPEDA will apply to personal information collected before PIPEDA was enacted. If the collection of this information did not comply with PIPEDA requirements, organizations may have to re-contact individuals to obtain their consent to the collection, use or disclosure of the information in compliance with PIPEDA.

Prior Consent to Actual Use or Disclosure – Organizations will be required to obtain consent before any intended uses and disclosures of the personal information. This may be difficult.

Changing Uses or Disclosures – Organizations may have to re-contact individuals to obtain new consents to any change from the stated uses or disclosures of personal information.

Providing Access to Personal Information – Most organizations will lack experience in granting access to personal information to enable an individual to confirm its accuracy, something that is required by PIPEDA.

In developing privacy compliance plans, organizations should consider, in addition to the internal privacy audit, providing training to employees on the company’s privacy policy, developing a procedure to handle requests for access or complaints and developing a contingency plan to deal with breaches of the legislation.


Model Code for the Protection of Personal Information

Note: The commentaries included in the Model Code have not been reproduced because of their length. However, the commentaries form part of the Model Code and are therefore relevant. In addition, PIPEDA modifies the Model Code, including the commentaries, in certain respects. For example, with respect to Principle No. 3 below, PIPEDA replaces "except where inappropriate" with more detailed exceptions (such as for law enforcement, emergencies, and for statistical, scholarly and research purposes). These modifications by PIPEDA are not reflected below. Accordingly, reference should be made to PIPEDA in its entirety.

1. Accountability

An organization is responsible for personal information under its control and shall designate an individual or individuals who are accountable for the organization’s compliance with the following principles.

2. Identifying Purposes

The purposes for which personal information is collected shall be identified by the organization at or before the time the information is collected.

3. Consent

The knowledge and consent of the individual are required for the collection, use or disclosure of personal information, except where inappropriate.

4. Limiting Collection

The collection of personal information shall be limited to that which is necessary for the purposes identified by the organization. Information shall be collected by fair and lawful means.

5. Limiting Use, Disclosure and Retention

Personal information shall not be used or disclosed for purposes other than those for which it was collected, except with the consent of the individual or as required by law. Personal information shall be retained only as long as necessary for the fulfillment of those purposes.

6. Accuracy

Personal information shall be as accurate, complete and up-to-date as is necessary for the purposes for which it is to be used.

7. Safeguards

Personal information shall be protected by security safeguards appropriate to the sensitivity of the information.

8. Openness

An organization shall make readily available to individuals specific information about its policies and practices relating to the management of personal information.

9. Individual Access

Upon request, an individual shall be informed of the existence, use and disclosure of his or her personal information and shall be given access to that information. An individual shall be able to challenge the accuracy and completeness of the information and have it amended as appropriate.

10. Challenging Compliance

An individual shall be able to address a challenge concerning compliance with the above principles to the designated individual or individuals accountable for the organization’s compliance.

1 PIPEDA already applies to banks, airlines, railways, telecommunication industries and similar undertakings over which the federal government has constitutional authority, including certain Crown corporations operating in those areas, such as the CBC. It also already applies to every non-federally regulated organization that 1) sells personal information that it has collected, used or disclosed in one provinc e outside that province (including internationally); or 2) collects, uses or discloses personal information in connection with the operation of a federally regulated private sector entity (such as where a bank retains a non-federally regulated outside consultant to collect personal information from the bank’s customers).
2 This client memo does not deal with Part 2 of PIPEDA, which deals with electronic documents. References in this client memo to "PIPEDA" or "the legislation" are to Part 1 and Schedule 1 of PIPEDA only.
3 Since January 1, 2001, the Office of the Privacy Commissioner has received over 25,000 inquiries and 400 complaints under PIPEDA and issued over 300 decisions.

4 See our client memo no. 2002-5T.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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