Canada: Digital Privacy Act Everything Old Is New Again

Last Updated: April 11 2014
Article by Bernice Karn

On April 8, 2014, the Harper government introduced Bill S-4 in the Senate. The new Bill, known as the "Digital Privacy Act" is touted as providing new protections for Canadians when they search the web and shop online. However, for privacy observers, the Digital Privacy Act largely represents a retabling of two previous Bills introduced in the House of Commons to amend the Personal Information Protection and Electronic Documents Act ("PIPEDA"), the most recent of which was Bill C-12, introduced in 2011, which died when Parliament was prorogued in 2013.

The Digital Privacy Act contains a number of administrative amendments and, of the recycled amendments to PIPEDA, the following are noteworthy:

  • Business Contact Information - The Bill contains a definition of "business contact information" which, together with the revised definition of "personal information," will make communicating with employees easier in the course of day to day business.
  • Business Transaction Exemption - A long standing problem with PIPEDA is that it does not contain an exemption for the use or disclosure of personal information in the context of the sale of a business or other fundamental business transaction. Following the lead of the provinces of Alberta and British Columbia, which have provided exemptions in their provincial privacy legislation to address this issue, the Digital Privacy Act would now allow for the use and disclosure of this information in the context of a fundamental business transaction provided that certain safeguards are in place and affected individuals receive notice of the disclosure.
  • Employee Information - Also in the business context, and again following the lead of the provinces of Alberta and British Columbia, the Digital Privacy Act would add an exemption that allows for the collection, use and disclosure without consent of personal information of the individual in the context of an employment relationship. Note that PIPEDA only applies to personal information of employees of a "federal work, undertaking or business."
  • Breach Notification - Another long standing criticism of PIPEDA was that it did not require any breach notification in the event of a data breach affecting personal information. The Digital Privacy Act seeks to rectify this shortcoming by mandating a report to the Commissioner for any breach of security safeguards involving personal information where it is reasonable in the circumstances to believe that the breach creates a "real risk of significant harm to an individual." The proposed amendments would also require notification to the individuals involved where the real risk of significant harm test is met.

    If enacted, the Digital Privacy Act will require organizations to keep and maintain records of every breach of security safeguards affecting personal information under their control. This rather onerous obligation will also have consequences for many cloud computing contracts where the customer is entrusting personal information to a cloud provider, particularly since the organization that "controls" the personal information may be liable for a fine of up to $100,000 for intentional breaches of the breach notification and record keeping requirements.

Compliance Agreements

In terms of actual "news" in the Digital Privacy Act, the Bill proposes a new section 17.1 that gives the federal Privacy Commissioner (the "Commissioner") the power to enter into "compliance agreements" where the Commissioner believes on reasonable grounds that an organization has committed, is about to commit, or is likely to commit an act or omission that could constitute a breach of certain provisions of PIPEDA. This is not the order making authority that many had thought that the Commissioner might obtain in future amendments to PIPEDA. A compliance agreement will suspend the Commissioner's right to apply to court for hearings of certain matters under PIPEDA, but affected individuals will retain the right to apply for hearings, and prosecutions of offences under PIPEDA remain possible.

Where the Commissioner is of the view that the organization is not adhering to the terms of a compliance agreement, the Commissioner has an obligation to notify the organization and may apply to the court: for an order requiring compliance, to request a hearing (relating to certain provisions of PIPEDA) or to reinstate existing suspended proceedings. While this compliance agreement regime does not have the force of order making authority, it should provide the Commissioner with some leverage to enforce compliance with PIPEDA, especially since the Commissioner is only required to believe on reasonable grounds that an organization has committed, is about to commit, or is likely to commit an act that could contravene certain provisions of PIPEDA in order to request a compliance agreement and it does have the effect of suspending unwanted litigation from the affected organization's perspective. Therefore, organizations will have an incentive to negotiate and enter into these types of agreements.

While the Digital Privacy Act is largely re-proposing concepts that have been tabled before in Parliament, privacy advocates hope that the third time is the charm and that this Bill will ultimately be enacted. The Bill should also provide some comfort to businesses in terms of facilitating business transactions without the necessity to obtain individual consents to the use or disclosure of personal information in the course of these transactions (or to obtain a court order permitting such transfer) and to at last put some parameters around the scope of breach notification requirements at the federal level.

We will be monitoring the progress of this Bill and will advise on any significant developments as they occur.

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.

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Bernice Karn
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