United States: California Enacts Four New Privacy Laws

On September 28th and 29th, Governor Arnold Schwarzenegger approved four laws further extending privacy protection in California. These laws address spyware, security obligations with respect to personal information, collection of medical information for direct marketing purposes, and protection of social security numbers.

The Consumer Protection Against Computer Spyware Act ("CPACSA"), Senate Bill 1436, is the first regulation of spyware in California and one of the first such anti-spyware laws in the country. "Spyware" refers to computer programs that perform functions on a computer often without the owner’s knowledge. Once introduced, spyware may disable or change security settings on the computer or monitor the user’s keystrokes to obtain passwords, account numbers and many other types of information.

The CPACSA makes it illegal for anyone to install software on someone else's computer and willfully or in a deliberately deceptive way to use it for wrongful purposes, including to modify settings, collect personal information or take control of the computer to send commercial emails or viruses. Critics of the law argue that it does not go far enough, as it requires willful or intentionally deceptive actions to trigger any violations. Further, it does not prohibit spyware, but just requires notification to the consumer before spyware is installed. The CPACSA goes into effect January 1, 2005.

Specifically, the CPACSA prohibits anyone other than an authorized user of a California resident’s computer from causing computer software to be copied onto that computer and using the software in a way that is intentionally deceptive to (a) modify the home page, search engine or bookmark settings; (b) collect personally identifiable information, including through recording keystrokes and Web site visits; (c) prevent unauthorized blocking of a consumer’s reasonable efforts to block the installation or disable the software; (d) misrepresent that the software is uninstalled or disabled, when it is not; or (e) remove, disable or render inoperative any security, anti-spyware or anti-virus software installed on the computer. ¹

The CPACSA also prohibits anyone other than an authorized user of a California resident’s computer from willfully causing computer software to be copied onto that computer and using that software to take control of the computer to (a) initiate commercial email or computer viruses, (b) damage another’s computer, (c) open advertisements that can’t be closed without turning off the computer or turning off the Internet browser, (d) modify the security settings for the purpose of stealing the information or causing damage to computers, (e) prevent the user from blocking the installation of or disabling software. ² Additionally, the CPACSA prohibits anyone other than an authorized user from (1) inducing a consumer to install software on a computer by misrepresenting that the software is necessary for security or privacy reasons, or to open, view or play a particular content; or (2) deceptively copying or executing software on a computer to cause the consumer to use the software in a way that violates the CPACSA.³ However, these sections of the CPACSA do not apply to telecommunication carriers, cable operators, providers of information services, hardware or software providers, or providers of computer services who monitor or interact with a subscriber’s computer or Internet connection for purposes of security, diagnostics, technical support, repair, installation of authorized updates, authorized remote system management or detection of unauthorized use or fraudulent or illegal activities. ⁴

Assembly Bill 1950 requires companies that own or license unencrypted personal information about California residents to "implement and maintain reasonable security procedures and practices" for that data. ⁵ The level of security required is not detailed, but rather must be "appropriate to the nature of the information to protect the personal information" from unauthorized access, destruction, use, modification or disclosure. "Personal information" includes an individual’s name in combination with one or more of the following data elements, if either the name or data element is unencrypted or unredacted: Social Security number, driver’s license or California identification card number, account number in combination with any security code or password, and medical information. ⁶ This statute also takes effect on January 1, 2005.

In addition to maintaining adequate security procedures, companies subject to this law may only disclose such information to unaffiliated third parties who contractually agree to maintain reasonable security procedures. ⁷

Businesses that comply with stricter privacy requirements imposed by other laws are deemed in compliance with this law. ⁸ These include health care providers covered by the Confidentiality of Medical Information Act, financial institutions subject to California Financial Information Privacy Act, entities covered by the medical privacy and security rules of Health Insurance Portability and Availability Act (HIPAA), entities subject to the confidentiality requirements of the Vehicle Code and any other business that is regulated by the state or federal government and subjected to greater protection of personal information that required under this law.

Senate Bill 1633 prohibits businesses from making a direct request to an individual for medical information for direct marketing purposes without first clearly informally the individual that the business intends to use the information "to market or advertise products, good, or services," and obtaining the consent of the individual. ⁹ Oral disclosures and consents must be recorded and maintained for two years and written disclosures must include a written consent. The law does not apply to health care plans, insurance companies or agents, and certain telephone companies. SB 1633 takes effect on January 1, 2005.

Senate Bill 1618 amends the Labor Code to change requirements relating to information displayed on itemized wage statements. Existing law in California requires employers to display on each pay stub the name of the employee and social security number. The new law provides that, by January 1, 2008, employers shall display only the last four digits of an employee’s social security number (or another employee identification number) on pay stubs or other checks, drafts or vouchers. ¹⁰

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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