United States: Is It Legal To Transfer Personal Data From The European Union To The United States?

Last Updated: March 13 2017
Article by Montserrat C. Miller

Human Resources professionals have one more item to add to their compliance checklist – ensuring the lawful transfer of employee, consumer or customer personal data from the European Union ("EU") to the United States.

To unravel this compliance requirement let's start with a hypothetical transfer of personal data from location A to location B for employment purposes. Company based in Providence, Rhode Island has offices worldwide, including several in the EU. Hiring is centralized in the United States and therefore all onboarding is conducted by Human Resources professionals in Providence. As per company policy, the company sends all new hires an employee packet and several of the forms in the packet require the collection of personal data or information. Personal data such as name, date of birth, address, email address, etc.

For its new hires in the EU, they are asked to send the employee packet back to Providence electronically so that the information can be processed for employee benefits, payroll, and a background investigation. Therefore, personal data is being transferred to the United States for processing. The question is, is this legal? Does the company in Providence, Rhode Island need to do anything from a compliance perspective?

The response to the first question is, maybe if the company has a permissible cross-border transfer mechanism in place. The second response is, yes. Bottom line is that any U.S. based company which operates globally has to factor in international privacy and data protection laws before transferring employee personal data from outside the United States to the United States.

Here's why. In the EU it is generally prohibited to collect, use, transfer, disclose or otherwise process an individual's personal data without justification. In case you are wondering, what's the European Union? The EU is made up of 28 member countries in Europe. It includes countries such as Austria, Belgium, France, Germany, Greece, Ireland, Italy, Spain and the United Kingdom (until they depart due to Brexit). For a full list of member countries, click here.

What do American companies need to do? First, if you have offices, operations or otherwise transfer someone's personal data from the EU to the United States you need to know that. We privacy professionals call that, mapping the data flows. In other words, are your employees, customers, consumers sending you personal data from the EU to the United States, what data and for what purpose.

Why should American companies care? Because in the EU they are serious about privacy and data protection. The Europeans would argue that they are far more serious and protective of their citizen's privacy than the Americans. They can and will bring enforcement actions against companies that transfer personal data outside the EU without having a permissible onward transfer mechanism. See the most recent action by German data protection authorities by clicking here.

What's a permissible onward transfer mechanism? In the EU, there is a general legal framework under which companies operate which is the EU Directive 95/46/EC ("EU Directive") and it describes how organizations can lawfully "process" personal data, meaning how they can collect, use, transfer, share, store, etc. personal data. Generally speaking—and please note that I'm focusing only on cross-border transfers of personal data in this article—an organization cannot transfer an individual's personal data from the EU to the United States without a lawful mechanism. That's right, you can't just transfer personal data without having a plan in place. Also, not to throw in a monkey wrench, but the EU Directive will be replaced by the General Data Protection Regulation ("GDPR") effective 2018, which will have stricter requirements on U.S. companies with operations in the EU, including requirements related to data breaches.

What options do American companies have to lawfully transfer personal data to the United States? A few, actually. One is by self-certifying with the Department of Commerce's EU-U.S. Privacy Shield program, instituting model contract clauses or binding corporate rules, or meeting one of the other derogations described in Article 26 of the EU Directive, such as consent of the data subject to the cross-border transfer. There are pros and cons to each of these options and that is the subject of another discussion and greater legal analysis. This article is intended as a primer to flag the issue of cross-border transfers of personal data from the EU to the United States and compliance considerations around such.

If your organization transfers personal data from the EU to the United States and you would like to discuss what your legal requirements or obligations may be I am happy to have that conversation with you. The privacy team at my firm, Arnall Golden Gregory LLP, advises companies on cross-border transfers of personal data and we would be happy to assist.

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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