United States: Other States Join California In Passing (And Others Are Trying To Pass) Stricter Data Privacy And Security Legislation

While most companies are squarely focused on the California Consumer Privacy Act (CCPA), 2019 has seen other major developments on data privacy and security. Several states have reacted to the CCPA by passing or pursuing their own security and privacy legislation, and others will likely follow. Namely, Nevada, New York, Maine and North Dakota have passed new data privacy and security legislation this year, while the Massachusetts, New Jersey and Pennsylvania state legislatures may still pass pending bills. As a reminder, the CCPA, which takes effect January 1, 2020, grants California consumers considerable control over the sale of their personal information by companies, as well as the right to access personal information collected by companies and to request that it be deleted. For more on the CCPA, please see previously published firm materials about the act's requirements, compliance tips for covered companies and a detailed webinar.

SELECT MAJOR STATE DEVELOPMENTS

Nevada

Nevada's SB 220 leapfrogged the implementation of the CCPA and will be effective October 1, 2019. The bill covers "operators" who own or operate an Internet website or online service for commercial purposes, collect covered information from consumers who reside in Nevada and have a nexus with the state through transactions with state residents or other activities. The Nevada law requires each operator to establish a designated address for consumers to submit requests to opt out of sales of their covered personal data that the operator has collected. The Nevada law's opt-out-of-sales provision is comparably more limited than the CCPA's since, under the Nevada law's definition of "sale," the opt-out right will apply mainly to the sale of information to data brokers who "license or sell the covered information to additional persons." Upon receiving such requests, operators must respond within 60 days and must refrain from making any such sales. Since the Nevada law does not provide for a private right of action, the Nevada Attorney General (AG) has sole enforcement responsibility, with the discretion to institute proceedings against an operator when there is reason to believe that a violation occurred. A district court may issue an injunction or a civil penalty of up to $5,000 for each violation.

Though the Nevada law is narrowly focused on allowing consumers to opt out of the sale of personal information, its earlier effective date may challenge companies preparing for CCPA compliance to roll out an opt-out function even sooner, at least for those affected by the Nevada law.

New York

The Stop Hacks and Improve Electronic Data Security (SHIELD) Act, SB 5575, was signed into law on July 25, 2019. This act amends New York's data breach notification law to require covered entities to employ "reasonable" administrative, technical and physical cybersecurity safeguards to protect the private information of New York residents. Covered entities include any person or business that owns or licenses private information concerning a New York resident, although the bill provides a partial safe harbor for entities complying with the data security provisions of the GLBA, HIPAA and the NY Department of Financial Services. Specific methods for maintaining a reasonable security program include conducting risk assessments to test the sufficiency and effectiveness of the employed safeguards, selecting service providers capable of maintaining appropriate cybersecurity safeguards and requiring those safeguards by contract, disposing of private information within a reasonable amount of time after it is no longer needed for business purposes, designating an employee to coordinate the program and requiring employee training. Additionally, the bill will expand the definition of personal information to include biometric information, user-name or email address together with an accompanying password, and account (credit or debit card) numbers without the accompanying password or access code if circumstances permit unauthorized access of the financial account. Because the SHIELD Act uses specific examples—such as risk assessment and data deletion—for determining reasonable security, the act marks a significant move toward stricter and more concrete security requirements.

Two data privacy bills introduced in this last session, SB 5642 and SB S224, were not considered by the New York legislature, which is now adjourned. One of the bills resembled the CCPA, providing similar consumer rights such as access, portability, correction, deletion and the right to opt out of the disclosure of personal information to third parties. In addition, it would have required businesses to act as "data fiduciaries." 

Maine

Maine's SP 275 comes into effect July 1, 2020. The law imposes requirements on Internet Service Providers (ISPs). Specifically, the law prohibits ISPs from using, disclosing, selling or permitting access to customers' personal information. The Maine law provides for several exceptions to this prohibition, including when a customer gives a provider express, affirmative consent; for advertising a provider's services to customers; for protection from fraud; to provide the service in the first place; or to provide emergency geolocation information regarding a consumer. The law also mandates that ISPs must take reasonable measures to protect the security of customers' personal information from unauthorized use, disclosure or access. Unlike the CCPA, which generally covers all for-profit companies over a size threshold that conduct business in California, the Maine law only covers ISPs.

North Dakota

The North Dakota legislative assembly nixed a draft bill that would have included more comprehensive, CCPA-like data privacy requirements in favor of a much more narrow "Legislative Management Study" to research consumer personal data protection, enforcement and remedies. The original draft bill generally prohibited the disclosure of personal information to a third party without the express, written consent of the individual, which would have been obtained by mailing or emailing a summary of the company's privacy practices to the individual and receiving an affirmative response. The original draft bill also included steep penalties for violation and a private right of action.

Pending State Developments

A number of states had notable privacy and security bills introduced this year. While many state legislative sessions have adjourned their sessions for the year, meaning no further action was taken on this legislation, the following three states have important pending bills that may see further activity in 2019.

Massachusetts

A proposed Massachusetts data privacy bill, S.120, uses a broad definition of personal information and includes a number of CCPA-like privacy rights. These rights include the right to disclosure of the categories of personal information collected and the third parties to whom such information is disclosed, the right to delete personal information, the right to portability of personal information and the right to opt out of the sale of information with third parties. Legal entities that collect Massachusetts consumer personal information and satisfy a threshold size requirement would be covered with exceptions for those entities governed by laws such as HIPAA and the GLBA. Though enforcement authority would rest with the Massachusetts AG for civil penalties of up to $2,500 per violation (or $7,500 per intentional violation), the bill also provides for a private right of action. Consumers could bring private actions for up to $750 per violation, and they would not be required to demonstrate a loss of money or property to do so. If enacted, the bill would require the Massachusetts AG to promulgate regulations by July 1, 2022, and the bill would be effective January 1, 2023.

New Jersey

New Jersey has a proposed data privacy bill, SB 2834, which would apply to "operators" that own or operate website or online services for commercial purposes and collect personally identifiable information of customers in the state. Like existing laws in California and Delaware, the bill would require these operators to conspicuously post privacy policies online. These privacy policies must describe the categories of personal information that the operators collect and the categories of third parties with whom they share this information, as well as a description of consumer rights, which include the right to receive specific pieces of information that were disclosed to third parties. Additionally, consumers have the right to opt out from sharing personal information with third parties through using a "Do Not Sell My Personal Information" button on the webpage.

Pennsylvania

Similar to the CCPA, Pennsylvania's proposed HB 1049 focuses on transparency and giving consumers more control over their personal information. The Pennsylvania bill would apply to for-profit businesses over a certain size threshold and would give consumers specific rights with regard to broadly defined personal information. These rights include the right to know what personal information is being collected and whether it is sold and disclosed; the right to opt out of the sale of their personal information; the right to delete personal information; access to the personal information that has been collected; and equal service and price, even if a consumer exercises their rights under the bill.

Conclusion

The proliferation of these laws from other states means that companies will need to look beyond the CCPA when evaluating data privacy and security compliance requirements in the United States. As additional states enact laws, and as those laws diverge, privacy and security compliance will become more fractured and complex. The proliferation of these laws may give further impetus to the need for federal privacy and security legislation so that companies can avoid the challenges raised by divergent privacy and security requirements throughout the United States.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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