Proposed Anti-Spam and Privacy Law Changes: What Business Need To Know

Ariane Siegel, Paige Backman, Corrine Kennedy and Geoffrey Marr¹

After four years of review, discussion and recommendations by leading privacy experts, Privacy Commissioners and Industry Canada, Bill C-29, which provides proposed amendments to the Personal Information Protection and Electronic Documents Act² ("PIPEDA"), began its second reading in the House of Commons on October 26^th, 2010, and is expected to come into force early in 2011. The proposed amendments under Bill C-29 are being made in accordance with a mandatory five-year review of the legislation provided for in Section 29(1) of PIPEDA.

One significant amendment involves a new provision dealing with breach notification. For the first time under PIPEDA, the proposed amendments present a mandatory notification framework for security breach related to personal information.

It is interesting to note that the Bloc Québécois announced their opposition to Bill C-29 at the second reading stage, stating that federal privacy laws interfere with provincial jurisdiction.

Also making headlines recently is the re-introduction of anti-spam legislation, entitled Bill C-28, the Fighting Internet and Wireless Spam Act ("FISA"). FISA targets spam or commercial electronic messages, spyware and phishing, among other things. It also provides additional amendments to PIPEDA, including prohibiting the collection of personal information through unauthorized access to computer systems, and prohibiting the unauthorized compiling of electronic address lists. FISA is also at the second reading stage in the House of Commons.

Below is a list of the most relevant proposed amendments to PIPEDA under Bill C-29 and highlights of FISA, from a corporate perspective, along with suggested action items to ensure your organization continues to be compliant with PIPEDA and will be compliant with FISA.

PART I – BILL C-29 – PIPEDA AMENDMENTS

What constitutes valid consent?

The proposed amendments refine when the consent given will be valid and expand on the enumerated exemptions available regarding requirements to obtain an individual's consent. Consent of an individual will only be valid "if it is reasonable to expect that the individual understands the nature, purpose and consequences of the collection, use or disclosure of personal information to which they are consenting."³

This clarification suggests a higher onus will be placed on the entity seeking consent, whether such consent is being sought through its privacy policy or otherwise, to ensure that such entity clearly explains how and why personal information will be collected, used and/or disclosed, as well as ensuring that such entity does not overstep the bounds of reasonability in so doing. This proposed amendment should also give businesses pause when seeking consent from children, minors and those with whom there may be capacity issues.

In addition, the proposed amendments expand the list of circumstances in which an entity may collect and use personal information without the consent of the individual, including notably, where the personal information constitutes the work product created in the course of employment,⁴ and disclose information without the consent of the individual where such personal information is requested by police in certain instances.⁵ Businesses should take the opportunity to review their privacy policies to ensure that they reflect correct practices and that the individual is providing the appropriate level of informed consent in respect of the collection, use and disclosure of his or her personal information.

Is business contact information considered personal information?

The current definition of "personal information" covers "information about an identifiable individual." However, it specifically excludes the name, title or business address or telephone number of an employee of an organization. Privacy practitioners have long lamented that the exclusion contains some glaring omissions, namely the fax number and email address of an employee of an organization. In the context of an act that is meant to address the electronic flow of information, the omission of the latter form of contact information seemed particularly glaring.

The proposed amendments provide for an expansion of such exclusion to include the work email address, fax number and any similar information about the individual by introducing a new defined term "business contact information."⁶ The wording of the provision addresses the deficiency under PIPEDA, in addition to leaving the language broad enough to capture other means of communication which may, in the future, play the same central role that email communication does in today's business world. It is important to note, however, that such information must be collected, used or disclosed solely for the purpose of communicating with the individual in respect of their work.⁷

Accordingly, businesses can feel more comfortable using the business-card type information of contacts for individuals, so long as the use of such contact information is being undertaken in connection to that individual's work position.

What information can I disclose in a business transaction?

Businesses have long been frustrated that PIPEDA requirements present a grey zone with respect to the nature of consent required for the collection, use and disclosure of personal information by businesses in the course of a business transaction, whether in respect of mergers, acquisitions, joint ventures or other corporate matters.

The proposed changes to PIPEDA would explicitly provide an exemption for disclosure of certain personal information in the course of business transactions.⁸ The parties may disclose certain personal information of individuals without their consent in this context, provided that the parties enter into an agreement in advance of such disclosure which (i) limits the use of the information disclosed to the purposes of the transaction, (ii) agrees to protect the information with reasonable and appropriate safeguards from disclosure, and (iii) provides for the return or destruction of the personal information disclosed within a reasonable time if the transaction does not move forward. The personal information that may be disclosed in this instance must be necessary for the parties to determine whether they should proceed with the transaction, for due diligence purposes for example, and necessary for the completion of the transaction if they do proceed.⁹

The business transaction amendments do not apply to prospective business transactions where the primary purpose is the purchase, sale or other acquisition of personal information.

Accordingly, businesses contemplating an upcoming transaction that would require the disclosure of personal information should be cognizant that, until the proposed amendments become law, consent of the individual to whom the personal information relates is still required. Once in force, the parties should work with their legal counsel to ensure that any letters of intent and non-disclosure agreements comply with the requirements set out above.

What will be required in the event of a breach of personal information?

To date, outside of Alberta and certain provincial health information legislation, Canada has not had mandatory breach notification requirements for businesses facing unauthorized access or disclosure of personal information they collect (privacy breach). Until now, although the Office of the Privacy Commissioner and some provinces had provided guidelines of 'best practices' in such situations, the majority of businesses were not required by law to disclose a privacy breach.

Bill C-29 would impose two separate levels of breach notification, one in respect of notifying the Privacy Commissioner of Canada, and another in respect of notifying individuals whose personal information has been compromised by the breach. As a result of section 10.1 of Bill C-29, a company would be required to disclose a breach of privacy laws to the Privacy Commissioner of Canada where there has been a "material breach of security safeguards under its control."¹⁰ Whether a breach will be considered "material" must be determined by the company through examining several factors, including the sensitivity of the information implicated in the breach, the number of individuals affected, and whether the breach represents a systematic failure to safeguard personal information by the organization.

Under section 10.2 of Bill C-29, an organization would have to inform an individual of a breach of the privacy safeguards implemented by it where there is a reasonable chance the breach "creates a real risk of significant harm to the individual." The provision provides a large scope for the kind of harm that an individual could experience as a result of the breach, including but not limited to humiliation and financial loss, and provides several factors to consider in evaluating the harmful nature of the breach to the individual. The breach will be more likely to be considered harmful to the individual if it is personal information that is sensitive and likely to be misused.¹¹

Businesses should ensure that their privacy policies reflect the breach notification requirements provided for under the proposed legislation, ensure that the privacy practices of the business incorporate a timely and structured response to a privacy breach, in accordance with the proposed amendments, and have a well-developed plan in place for notification in the event of a breach.

What are the penalties for non-compliance?

Bill C-29 does not provide for specific penalties for non-compliance with certain sections. However, the Privacy Commissioner may investigate privacy complaints and conduct audits on an organization. Furthermore, the Federal Court can award damages for non-compliance with PIPEDA.

PART II – BILL C-28 - FISA AMENDMENTS

What constitutes valid consent?

In an attempt to reduce unsolicited emails (ie: spam), FISA contains consent requirements. Under FISA, spam is considered a commercial electronic message sent by any means of telecommunication including email, text, phone, sound, and voice or image message. One major focus of FISA is that it prohibits the sending of spam unless the person receiving the message has consented to receiving it, and the message is in a form that identifies the sender and provides instruction on unsubscribing.¹²

There are exceptions to the consent requirements, which include: the existence of a personal or family relationship, providing a requested estimate or quote, a message to facilitate, complete or confirm a commercial transaction, providing product recall or warranty information, or safety information about a product the message recipient has purchased, a message about an ongoing membership or subscription, and a message related to an employment relationship or benefit plan.¹³

Before sending out a commercial electronic message to its customers, companies should ensure that their messages will not be considered spam and caught under FISA, or ensure that the messages sent fall under one of the exceptions mentioned above.

Does FISA combat spyware, malware and phishing?

FISA addresses spyware and malware issues, and prohibits, in the course of a commercial activity, the installation of a computer program that causes an electronic message to be sent from another person's computer, without the individual's express consent.¹⁴

FISA also attempts to prevent "man in the middle attacks," where an electronic communication, intended to travel between two parties, is intercepted and redirected without either party's knowledge. FISA prohibits the altering of transmission data in a message so that the message is routed to another destination. Under this bill, all alterations of transmission data require the sender's express consent.¹⁵

Therefore, companies should be cautious with the electronic messages they send out and ensure they are complying with FISA. Furthermore, businesses which install computer programs on another individual's computer, in the course of their commercial activities, will need to review their consent and disclosure practices.

What are the penalties for non-compliance?

There are monetary penalties for violating FISA, including up to one million dollars per violation for individuals and ten million dollars for businesses.¹⁶ Furthermore, FISA allows for a private right of action, which would permit individuals and businesses to take civil action against someone who violates this bill.

Overall, organizations should keep a watchful eye on the progress of Bill C-28 and C-29. In preparation of the bills coming into force, it would be prudent of organizations to re-examine their privacy policies, breach notification procedures, how they send commercial electronic messages, and the security measures they have in place to protect the privacy of others.

Footnotes

^{1.Ariane Siegel and Paige Backman are Partners and co-leaders of the Privacy Team; Corrine Kennedy and Geoffrey Marr are Associates.}

^{2.2000, c. 5.}

^{3.Ibid, s. 5.}

^{4.Ibid, s. 7(2).}

^{5.Ibid, s. 6.}

^{6.Bill C-29, s. 3.}

^{7.Ibid, s. 4.}

^{8.Ibid, s. 7.}

^9.Ibid.

^{10.Ibid, s. 10.1}

^{11.Ibid., s. 10.2}

^{12.Bill C-28, s. 7.}

^13.Ibid.

^{14.Ibid, s. 9.}

^{15.Ibid, s. 8.}

^{16.Ibid, s. 21}

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.