By now most companies have heard about the California Consumer Privacy Act (“CCPA”). Privacy as an inalienable right has been enshrined in the California Constitution since 1972, and California has developed a reputation as being at the forefront of state privacy legislation. California is also known for grassroots-driven legislation through the ballot initiative process known as “Propositions.” The Cambridge Analytica scandal led to a combination of the two – a proposed data privacy law with extremely burdensome obligations and draconian penalties garnered enough signatures to appear on the ballot in November 2018. To prevent this from happening, the California legislature partnered with California business and interest groups to introduce and pass the California Consumer Privacy Act. It went from introduction to being signed into law by the governor of California in a matter of days in June of 2018, resulting in withdrawal of the ballot initiative. No major privacy legislation had ever been enacted as quickly. The law will become effective as early as January 1, 2020 – the effective date is six (6) months after the California Attorney General releases implementing and clarifying regulations which are expected sometime in 2019. Given the speed at which it was enacted, CCPA has numerous drafting errors and inconsistent provisions which will need to be corrected. In addition, as of the date of this article, the implementing regulations are not yet released.
Other states have introduced statutes similar to CCPA, and there is some discussion in Congress about a superseding national data privacy law. Because of this, companies may want to look at CCPA compliance from a nationwide, and not California, perspective. For companies hoping that CCPA will be scaled back or repealed, that’s not likely to happen. The clock is ticking for businesses to develop and implement a compliance plan. When determining what compliance approach to take, consider the wisdom of the “Herd on the African Savanna” approach to compliance – the safest place to be in a herd on the African savanna is right in the center. It’s almost always the ones on the outside which get picked off, not the ones in the center. The ones more likely to be “picked off” through an investigation or lawsuit are the ones at the front of the herd (e.g., those who desire to be viewed as a leader in compliance) and the ones at the back of the herd (e.g., those who start working on compliance too late or don’t make serious efforts to be in compliance). For many companies, being in the center of the herd is the optimal initial position from a compliance perspective. Once additional compliance guidance is released, e.g., through clarifying regulations, press releases, or other guidance from the state Attorney General, companies can adjust their compliance efforts appropriately.
In this article, I’ll talk through steps that companies may want to consider as a roadmap towards CCPA compliance. (This is a good place to note that the information in this article does not constitute legal advice and is provided for informational purposes only. I summarize and simplify some of CCPA provisions for ease of discussion; you should look at the specific language of the statute to determine if a provision applies in your case. Consult your own internal or external privacy counsel to discuss the specifics of CCPA compliance for your own business.)
A Quick CCPA Refresher
The first problem with the “California Consumer Privacy Act” is its name. It applies to personal information collected about any California resident (not just consumers) in either a business-to-consumer (“B2C”) or business-to-business (“B2B”) context. It applies to almost every business entity that collects personal information about California residents, their affiliates, their service providers, and other third parties with which personal information is shared or disclosed. The use of “service provider” and “third party” are somewhat similar under the CCPA – both are businesses to which a company discloses a person’s confidential information for a business purpose pursuant to a written contract. The difference between the two is whether the information is being processed on behalf of the disclosing company. For example, SalesForce would be a service provider – it is processing personal information on behalf of your company. However, if the company with whom you share personal information processes it for its own benefit, not yours, it’s a “third party” under the CCPA.
“Personal Information” is defined extremely broadly under CCPA, in some ways even more broadly than under the EU’s General Data Protection Regulation (“GDPR”). It is information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular person or household. It includes but is not limited to IP address, geolocation data, commercial information, professional and employment-related information, network activity, biometric information, audio/video, and behavioral analytics about a person. CCPA covers businesses which “collect” a California resident’s personal information, defined as actively or passively obtaining, gathering, accessing or otherwise receiving personal information from a person, or by observing the person’s behavior. It also covers “selling” personal information, which is another bad choice of a defined term – “selling” personal information under the CCPA includes selling, renting, sharing, disclosing, or otherwise communicating (by any means) personal information to another business or third party for monetary or other valuable consideration, with some significant exceptions.
CCPA creates five (5) rights for California residents:
- The Right to Know – California residents have a general right to know the categories and purposes of personal information collected, sold, or otherwise disclosed about them.
- The Right to Access and Portability – California residents have a specific right to know how, why and what personal information about them is being collected, sold or disclosed, and if information is provided electronically, to receive it in a portable format.
- The Right to Deletion – California residents have a right to request the deletion of personal information about them collected by a business, with some exceptions.
- The Right to Opt Out – California residents have a right to say “no” to a company’s sale, sharing or transfer of their personal information with third parties.
- The Right to Equal Service & Pricing – California residents have a right to equal service and pricing whether or not they choose to exercise their CCPA rights.
Creating and Implementing a CCPA Compliance Plan
For companies that have not already gone through a GDPR compliance effort, CCPA compliance can seem daunting. However, creating a solid compliance plan and getting started now maximizes the chance your company will be in good shape for CCPA once it becomes effective. Here are some things to consider as you create and implement a CCPA compliance plan for your business. (Please note that if your company has already gone through a GDPR compliance effort, some of these may already be fully or mostly in place.)
1. Identify CCPA Champions within your business
An important initial step towards CCPA compliance is to identify the person(s) within your company that will lead the CCPA compliance effort. CCPA compliance will require a cross-departmental team. This often includes Legal (to advise on and help to interpret the statutory and regulatory requirements and to monitor for new developments both on CCPA and similar federal and state legislation, and to create a compliance plan for the business if the company does not have a data governance team); Development and Information Technology (to implement the necessary technical and operational systems, processes, and policies which enable CCPA compliance); Sales leadership (for visibility into CCPA compliance efforts and to help manage inbound requests for CCPA compliance addenda); Customer Support (as CCPA requires customer support personnel be trained on certain aspects of CCPA compliance); Security (if your company has a Chief Information Security Officer or other information security person or team); Data Governance (if your company has a data governance person or team); and an executive sponsor (to support the CCPA compliance efforts within the C-Suite). Depending on your company, there may be other involved groups/parties as well.
2. Determine how CCPA applies to your business
A key early step in CCPA compliance is determining how CCPA applies to your business. There are different compliance requirements for companies that collect personal information, companies that process personal information as a service provider for other companies, and companies that “sell” personal information or disclose it for a business purpose.
- Does your business collect information directly from California residents, e.g., through online web forms, through customer support contacts, from employees who are California residents, through creation of an account, etc.? If so, it must comply with CCPA requirements for companies that collect personal information (a “data controller” in GDPR parlance).
- Does your business receive and process personal information on behalf of customers or other third parties? If so, it must comply with CCPA requirements for companies acting as a service provider (a “data processor” in GDPR parlance.) If you are a service provider, you must ensure your service offerings enable customers to comply with their own obligations under CCPA. If not, expect a lot of requests for assistance from your customers, which could result in significant manual effort.
- Does your business (a) “sell” personal information to affiliates, service providers or third parties (other than for the excluded purposes under CCPA), and/or (b) disclose or otherwise share personal information with an affiliate, service provider or third party for operational or other notified purposes? If so, it must comply with CCPA requirements for companies that “sell” personal information or disclose it for a business purpose. It’s important to note that under Section 1798.40(t)(2) of the CCPA, there are certain exceptions that when satisfied mean a company is not “selling” personal information under the CCPA. For example, a business does not “sell” personal information if a person uses that business’s software or online system, or gives consent for a business, to disclose their personal information to a third party, as long as that third party is also obligated not to “sell” the personal information. As another example, a business does not “sell” personal information when it shares it with a service provider, as long as certain conditions are met.
3. Inventory your data assets, data elements and data processes
One of the most important steps in CCPA compliance, and data privacy compliance in general, is to conduct a data inventory. For CCPA purposes, consider inventorying your data assets (programs, SaaS solutions, systems, and service providers in which data elements are stored for use in data processes), data elements (elements of personal and other information stored in data assets), and data processes (business processes for which data elements are stored and processed in data assets). This inventory should also collect information on service providers and other third parties with whom data elements are shared or disclosed by your business, and the purposes for which information is shared or disclosed. Companies should try to complete this inventory as quickly as possible. The CCPA compliance team should work to create a list of internal individuals who should complete this inventory; once all responses are received, the compliance team should consolidate the responses into a master table.
The data inventory is a snapshot in time. It’s also important to refresh the data inventory on a regular basis, e.g., quarterly, to capture changes to data collection and usage over time.
4. Cease any unnecessary collection and/or storage of personal information (“data minimization”)
Once the data asset/element/process inventory is created, businesses should be encouraged to use the opportunity to conduct a “data minimization” exercise. One of the central principles of data privacy is data minimization – limiting the collection and storage of personal information to only what is directly necessary and relevant to accomplish a specified business purpose. The CCPA compliance team should consider both (a) identifying data elements without an associated data process, which I call “orphaned data elements,” and purging and ceasing the further collection of stored orphaned data elements; and (b) identifying data collection which is not associated with an associated business purpose, which I call “orphaned data transfers,” and cease any further orphaned data transfers and terminate the associated contracts. Also consider validating that record retention policies are being followed so that data is promptly irretrievably deleted once it is no longer needed for a business purpose.
5. Implement a compliance plan for the 5 CCPA privacy rights
The heart of a CCPA compliance plan is implementing compliance with the 5 privacy rights created by the CCPA. A solidly-constructed plan should cover compliance requirements where the business acts as a data collector, a service provider, or a company selling or otherwise disclosing personal information.
a. The Right to Know
b. The Right to Access and Portability
Another key requirement is the implementation of a process to respond to verifiable requests from data subjects for the following information covering the 12-month period preceding the request date. Companies will need to provide information including:
- The categories of personal information collected about that person
- The categories of sources from which the personal information is collected
- The business/commercial purpose for collecting/selling personal information
- The categories of third parties to which their personal information is shared/disclosed
- The specific data elements collected about that person for the 12-month period preceding the request date (this could be read to conflict with data destruction policies or data minimization best practices, but I suspect that destruction policies or data minimization best practices will trump this disclosure requirement)
- If a person’s personal information is sold or is disclosed for a business purpose by your business unit, additional information must be provided
If the data inventory is done right, it can be a source of data for this response (except for the requestor’s specific data elements). Companies must provide at least 2 methods for a person to submit a verifiable request – a toll-free number and website address are both required. The California Attorney General will release regulations on how to “verify” a request. Information must be disclosed within 45 days of receipt of the request, but there is a process under CCPA to extend the time period to 90 days if necessary. If information is provided electronically, they must be provided in a portable format (e.g., an .xml file). The team that is responsible for fulfilling verified requests should be trained on how to prepare a response, and should test it before the CCPA effective date to validate that the process is working properly. You can’t require someone to have an account with you in order to submit a request. Don’t forget to train your website and customer service personnel on how to handle consumer requests.
Also, if you are a service provider, your clients will look to you to ensure they are able to pull information from your systems necessary for them to comply with the right to access and portability. Don’t overlook including in your compliance plan a review of your customer portal and interfaces (e.g., APIs) to ensure customers are able to satisfy their CCPA compliance obligations.
c. The Right to Deletion
Another key requirement is to implement a process to delete collected personal information of a person if that person submits a verified request for deletion, and to direct your service providers to do the same. Note that this does not apply to third parties with whom information has been shared or disclosed who are not service providers. As with the right to access and portability, you can’t require someone to have an account with you to exercise this right.
There are many important exclusions to the right of deletion. These include:
- Completing a transaction with, providing a good or service requested by or reasonably anticipated under a business relationship with, or otherwise needed to perform a contract with, a person
- Security purposes
- Debugging and error resolution
- Conducting formal research (many conditions apply)
- “Solely internal uses” that are reasonably aligned with a person’s expectations based on the person’s relationship with the business
- Compliance with a legal obligation
- Internal uses in a lawful manner that is compatible with the context in which the person provided the personal information
- Other limited exceptions under CCPA
d. The Right to Opt Out
This one may be the most challenging for many companies to implement. It applies if a business “sells” personal information to third parties, or otherwise shares personal information with a third party (e.g., a data sharing agreement). CCPA appears to provide that an opt-out would not apply to information provided to a company’s own service providers to further the company’s own business purposes, as long as there are certain contractual requirements in place with the service provider.
CCPA requires companies to implement a “Do Not Sell My Personal Information” opt-out page linked to from the homepage footer on a website, and from their mobile apps. (The description of a person’s rights under CCPA in section (a) above should include a description of the right to opt out.) Creating a process to verify requests (pending guidance from the California Attorney General) is especially important here since opt-out requests can be submitted by a person or that person’s “authorized representative.” Once a request has been verified, the personal information of the data subject cannot be shared with third parties (e.g., by associating an opt-out flag with the personal information) until the person later revokes the opt-out by giving the business permission to share his or her personal information with third parties. However, you cannot ask for permission for at least 12 months from the opt-out date. Companies must train their customer service representatives on how to direct persons to exercise their opt-out rights.
e. The Right to Equal Service and Pricing
As part of a CCPA compliance plan, businesses should consider ways to make sure that they do not charge more or otherwise “discriminate” against a person who chooses to exercise one of their CCPA rights. A business can offer financial incentives to persons for the collection, sale or retention of their personal information, as long as that incentive is not unjust, unreasonable, coercive or usurious.
5. Verify you have CCPA-compliant written contracts in place with service providers and third parties receiving personal information
Personal information governed by CCPA may only be disclosed to a service provider or third party under a written contract. Businesses should work with their internal or external Legal resource to validate that written contracts are in place with all service providers and third parties to which personal information is disclosed, and that there is a valid business purpose for disclosing the personal information. If no written agreement exists, work with your Legal resource to negotiate and execute a CCPA-compliant agreement. For existing written agreements, a CCPA contract addendum will likely be required which adds into the agreement the obligations and commitments required under CCPA. Don’t forget to look at any data sharing with your corporate affiliates which is likely under an inter-company agreement.
6. Prepare for compliance requests where your company is a service provider
If your company is a service provider to other businesses, you should expect to start receiving questions about, and contract amendments/addenda related to, CCPA. It’s the inverse of #5 above. Consider how to most efficiently handle these requests. Some companies may want to consider whether to have a standard CCPA compliance addendum for use with customers, or to have a CCPA compliance statement on a public facing website that can be referred to as needed. Work with Sales and account managers to educate them as to why the company cannot accept a customer’s own CCPA addenda, which may include more than just CCPA compliance terms.
7. Take steps to permit continued use of de-identified personal information
Finally, a CCPA compliance plan should include implementation of appropriate steps as needed so your company can continue to use de-identified personal information (an information record which is not reasonably capable of being identified with, relating to, describing, being associated with or being directly/indirectly linked to the source person) and aggregated personal information (information relating to a group or category of persons from which individual identities have been removed, and which is not linked or reasonably linkable to a person or device). CCPA talks about de-identified data only with respect to the following requirements, but the same safeguards and processes would likely apply to aggregated personal information.
- Implement technical safeguards to prohibit re-identification of the person to whom de-identified personal information pertains.
- Implement business processes that specifically prohibit re-identification of de-identified personal information.
- Implement business processes to prevent the inadvertent release of de-identified personal information.
Your company can only use de-identified personal information as long as it makes no attempt to re-identify the de-identified personal information (whether or not that attempt is successful). If your company begins re-identifying personal information, cease any use of de-identified personal information immediately.
8. Review your security procedures and practices, and consider encryption and data redaction options
Finally, business are encouraged to review their security procedures and practices to ensure they are reasonable and appropriate to protect personal information in their possession or control. CCPA creates a private right of action for consumers whose un-encrypted or un-redacted personal information is subject to an unauthorized “access and exfiltration,” theft, or disclosure as the result of a business’s violation of its duty to implement and maintain reasonable security procedures and practices to protect personal information appropriate to the nature of the information. For this private right of action, CCPA specifically uses a different definition of personal information, the one found in California Civil Code § 1798.81.5(d)(1)(A). Here, “personal information” means a person’s first name or first initial and last name coupled with the person’s (i) social security number, (ii) driver’s license number or California identification card number, (iii) account number, credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual’s financial account, (iv) medical information, and/or (v) health insurance information, where such information is not encrypted or redacted. Any private right of action is sure to spawn a cottage industry of class action lawsuits. If your company collects and/or receives personal information as defined above, consider a review of your company’s security procedures and practices to ensure that they are reasonable and appropriate to protect such personal information given the nature of the information.
In 2016, the California Attorney General issued a Data Breach Report in which the Attorney General stated that “[t]he 20 security controls in the Center for Internet Security’s Critical Security Controls identify a minimum level of information security that all organizations that collect or maintain personal information should meet. The failure to implement all the Controls that apply to an organization’s environment constitutes a lack of reasonable security.” Given this, all companies are encouraged to review the Center for Internet Security’s Critical Security Controls to ensure that they meet the California AG’s minimum definition of “reasonable security.”
The California Attorney General’s report included other recommendations, such as use of multi-factor authentication on consumer-facing online accounts containing sensitive personal information, and the consistent use of strong encryption to protect personal information on laptops, portable devices, and desktop computers. Companies may want to evaluate whether implementing encryption at rest on servers, workstations, and removable media, and/or redacting personal information (e.g., through tokenization and deletion of the source data or another data redaction technique), would make sense as a part of its security procedures and practices.
Eric Lambert is counsel for the Transportation division of Trimble Inc., an geospatial solutions provider focused on transforming how work is done across multiple professions throughout the world’s largest industries. He supports the Trimble Transportation Mobility and Trimble Transportation Enterprise business units, leading providers of software and SaaS fleet mobility, communications, and data management solutions for transportation and logistics companies. He is a corporate generalist and proactive problem-solver who specializes in transactional agreements, technology/software/cloud, privacy, marketing and practical risk management. Eric is also a life-long techie, Internet junkie and avid reader of science fiction, and dabbles in a little voice-over work. Any opinions in this post are his own. This post does not constitute, nor should it be construed as, legal advice.