The new General Data Protection Regulation is effectively a “done deal” following the final trilogue meeting on December 15. One might assume based on UK media coverage that the biggest change in EU privacy law is that kids under 16 will need their parent’s consent to sign up for social media services and apps. As much consternation as that will cause at the breakfast table, it’s really the least of our worries.  

It will take some time to process the new Regulation, and of course we don’t have the complete, official version yet (please read the important caveat at the end of this summary), but here are the key features of the Regulation in bullet point form so we can start mapping out the new legal landscape. This summary focuses more on what’s new than what has stayed in place; generally speaking, rights of data subjects that existed under the Directive also exist under the Regulation.  On the other hand, the burdens on data controllers and processors have substantially increased. We’ll explore all of this in more detail over the coming weeks through our blog, www.privacyandsecuritymatters.com, and further client alerts.

Who is subject to the Regulation?

• Data processors as well as data controllers are directly liable under the Regulation.  (Under the 1995 Directive, only controllers were directly liable.)

• Companies with an “establishment” in the EU are subject to the Regulation, regardless of where they process personal data. (There’s a looming conflict-of-laws issue here.) That means that cloud-based processing performed outside of the EU for an EU-based company is covered by the Regulation.

• Companies that monitor the behavior of data subjects who are located within the European Union. Generally, these companies will need to appoint a representative in the EU.

• Companies based outside the EU that provide services or goods to the EU (including for free) are subject to the Regulation. These companies may need to appoint a representative in the EU.

Who is protected by the Regulation?

• The Regulation protects “natural persons, whatever their nationality or place of residence.” 

• You just need to be alive.

Who will enforce the Regulation?

• The much ballyhooed “one-stop shop” has survived in a watered-down form in the Regulation.

• Each company (or corporate group) will have one national DPA as its lead regulator.

• The lead DPA will be required to consult with other DPAs whose nationals are affected, or which otherwise have a specified interest in a given matter.

• Most importantly, the Regulation creates an entirely new super-regulator (or, one could say, it elevates the Article 29 Working Party to full-blown super-regulator status) in the form of the European Data Protection Board.  

• The European Data Protection Board will include the head of each national DPA and the European Data Protection Supervisor or their respective representatives (and thus will be very similar in composition to the Article 29 Working Party).

• The European Data Protection Board will issue guidance and will be empowered to resolve disputes among the national DPAs.

Public Interest Groups as Plaintiffs

• The Regulation authorizes a form of class action, although these can only be brought by a “body, organisation or association which is of non-profit making character, whose statutory objectives are in the public interest and which is active in the field of the protection of personal data.” So private-sector plaintiffs lawyers won’t benefit, but public-interest privacy advocates have gained an incredibly powerful tool, particularly against large companies.

• Companies can still be sued in the home country of the data subject.

Scope of “Personal Data”

• Expanding slightly on the Directive, personal data is defined as “any information relating to an identified or identifiable natural person 'data subject'; an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that person.”

Sensitive Personal Data

• Two new categories of data, genetic and biometric data, join the prior list of “sensitive” or “special” personal data: data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, trade-union membership, and data concerning health or sex life and sexual orientation.

Pseudonymized Data

• Pseudonymized data remains personal data (because it can, by definition, be re-associated with a specific person).

• Pseudonymization is viewed as a highly recommended risk-reduction technique.

• There are some benefits attached to using pseudonymized data:

  • pseudonymization is a positive factor when analyzing whether a future data use is “compatible” with the original use for which the data were gathered;

  • pseudonymization counts as part of the organizational and technical measures used to safeguard personal data; and

  • depending on the facts, there may be some relief from data breach notification requirements if the compromised data were pseudonomized and the “key” that would allow re-identification was not compromised.

Anonymized Data

• The Regulation does not apply to fully anonymized data.

Substantial Fines for Noncompliance 

• Maximum fines have been confirmed via an EU press release as 4% of worldwide turnover of the offending undertaking. Final wording on fines is not yet available.

• “Undertaking” is to be construed in light of Articles 101 and 102 of the Treaty on the Functioning of the European Union (which is to say, in accordance with the EU’s “single economic entity” interpretation for purposes of antitrust/competition law). For most purposes, companies should assume that fines would be based on their corporate group’s turnover.

Consent 

• Consent is one of several possible bases for processing personal data (as it was under the Directive).

• Consent must be freely given, specific and informed.

• Consent must be demonstrated by a “clear affirmative action by the data subject.”

• The Parliament’s proposal that consent can be shown via browser settings for online activities does not seem to have made it into the final Regulation – but we’ll confirm that later.

Limitations on Consent

• Consumers cannot be asked to agree to any unfair contract terms in exchange for their consent. (Recital 32 expressly refers to Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts.) This will require most companies to carefully review their terms of use.

• Different types of data uses require separate consent (presenting an “all or nothing” choice to individuals is not permitted).

• Consent “should not be regarded as freely-given if the data subject has no genuine and free choice and is unable to refuse or withdraw consent without detriment.”

• Consent is not valid in the context of a contract (including, presumably in terms of use for a service) if the data subject is required to give consent to uses of his or her personal data that are not necessary for the performance of the contract/service. This will have a major impact on the business model of “free” apps and other services that rely on monetizing users’ data to pay for the costs of providing the app/service. (Note that the wording of this provision was not shown as final in the Dec. 14 draft of the Regulation, so we will update this when the final wording is available.)

• Consent is not valid where there is a “a clear imbalance [of power] between the data subject and the controller.”

Breach Notification Requirements

• 72 hours to report to DPA, unless controller can demonstrate “that the personal data breach is unlikely to result in a risk for the rights and freedoms of individuals.”

• Breaches must be disclosed to the affected individuals “without undue delay if the personal data breach is likely to result in a high risk” to their “rights and freedoms.” 

Documentation

• Maintaining and enforcing internal data protection policies and procedures is a requirement under the GDPR.

• Companies may need to produce this documentation in the event of a complaint.

• Data breaches and subsequent investigations must be documented.

Data Security Obligations

• The Regulation requires “privacy by design” in information management systems

• The standard for security is somewhat flexible: Companies need to determine what security measures are adequate considering “the state of the art [of security technologies] and the cost of implementation and taking account of the nature, scope, context and purposes of the processing as well as the risks of varying likelihood and severity for rights and freedoms of individuals posed by the processing.”

• In a nutshell, security measures need to match the risk of data breach and resulting harm to the data subjects. 

Data Protection Impact Assessments and Consultations with the DPA

• Impact assessments are required when a proposed data processing activity poses a “high risk for the rights and freedoms of individuals.”

• Prior consultation with the DPA will be required to determine the nature of the impact assessment.

• Consultation with the DPA will also be required when an impact assessment identifies a risk that needs to be remedied.

Data Protection Officers

• Data Protection Officers are essentially in-house compliance officers. They must have a high level of independence in conducting their duties.

• Companies must appoint a Data Protection Officer if:

  • its “core activities . . . consist of processing operations which, by virtue of their nature, their scope and/or their purposes, require regular and systematic monitoring of data subjects on a large scale;” or

  • its “core activities . . . consist of processing on a large scale of special categories of data” or “data relating to criminal convictions and offences.”

• Ordinary processing of employee data for HR purposes inescapably requires processing some “special” data. It’s not clear whether such internal processing would be a “core activity” or how many employees a company would need to have to make that processing “large scale.” Hopefully there will be further guidance on these points.

Transfers of Personal Data to Third Countries

• Transfers of employee data within a corporate group are not exempt from the rules on transfers outside of the EU.

• Model Clauses and Binding Corporate Rules will still be available.

• Certification programs (also referred to as “privacy seals”) may also be approved as a basis for transferring data outside of the EU. (This opens up a pathway for the Commission to skirt the problem of negotiating a new Safe Harbor agreement with the US.)

• The Commission can now make sector-specific adequacy determinations. For example, the Commission might determine that the US offers adequate protection for financial data or health data, given the comprehensive federal legislation in those sectors.

• There is a new basis for transfers that are not “repetitive and that only concern a limited number of data subjects,” where the controller has assessed the transfer, adduced safeguards and has a “compelling” legitimate interest that is not outweighed by the interests or rights and freedoms of the data subject.

Binding Corporate Rules 

• Still available. (Note, however, that the Regulation doesn’t prevent national Data Protection Authorities from reconsidering BCRs on the basis of the Schrems decision striking down Safe Harbor.)

• The Regulation offers a simpler administrative pathway under the “lead DPA” structure, so hopefully we will see BCR approval times shortened.

Access to and Correction of Personal Data

• Access and rectification rights are broadly similar to the Directive.

• The controller’s current right to charge a reasonable fee for data access requests is severely limited under the Regulation.

Right of Erasure (also known as the Right to be Forgotten)

• A data subject can require that his or her personal data be erased if

  • the data are no longer necessary in relation to the purposes for which the data are collected or otherwise processed,

  • the data subject has withdrawn consent for processing;

  • the data subject objects to the processing of personal data concerning him or her, or 

  • where the processing of the personal data otherwise does not comply with the Regulation.

• There are a few limitations on the Right of Erasure that we will explore later.

Portability

• Data portability was much discussed during the consultation phase of the Regulation, since it’s arguably unrelated to privacy interests.

• It appears that data portability will be limited to data that were originally provided by the data subject (such as photos or documents stored in the Cloud).

• Interoperable standards are encouraged, but not mandated.

Age of Consent (to sign up for online services)

• Sixteen. The final wording is not available yet, but press releases have indicated that Member States will be free to set a lower age limit, to be no lower than 13.

• This was a late addition to the Regulation and was not subject to public consultation.