Navigating California's Pioneering Data Security Law: A Comprehensive Guide
John Altorelli originally published thought leadership on California's groundbreaking data security law and how it impacts businesses and individuals alike.
In 2003, California introduced the first-ever data security law, which required companies to notify California residents in the event of a security breach involving their personal information. As the legislation went into effect on July 1, 2003, it marked a significant shift in how businesses and individuals approach data protection. In this blog post, we will take a closer look at the key aspects of this groundbreaking law, and how it continues to shape the data security landscape.
The Purpose of the Act
The California data security law, officially known as SB 1386 (or § 1798.82 et seq. of the California Civil Code), was enacted to address the growing risk of identity theft arising from the vast amounts of personal information stored in computer databases. The Act was a direct response to the hacker attack on California's payroll database in April 2002, which compromised the personal information of 265,000 state employees.
Who is Covered by the Act?
The Act applies to any individual or business conducting business in California that owns or licenses computerized data containing unencrypted personal information of California residents. This includes businesses that may not have offices in California or store data within the state. The Act also extends to those who maintain but do not own the covered data, such as outsourcing companies.
Covered Data and Triggers for the Notice Requirement
The Act covers sensitive personal information, including an individual's name combined with data elements such as Social Security numbers, driver's license numbers, and financial account access details. The Act's disclosure requirements are triggered when there is a security breach involving covered data, and the company reasonably believes the data was acquired by an unauthorized person.
Notice Requirements and Methods
Companies are required to provide notice of a security breach in the most expedient time possible, without unreasonable delay. The notice can be provided through actual notice (in writing or electronically), substitute notice (in certain cases, via email, websites, and statewide media), or through a company's existing information security policy.
Penalties and Legal Actions
The Act allows for private actions for damages and injunctive relief, with no prohibition on class action lawsuits. This has led to concerns about potential nuisance litigation.
Recommendations for Compliance
To comply with the Act, businesses conducting operations in California should:
Audit covered data
Consider segregating covered data
Use encryption to protect data
Review third-party agreements
Obtain consent for email notices
Implement a security monitoring program
Develop notification procedures
Train employees on the Act and its requirements
California's pioneering data security law has set a precedent for how businesses handle personal information and respond to security breaches. By understanding the requirements of the Act and implementing appropriate measures, companies can protect the sensitive information of their customers, employees, and other stakeholders, and minimize the risk of costly legal actions.
Please see the original post here which was authored by John Altorelli on Paul Hastings website https://www.paulhastings.com/.