Workplace Privacy, Data Management & Security Report : Privacy Lawyers & Attorneys : Jackson Lewis Law Firm : Data Security, HIPAA & Confidentiality Issues

Beginning March 1, 2010, businesses will be required to safeguard from identity theft and other dangers personal information about Massachusetts residents under a “written information security program” or WISP. Similar requirements exist in other states around the country, although those requirements generally are not as comprehensive as those becoming effective in the Bay state.

Our complimentary webinar is designed to help employers and businesses become compliant. The program will cover:

• the emergence of data security mandates across the country,
• the Massachusetts approach to data security – breach notification, data destruction, the nuts and bolts of the identity theft/data security regulations, and
• best practices when creating a WISP.

We hope you enjoy the webinar.

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On January 29, 2009, I had the opportunity to attend a brief presentation sponsored by Minnesota CLE entitled, “Corporate Data Privacy & Security: 10 Legal Practice Tips,” given by Brad Bolin, Senior Corporate Counsel for Best Buy, Inc. a Fortune 500 electronics retailer headquartered in Richfield, Minnesota. Bolin is a specialist in information security and privacy law. I was curious to hear what data privacy issues were on the mind of someone who monitors these issues for a living on behalf of a large corporation, especially a company that sells some of the very devices that make data privacy more challenging and which is known for its “results oriented” work environment. Many of the issues relate to topics discussed on this blog. The views expressed were strictly those of Bolin, not Best Buy. Here were his observations:

1. Work/Life Balance.  Electronic connections are collapsing the distinctions between work and personal life. Employees expect to be connected 24 -7. Bolin quoted Best Buy CEO Brian Dunn as noting, “Technology is … a constant backdrop in people’s lives, at home, at work, on the road and literally in the palms of their hands. We call it the ‘connected world’ and, as exciting as it is, it’s also increasingly complex, and difficult to keep pace with.”

2. Smart Phones Part 1.  Smart phones are becoming common and are a great example of how the “limited personal use” exception is swallowing the rule. He cited a survey showing that 20% of companies allow their employees to use personal devices for work, and the number is surely growing. Bolin discussed how under the old corporate model, a company that pays for an employee’s smart phone ought to take it back from the employee upon his or her departure, erase the contents and either recycle or reuse the device to prevent the disclosure of confidential corporate information. But what about the employee’s personal photographs, “apps”, movies, contacts and downloaded songs? What if the employee paid for the device but the company reimburses the cost? Securing employee-owned smart phones is not the same as securing corporate-owned devices, he emphasized.

3. Smart Phones Part 2.  Bolin said that, whatever rules you choose, a departing employee should be able to take his or her personal data, while IT should be able to ensure that any corporate information has been safely removed. The process should be simple and transparent to all. Adopt simple rules that make corporate data on an employee's smart phone easier to identify and control. For example, distinguish between media files on the one hand, and xls doc, ppt, and pdf documents on the other. Have a transparent dialog with employees about the trade-offs that exist cost when placing personal phones on the corporate network. For example, an employee might be required to archive SMS text messages on his phone for e-discovery purposes.

4. Texting Issues.  While e-mail typically is stored on a common server, text messages usually are stored by cell phone companies or directly on phones, and often the employer does not directly pay for their storage. Employers must have either a warrant or the employee's permission to see cell phone text messages that are not stored by the employer or by someone the employer pays for storage, Bolin said, citing Quon v. Arch Wireless, et al. 529 F.3d 892 (9th Cir. 2008),  The case is now under review by the United States Supreme Court.

5. TMI = Too much information.  An embedded Global Positioning System (GPS) feature is great for supporting and measuring effectiveness of a mobile sales force, but it raises the danger of collecting information about employees regarding the personal part of their life.

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As we have discussed before, data breach notification is one of the most rapidly emerging areas of law. Good security incident procedures as well as effective training can help avoid the risk of data breach. (Sample data breach training). 

A case in point: Connecticut's Attorney General has filed a civil action against Health Net of the Northeast Inc. (“Health Net”) for failing to secure approximately 446,000 individuals’ patient information on a missing portable computer disk drive, and for failing to provide prompt notice of the breach. Among other things, the suit alleges Health Net violated the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health (HITECH) Act, when it failed to provide prompt notice, failed to encrypt the data, failed to provide for and implement appropriate policies to safeguard the information, and failed to supervise and train its workforce on safeguarding protected health information and personal information. 

As this suit demonstrates, state Attorneys General will use the authority granted by HITECH to enforce the privacy and security protections of HIPAA for protected health information, as many breaches involving such information may not be covered by state data breach laws. Such enforcement will only add to the cost of a data breach, which, according to the 2009 Ponemon Institute Annual Cost of a Data Breach study, continues to rise.

While a company’s first line of defense always should be a comprehensive data security policy, preparation should include an effective security incident procedure. Several key questions, some of which will form the foundation for any good security incident procedure, must be answered immediately following a breach: 

• How did the breach occur?
• Are measures in place to contain the breach?
• What information was compromised? 
• Whose information was compromised?
• Will the local authorities be alerted?
• What potential breach notice laws are implicated?
• Does notice of the breach have to be provided?
• If so, to whom and how will notice be provided?
• Does the company have applicable insurance to cover the notification process?
• Will any monitoring service be provided for affected individuals?
• Are measures in place for public relations implications?

However, a security incident procedure is only as strong as the awareness you create among your employees as to what constitutes a data breach and who to notify in the event of a possible breach. Therefore, in addition to an effective security incident procedure, it is essential that training, like the sample above, be provided to employees on a regular basis.   

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While most are not taking the day off, January 28 is recognized internationally as Data Privacy Day - a day for people to become more aware of and promote data privacy related issues.

Many organizations support these initiatives and some have created and contributed to a website to promote this day and data privacy and security generally. This website provides a wealth of information and resources related to data privacy in all facets of our lives.

Of course, our focus is on employers and we encourage all employers to use this day as an opportunity to focus on this emerging issue and create awareness in their organizations.

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Less than one month into 2010 the trend to address data security, destruction, and encryption has continued among state lawmakers. Specifically, Florida, Michigan, Kentucky, Kansas, Pennsylvania, and New York all have introduced, reintroduced, or amended legislation of this kind. 

• The Florida and Michigan laws would amend personal data destruction rules for companies.
• The New York law would mandate data security and encryption measures.
• The Kentucky bill would require government agencies to protect all personal data under the Gramm-Leach-Bliley Act.
• The Michigan bill includes a state version of the Federal Trade Commission's Red Flags Rule and would require creditors in the state to implement programs aimed at spotting “red flags” of possible identity theft and put in place mitigation measures. Michigan is also considering a number of other measures. 
• The Kansas law would require state agencies to engage in periodic network security reviews.
• The Pennsylvania bill would require public agencies to notify state residents of a breach of their personal information within seven days of the discovery of the breach.

While 5 states remain without data breach notice bills (Alabama, Kentucky, Mississippi, New Mexico, and South Dakota), Congress is considering legislation, the Data Accountability and Trust Act (DATA) (H.R. 2221), that would preempt all state notification laws and instead establish a national breach notice standard.

As we have previously mentioned, we anticipate data privacy and security legislation and case law to be at the forefront of legal issues in 2010. Employers should begin by reading the Data Security Primer and consider implementing comprehensive data security policies and procedures that would allow them to comply with the various state laws that may impact their business. 

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As reported by the December 23 Rochester, Minnesota Post Bulletin, the Mayo Clinic has terminated two medical professionals, a physician and another staff member, after determining that they had inappropriately accessed a patient’s confidential electronic health records (EHRs).

The access highlights what should be a growing concern for health care industry employers: the increased availability EHRs provide about patients’ private information that is otherwise protected by HIPAA. As reported in the Bulletin, according to the President of the Minnesota-based Citizens’ Council on Health Care, “the development of the electronic medical record has allowed all sorts of people to have access” that they would not have had before the advent of EHRs.

As previously reported here, the risks of data breaches and misuses of personal information rise significantly when the information is in electronic format. The trend toward putting more information in electronic format will only continue given the significant cost savings through technological advancements and, for health information, federal subsidies for the adoption of EHRs. Despite protections mandated by law, the portability and availability of EHRs nevertheless facilitate the improper viewing or misuse patients’ protected health information.

The Mayo Clinic terminations come on the heels of a string of employee terminations in 2008 by the UCLA Medical Center, which, through investigations dating back to 2004, found that at least 127 employees had improperly accessed the medical records of celebrities. One employee was even indicted in 2009 after she was found to have purposefully removed the social security numbers of celebrity patients and recorded actor Farah Fawcett’s medical records. Farah Fawcett subsequently sued her.

While most medical providers are well-aware of HIPAA’s requirements, the interest in all things celebrity may be too much for some to resist. We expect that the American Recovery and Reinvestment Act of 2009 (ARRA) [pdf] may only increase the risk of privacy breaches for it provides incentives to health care-related businesses to develop even more extensive uses of electronic health records. However, even famous celebrities have privacy rights under HIPAA, and health care employers should revisit their policies, procedures and training in the area of maintaining patient privacy and more closely monitor the use of electronic medical records.

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Last month, we briefly discussed "cloud computing," along with some issues that should be considered when deciding whether to adopt this new technology. Our post focused on data privacy and security issues.

As reported by Kim Hart, of The Hill's Technology Blog, a December 9, 2009, Federal Communications Commission filing states that the Federal Trade Commission is in the process of investigating "cloud computing" to address some of the same concerns noted in the post referenced above - privacy and security concerns.

Companies operating in the cloud, or thinking of moving in that direction, ought to be on the lookout for regulation or guidance that could come from the FTC's investigation.

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Like individuals, businesses have resolutions/goals for 2010, perhaps even this new decade. As information risk, such as HIPAA or the occurrence of a data breach, continues threaten companies and put individuals’ personal identities, finances and medical information in jeopardy, addressing this issue in the coming years is a worthy resolution for any business. With this January 28, 2010, being the second National Data Privacy Day, January is as good a time as any to begin thinking about your organization’s information risk. The following list, which is by no means exhaustive, provides ten critical areas businesses will need to consider when addressing this issue.

1. Risk Assessment. Many businesses remain unaware of how much personal and confidential information they maintain, who has access to it, how it is used and disclosed, how it is safeguarded, and so on. Getting a handle on a business' critical information assets must be the first step, and is perhaps the most important step to tackling information risk. You simply can’t adequately safeguard something you are not aware exists.
2. Develop a Written Information Security Program. Even if adopting a written information security program (WISP) to protect personal information is not an express statutory or regulatory mandate in your state, having one is critical to addressing information risk. Not only will a WISP better position a company when defending claims related to a data breach, but it will help the company manage and safeguard critical information, and may even help the company avoid whistleblower claims from employees. For companies, a WISP can be a competitive advantage. Of course, in states like Massachusetts, Maryland, Oregon, Connecticut and others, a WISP in one form or another is required.
3. Vendors/Business Partners. Businesses addressing their information risk cannot stop at their information systems, buildings, and employees. Very often, vendors of the business maintain significant amounts of sensitive company and personal information of that business. This list of vendors can be long and include service providers such as: employee benefits consultants/administrators/brokers, accountants, lawyers, record storage/destructions companies, office cleaning services, professional employer organizations, payroll companies, cloud computing or other information service providers, and so on. Businesses that turn over sensitive information to a vendor need to take steps to ensure the vendor has implemented appropriate safeguards to protect the information. If this information is personal information, a number of states mandate contract provisions requiring the vendor to safeguard the information.
4. HIPAA. The recent changes by the HITECH Act, under the American Recovery and Reinvestment Act of 2009, will drive increased focus on HIPAA in 2010, particularly for business associates which for the first time become directly subject to many of the same privacy and security requirements as covered entities. The addition of a HIPAA breach notification requirement, effective September 23, 2009, and the growth of electronic health records, already are driving covered entities to amend their business associate agreements. Plan sponsors, health care providers and business associates all need to refocus their attention on HIPAA in 2010.
5. Insurance. Like many other risks, information risk can be addressed in part through insurance. More carriers are developing products dealing with personal information risk, and specifically data breach response. This kind of coverage should be a part of any CIO, privacy officer or risk manager’s plan for safeguarding information.
6. Identify “Red Flags”. Identifying “red flags” is the next step after implementing a WISP, beyond safeguarding sensitive information. The concept of “red flags” is to have policies and procedures designed to detect, prevent, and mitigate instances of identity theft – that is, with safeguards already in place, businesses need to be able to identify circumstances (“red flags”) which indicate incidents of identity theft could be occurring, and then take steps to prevent the identity theft or mitigate its effects. After a number of extensions, on June 1, 2010, the Federal Trade Commission will begin enforcing its “red flag” regulations that apply to financial institutions and creditors.
7. Training. A necessary component of any WISP and a required element under most federal and state laws mandating data security, training deserves special mention if only to remind businesses to remind employees how powerful the small devices are that they carry around.
8. Develop a Plan for Responding to a Breach Notification. All state and federal data breach notification requirements currently in effect require notice be provided as soon as possible. Delays in notification viewed as unreasonable could trigger an inquiry by the state’s Attorney General, or in the case of HIPAA protected health information, the Office of Civil Rights.
9. Carefully Integrate New Technologies. As businesses look for new technologies to increase productivity, cut costs, and gain a competitive advantage, how those technologies address information risk must be a factor in the decision whether to adopt the technology. For example, cloud computing is fast becoming a popular tool used by businesses to enhance their computing capabilities, at substantially reduced costs in some cases, but it raises a number of issues concerning information risk.
10. Watch for New Legislation. Today, managing data and ensuring its privacy, security and integrity is critical for businesses and individuals, and is increasingly becoming the subject of broad, complex regulation. It seems to be only a matter of time before U.S. companies are subject to a national law requiring the protection of personal information. Companies therefore need to stay tuned in order to continue to remain compliant and competitive in this regard.

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The State of Minnesota has been smacked with a number of privacy-related district court lawsuits recently.

The most recent dispute arose after the state of Minnesota hired a Texas-based company, Lookout Services to perform E-Verify services for state employees as part of a U.S. Department of Homeland Security program to ensure that all employees of the state and its contractors have Social Security numbers and are authorized to work in the United States. A reporter for Minnesota Public Radio, Sasha Aslanian, discovered confidential data from state officials posted on the company's Web site, and reported the story along with a recitation of other recent privacy blunders by the state.  The story triggered a mandatory notification of a potential data breach under Minnesota law. In response, Lookout Services filed a lawsuit against both the state and Minnesota Public Radio alleging that Aslanian hacked into the site in violation of the Computer Fraud and Abuse Act.

A state agency, the Minnesota Department of Human Rights ("MDHR"), was the target of another district court action brought by a teacher who had been named as a witness in an action by the MDHR against the Anoka-Hennepin school district. The MDHR charge alleged in part that the teacher singled out a student for harassment because the student was gay. The MDHR settled the case, to which the teacher was not a party, with the school district and featured a description of the case as its “case of the month” on its website. The teacher sued and successfully obtained a temporary restraining order, in part requiring the MDHR to take her name off the website and amend it to refer only to a “female teacher.” The case is captioned Cleveland v. Minnesota Department of Human Rights.

In the third case, a state court dismissed a claim that the Minnesota Department of Health violated the Minnesota Genetic Privacy Act (GPA) by gathering and storing blood specimens from newborn babies and sharing them with medical facilities without the parents’ consent. The GPA prohibits collection or use of genetic information without informed consent, “unless otherwise expressly provided by law.” In an 11-page order, Hennepin County judge found that the blood samples were biological samples, not genetic information and, regardless, the state’s Newborn Screening Law was a statutory exception to the GPA. Bearder, et al v. State of Minnesota. This is a rare example of a private lawsuit under a genetic privacy law, but we can expect to see more as new legislation is enacted in this area, such as the Federal Genetic Information Nondiscrimination Act.

The last case involves the neighboring state of Wisconsin and comes to us from lawyer Peter Nickitas who recently obtained a $40,000 jury verdict in federal court against Dunn County Wisconsin for violation of Wisconsin’s Open Records Laws.  The case, Sheffler v. County of Dunn, involved a Minnesota citizen who was arrested in Madison, Wisconsin and spent time in the Dunn County Jail. A few weeks later he requested copies of video footage from his time in jail. The County failed to respond to his request in a timely fashion and the footage was copied over before it could be produced. Plaintiff Troy Scheffler represented himself pro se in defeating the County’s motion for summary judgment  and Nickitas represented him at trial. 

"These cases all demonstrate that private employers are not alone in facing the complexities and exposure of managing personal information about individuals, particularly employees",  observes Joe Saccomano, head of the Jackson Lewis public sector practice group. 
 

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New Hampshire’s new breach notification law builds on the breach notification requirements under the HITECH Act by requiring health care providers and business associates to notify individuals of disclosures of their protected health information that are prohibited by New Hampshire law, even if such disclosures are permitted under HIPAA or other federal law. This new health information protection was enacted with other measures relating to privacy of electronic medical records and allowing individuals to opt out of sharing their names, addresses, and protected health care information with e-health data exchanges.

H.B. 619 becomes effective for data breaches occurring on and after January 1, 2010. Individuals may sue for violations of the notification requirement and, significantly, seek damages of not less than $1,000 per violation. The law also expressly requires business associates to cover the costs of notification if the use or disclosure triggering notification was made by the business associate.

Now, when New Hampshire health care providers and business associates experience a possible data breach, they will have to consider a number of laws to determine the appropriate response. These include H.B. 619, the state’s general breach notification statute, and the breach notification rules under the HITECH Act and implementing regulations. This is even more complex for health care providers and business associates operating in multiple states as at least five other states (Arkansas, California, Delaware, Missouri, Texas) and Puerto Rico require notification in the event some form of medical information is breached.
 

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As passed by the House of Representatives on December 8, 2009, the Data Accountability and Trust Act would create federal data security standards, a national breach notification requirement, data destruction mandates, and special requirements for "information brokers." 

The Act will now move to the Senate, where it likely will be considered together with recent bills from various Senate Committees, two such bills we discussed in a recent post.

The Act would apply to each person engaged in interstate commerce that owns or possesses data in electronic form containing personal information (or contracts to have any third party entity maintain such data). In short, most businesses in the United States would be subject to the Act and required to establish and implement data security policies and procedures. Like other data security regulations, the Act would permit covered persons, when developing their policies and procedures, to take into account:

• the size of, and the nature, scope, and complexity of the activities engaged in by, such person;
• the current state of the art in administrative, technical, and physical safeguards for protecting such information; and
• the cost of implementing such safeguards.

These new standards will be regulated by the Federal Trade Commission (FTC). Violations of the Act would be enforced primarily by state Attorneys General, although the FTC maintains a right to intervene in those actions. Penalties can be substantial. For example, in the case of a violation of the breach notification requirement, the penalty amount would be calculated by multiplying the number of violations by an amount not greater than $11,000. Each failure to send notification would be treated as a separate violation, with a maximum civil penalty of $5,000,000.

Of course, it will be some time before the Act would become effective, if at all, and it may be substantially modified prior to enactment. Still, recent actions by Congress (for example the enhancements to HIPAA under the American Recovery and Reinvestment Act of 2009) and the states suggest a national standard for protecting personal information is only a matter of time. Companies should be gearing up to deal with these emerging information risks.

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Co-Author:  Joseph J. Lazzarotti, Esq.

Health Net Inc., one of the nation’s largest publicly traded managed health care companies, recently notified authorities and informed affected persons, with a statement on its website, that the unencrypted personal information of 1.5 million current and former members, stored on a portable disk drive, is missing from the company's Connecticut office. The company is now working to send written notices to affected individuals in four states—Arizona, New York, New Jersey and Connecticut.

Coordinating a data breach response, responding to the questions and complaints of affected persons, and negotiating with vendors to provide monitoring services are time-consuming, tedious tasks that require a strong sense of an organization’s public image, good judgment and excellent communication skills. Having the right person to drive this effort internally is critical. 

Additionally, companies that experience data breaches increasingly are becoming subject to federal and state agency inquiries. In this case, at least two states have announced investigations. Connecticut Attorney General Richard Blumenthal said his office will investigate the loss of the portable disk drive that he believed held the unencrypted health, personal, and financial information of some 450,000 Connecticut residents. Blumenthal also vowed to probe a six-month lag in notifying affected individuals of the breach. In a letter dated November 19, 2009, Arizona Attorney General Terry Goddard’s office requested information about the breach from Health Net, also noting the time between the breach and when affected persons were notified. It is critical that an organization’s Privacy Officer be prepared to respond to these inquiries, with the assistance of internal or external counsel when appropriate.

A breach of personal information, particularly one of this size, reminds us of the need for companies to take steps to implement policies and practices that safeguard sensitive personal and company confidential information. The first step is to appoint a person to spearhead a data breach response– typically the Chief Privacy or Information Officer. Among the duties and responsibilities of a Privacy Officer is being the company’s first line of defense when responding to a data breach, including directing the investigation of the breach, coordinating the notification process, addressing the concerns of affected persons and responding to government agency inquiries. For a sample Privacy Officer job description, click here.  

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Continuing our thoughts on how disclosures of private or confidential information may adversely impact the institution and the persons affected by such disclosure, we now focus on something near and dear to lawyers’ hearts: paper shredding.

Many businesses regularly shred documents they no longer need to protect them from disclosure. While this may secure the information contained in those documents, an additional concern exists for HIPAA-covered entities, such as hospitals, medical providers or their business associates. Often, those documents might consist of old medical records, charts, notes, or other information containing protected health information (“PHI”) specifically protected from disclosure under HIPAA.  

Shredding frequently is done by outsourced vendors.  They shred what is provided to them and then resell it as fill, packaging material or for other recyclable-type uses. But shredding alone may not be sufficient to secure data under HIPAA. This can cause a HIPAA headache, as suggested by recent occurrences overseas.  A gift-wrapping company owner in England discovered protected health data (including names of patients) from a local hospital on the shredding she used for work. In another situation being investigated by British authorities, an outsourced medical transcription company in India disclosed shredded health data. Although those situations occurred abroad, they could just as easily happen in the U.S., or occur outside the U.S. but affect information involving U.S. citizens.

If a data breach is discovered by the unauthorized disclosure of PHI through shredding or otherwise, under the American Recovery and Reinvestment Act of 2009 (“ARRA”), covered-entities and business associates must notify those affected by the disclosure of unsecured PHI within 60 days after a breach. If the breach involves disclosure of PHI for over 500 persons, a covered-entity and/or a business associate must also notify Department of Health and Human Services and the media. “Unsecured” under ARRA means any data not rendered unusable, unreasonable or indecipherable. Thus, an individual’s name legible on a snippet of shredded paper together with some health information may be enough to trigger ARRA’s disclosure requirements and constitute a HIPAA violation. For more information about data breaches under HIPAA, click here.

We therefore remind HIPAA-covered entities to ensure that their vendors are compliant with the HIPAA security requirements, that they have appropriate business associate agreements where necessary, and that they actively monitor compliance with those agreements.

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Based on recent events, the University of East Anglia likely will agree that data privacy and security requires a comprehensive approach, as data breaches are not limited to incidents involving personal information and identity theft. In fact, the effects of a breach to an organization's information systems involving confidential company information can be far worse on the organization as a whole than if the breach involved personal information.

Take, for example, a report by The New York Times reporter Lauren Morello concerning a breach involving thousands of emails and documents of the Climatic Research Unit (CRU) at University of East Anglia. Apparently, hackers obtained and posted on the Internet emails and documents calling into question some of the positions about climate change and global warming held by the CRU. Whatever the truth or perception of the information contained in the posted emails and documents, the CRU surely is in an uncomfortable position of having to defend its statements and address their context. 

Last month we reported a data breach involving personal information of a different kind - ethics investigations of members of the United States Congress. Again, while not the kind of personal information that would lead to identity theft, or require notification be sent to the affected individuals, it is the kind of information that could have significant adverse consequences for the institution and the persons affected.

For this reason, organizations need to address "information risk" on an organization-wide basis, making sure that their written information security programs take into account how information of any kind, maintained in any medium by the organization, can, if misused, caused the organization harm. While remedies may be available through the criminal justice system or civil litigation under such laws as the Computer Fraud and Abuse Act, avoiding the breach in the first place obviously is preferred.

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“Cloud computing” takes many forms, but, fundamentally, it is a computer network system that allows consumers, businesses, and other entities to store data off-site and manage it with third-party-owned software accessed through the Internet. Files and software are stored centrally on a network to which end users can connect to access their files using computers that are less powerful and sophisticated than those we use today.  This technology reduces the need for expensive multiple servers and PCs with enough capacity to store massive data and application files. Some believe the PC of the future will need simply the capacity to connect to a web browser for the user to access his or her applications and files.

For more information on how cloud computing works, click here. For information on the FTC investigation of cloud computing, click here.

If you are not already computing in a cloud, you likely will be hearing more about “cloud computing” soon. Last month, for example, the City Council for the City of Los Angeles voted to move city employee e-mail and other applications from city computer networks to a cloud service provider – in this case, Google Inc. City officials cite significant cost savings (which they estimate to be in the millions) as one of the reasons for the switch. They acknowledged that concerns over data privacy, security and management remain.

We’ll agree that significant cost savings can be achieved through, among other things, reduced infrastructure. Questions and concerns many have with cloud computing, however, relate to the privacy, security and management of the information in the cloud. These include:

• What if the cloud starts to rain – a cloud computing data breach – who is responsible for notifying affected persons (and bearing the costs)?
• Which company owns the data placed in the cloud?
• If the data in the cloud is employee e-mail, is the employer still permitted to access and monitor email communications? Will new policies/notices be needed?
• Will company proprietary information be safe?
• Who has access to the data? Who should have access?
• Is the cloud service provider a business associate under HIPAA, prepared to comply with the HITECH Act? What other legal compliance requirements are there?
• Do we still need to maintain a back-up of data in the cloud?
• Where is the data stored? Is it in the United States, or in a foreign country subject to different data security standards? Does one location as opposed to another provide better access or security? What if data is stored in multiple places, will we be able to locate what we need when we need it?
• How big is the cloud? How much can we store?
• What if the cloud goes down? How do we get our data and access the applications needed to run our business?
• How do we move between clouds? Can our data be held captive when contract negotiations fall through?
• Can we put our clients’ data in the cloud? Do we have to tell them where it is?
• What happens to the data if the cloud service provider or the cloud customer goes out of business?
• Will applications in the cloud work the same way, be as flexible, and respond with the same speed as those on current PCs?

Organizations such as the Cloud Security Alliance have been formed to grapple with some of these issues. Indeed, the City of Los Angeles has had to respond to some of these concerns. So, while cloud computing may yield substantial cost savings and appear tempting, these and other questions and concerns should be addressed before moving in that direction.

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The Baltimore Sun reports that Baltimore police are investigating a security breach at Mercy Medical Center that left certain patient records open to possible identity theft. According to the article, affected former patients were sent a letter informing them that their personal patient records may have been accessed by a former employee in order to apply for credit cards and loans. A Maryland state law that became effective in 2008 would require Mercy Medical Center to notify these individuals promptly in the event of such a breach. 

This case is yet another example of personal information being accessed for improper purposes by hospital staff and demonstrates the need for hospitals to establish strict privacy controls and notification procedures.

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Today, Connecticut Attorney General Richard Blumenthal announced his office will investigate a data breach that occurred in late August that affected approximately 18,817 Connecticut health care professionals. The American Medical Association reported earlier that this breach involved the personal information, including Social Security numbers, of an estimated 850,000 physicians nationwide. What is most troubling about this breach is that it probably was avoidable.

Like many data breaches, this one involved a stolen laptop, in this case from the employee’s car. However, as NewsTimes.com reported, despite the employer’s encryption policy, the employee downloaded the file to a laptop, without the required encryption, in order to work from home.

Even the best firewalls and other technology-based information system protections cannot save us from ourselves. It was possible here that not only did the employee violate the company’s encryption policy, but he or she also may have exercised poor judgment in leaving the laptop in a car. The ease with which employees acquire, handle and transport massive amounts of sensitive personal information make it critical that businesses ensure their employees have greater awareness of the sensitivity of this information and receive regular training about how to be more cautious handling it. This should be a part of any written information security plan. 

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Joining the growing number of states which have enacted laws regulating the destruction of records to prevent possible identity theft, the Rhode Island Legislature passed H. 5092 on October 29, 2009. The bill requires businesses and government agencies to completely destroy records containing personal information, or render the personal information unusable, before disposing of records whether in electronic and paper form. Not surprisingly, H. 5092 comes on the heels of Texas’s Attorney General settling related violations for nearly $1,000,000 with Select Medical, and over $600,000 with Radio Shack.

As with most legislation of this nature, including the FTC’s data disposal rule, the law provides two means by which covered entities may destroy records: either by modifying the personal data to make it entirely unreadable or indecipherable through any means, or by taking reasonable steps to shred, erase, or otherwise destroy records. The bill also exempts certain covered entities whose destruction practices are covered by federal law or who contract with data disposal firms (who would be subject to the data disposal law). The need for such measures is further underlined by the overzealous office workers who used documents containing personal information as “confetti” during the New York Yankees World Series parade. 

Underlying the consequential nature of proper destruction, this bill permits individuals to sue to recover actual damages, and permits the state attorney general to seek fines or sue on behalf of individuals, with each record not properly disposed of being counted as a separate violation.

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In another recent example of a law firm running afoul of privacy requirements in litigation (See also the discussion of Kim v. St. Elizabeth’s), U.S. District Judge Michael Davis recently assessed a $5,000 sanction against the law firm for electronically filing an affidavit that contained the Social Security numbers and dates of births of 179 people. Engeseth v. County of Isanti, No. 06-CV-2410 (D. Minn.), Oct. 20, 2009. The court’s order was premised on Rule 5.2(a) of the Federal Rules of Civil Procedure which states that filings in federal court may only include the last four digits of an individual’s social security number or taxpayer identification number. Judge Davis noted that: 

The Court is deeply concerned with the harmful and widespread ramifications associated with negligent and inattentive electronic filing of court documents. Although electronic filing significantly improves the efficiency and accessibility of our court system, it also elevates the likelihood of identity theft and damage to personal privacy when lawyers fail to follow the federal and local rules. 
(emphasis added)

In addition to the $5,000 sanction, Judge Davis required the plaintiff’s law firm to pay the costs associated with preventing identity theft for the 179 harmed individuals including informing the individuals and paying the costs of FICO standard services consisting of a credit report and a 12-month subscription to FICO Quarterly Monitoring.

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As shown by a recent Illinois appellate court decision, Kim v. St. Elizabeth's Hosp., Ill. App. Ct., No. 5-08-0571, (Oct. 23, 2009), the patchwork of federal and state protections for certain types of information has made the process of responding to subpoenas more difficult. This is particularly the case with medical records.

Based on an Illinois law providing special protections for mental health records known as the Illinois Mental Health and Developmental Disabilities Confidentiality Act, the plaintiff in this case sued the hospital and her former husband’s law firm alleging the impermissible release of her mental health records in connection with a prior divorce action.

Absent an authorization from the individual, the Illinois Act prohibits any third party, including medical providers, from responding to a subpoena for mental health records unless the subpoena is accompanied by a written court order authorizing the disclosure. This requirement may be surprising to some, who assume that a subpoena is, itself, a request from the court. The law also prohibits the use of mental health records in litigation unless a judge makes certain findings after a review of the records.

In this case, the husband’s law firm served a subpoena on the health care provider seeking “any and all records regarding the care and treatment of” the plaintiff. While the appellate court wrestled with some procedural issues involving the lower court’s rulings, it held that the matter had not been fully considered and there could very well have been a violation of the Illinois law restricting the disclosure of certain mental health records.

This decision highlights the complicated tensions that arise in every state and federal court when medical records or other private information is requested during discovery. It also should be a reminder for hospitals and all other entities receiving requests for information to exercise the appropriate due diligence before responding.

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Yesterday, the U.S. Senate Judiciary Committee again approved two pieces of legislation that would require certain entities to safeguard personal information and notify individuals of breaches of that information. Over the last few years, similar legislation made it out of various Committees, but failed to go any further. Could this time be different?

The Committee voted in favor of the Personal Data Privacy and Security Act of 2009 (S.1490) and the Data Breach Notification Act (S.139), sponsored by Senators Patrick Leahy and Dianne Feinstein, respectively.  In its current form, S. 1490 would require that covered entities, among other things, perform risk assessments, limit access to sensitive information, train their work force, and require vendors by contract to implement appropriate safeguards. The Data Breach Notification Act would establish a national standard for federal agencies and businesses engaged in interstate commerce to report data breaches.

There are a number of circumstances that suggest this legislation is more likely to move forward than in years past:

• The Judiciary Committee approved both measures by significant majorities.
• The number of data breaches and complaints about them continue to mount.
• Congress recently had its own data breach (reported here), affecting personal information not likely to lead to identity theft, but which could hurt some members' reelection efforts.
• The change in administration which arguably is more focused on privacy concerns given the push for electronic health records.

Stay tuned. . . 

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In good and not-so-good economic times, the on-boarding process – recruiting, application, hiring and orientation – is critical for employers to attract and welcome new talent. In recent years, technology has enabled employers to perform all or a part of this process on-line, significantly increasing efficiency and reducing costs. Moving to a web-based on-boarding system, however, raises many workplace challenges and considerations, including the privacy, security and management of personal data collected in the process.

Following are some of the key challenges and considerations employers should think about when moving to electronic on-boarding:

• Can the on-line process be the exclusive method for applying and on-boarding? Consider, for example, applicants who cannot access or view the site because of a disability.
• Are there laws limiting the personal information that may be collected from applicants? See, for example, Utah Employment Selection Procedures Act discussed in our article and the Utah law. 
• How must personal information collected during the process be safeguarded, retained, preserved, and ultimately destroyed? A recent class action was filed alleging failure to safeguard on-line job application information. 
• Is the process subject to collective bargaining?
• Are there special rules for government contractors? See Office of Federal Contract Compliance Programs (OFCCP) guidance. 
• Are on-line consents for fitness-for-duty examinations, background checks, and drug testing valid? Can non-compete agreements be executed electronically?
• Are there any specific issues/disclosures for public sector employees/applicants?
• Can the I-9 verification/e-verify process be completed on-line?
• Do the rules change for applicants from other countries?
• If an applicant is hired, how does collected information about the person transfer accurately and securely for benefit plan enrollment, payroll, personnel, and other purposes?
• Has the on-boarding vendor been vetted and shown capable of safeguarding personal data and preserving the integrity of that data? Where is data stored by the vendor? Are appropriate contract provisions in place?
• Can benefit plan enrollment forms be completed on-line?
• Can handbooks and benefit plan documents be provided on-line as part of the on-boarding process? See ERISA electronic disclosure regulations.

Employers implementing an electronic on-boarding process will certainly realize significant savings of time and money. However, those savings can be short-lived if the on-line process is not designed to address the risks inherent in the new medium.
 

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The Washington Post is reporting another inadvertent disclosure of sensitive information involving "peer-to-peer" or "P2P" technology. This time, the disclosure exposed a House Ethics Committee document outlining ongoing ethics investigations for an uncomfortably large number of House members. The same technology raises serious issues for employers.

According to the Washington Post, the now-terminated, junior committee staff member saved a copy of the document summarizing the ethics investigations to her personal computer where her peer-to-peer file-sharing software allowed it to be shared.

Besides the difficult political questions that are sure to follow, this incident makes clear that strong data security requires more than a strong firewall and encryption. Administrative policies, training and vigilance are essential, particularly where working remotely and from home is the norm.

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