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

By:  Lillian Chaves Moon

In the face of increasing incidences of and rising public concern regarding identity theft, the California Legislature is considering a bill with new personal information data disclosure requirements for California businesses and a broad definition of what constitutes personal information.

California Assembly Bill 1291, would require businesses who have customer personal information and have disclosed such information to provide each such customer with notice of the names and contact information of all third parties who received personal information from the business and provide a designated request address at which to receive requests from customers as provided for under the bill. Additionally, the business must make available, free of charge, access to or copies of all of the customer’s personal information that the business holds. Also, if the business has any online privacy policies, each privacy policy must also include a statement of the customer’s rights as provided in the legislation and a designated request address.

Personal information broadly includes, but is not limited to, any of the following: (1) identity information such as real name, alias, nickname, and user name; (2) address information, including but not limited to, postal address, e-mail, internet protocol address; (3) telephone number; (4) account name; (5) social security number or other government-issued identification number, such as a driver’s license number, identification card number, and passport number; (6) birthdate or age; (7) physical characteristic information such as height and weight; (8) sexual information, including but not limited to, sexual orientation, sex, gender status, gender identity, and gender expression; (9) race or ethnicity; (10) religious affiliation or activity; (11) political affiliation or activity; (12) professional or employment-related information; (13) educational information; (14) medical information; (15) financial information; (16) commercial information; (17) location information; (18) internet or mobile activity information; (19) content including text, photographs, audio or video recordings, or other material generated by or provided by the customer; and (20) any of the above information as it relates to the customer’s children.

Customer is defined as an individual who is a resident of California and provides personal information to a business “in the course of purchasing, viewing, accessing, renting, leasing, or otherwise using real or personal property, or any interest therein, or obtaining a product or service from the business including advertising or any other content.” Customers also include individuals for whom the business obtained personal information from another business. Accordingly, the bill would cover individuals who are not traditionally thought of as customers and may also include a business’ employees.

All businesses, including employers, with operations in California or with California customers must stay abreast of these developments and, given the breadth of personal information implicated, no such business can be exempt from the requirements. In preparation for the passing of this or a similar bill, it is important to determine how customer personal information is disclosed and set forth a compliance plan to meet the pending disclosure and access requirements.

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New York takes another step toward safeguarding Social Security Numbers (SSN), this time limiting certain entities, including employers, from requiring a person to disclose or furnish his or her SSN for any purpose. Signed into law by Gov. Andrew Cuomo on August 14, 2012, the new law (A.8992-A / S.6608-A) adds a new section 399-ddd to the General Business Law of the Empire State, that becomes effective 120 days from enactment (December 12, 2012). Businesses will need to revisit their practices with employees, customers and other individuals in situations where all or a part of the Social Security Number is involved. 

There are two important points to note about the law: (i) the definition of SSN; and (ii) the exceptions.

Under the new law, SSN includes the 9-digit number issued by the Social Security Administration, but also "any number derived from such number," unless the number is encrypted.  So, for example, unless one of the exceptions below applies, requiring employees or customers to use the last four digits of their SSN as part of an identification number will become unlawful later this year.  

Here are some of the exceptions:  

• The individual consents to the acquisition or use of his or her SSN (of course, while not expressly stated in the statute, a court would likely interpret this provisions to mean a voluntary consent);

• The SSN is expressly required by federal, state or local law or regulation; 

• The SSN is used for internal verification or fraud investigation;
   
• The SSN is requested for credit or credit card transaction initiated by the consumer or in connection with a lawful request for a consumer report or investigating consumer report (in addition to permissible background checks under the Fair Credit Reporting Act and New York law, this provision also may cover corporate credit card programs, frequently used by companies to better manage business expense reimbursement);

• The SSN is requested for purposes of employment, including in the course of administration of a claim, benefits, or procedure related to employment, such as termination from employment, retirement, workplace injury, or unemployment claims;

• The SSN is requested for tax compliance, collecting child or spousal support, or determining whether a person has a criminal record; and

• The SSN is requested by an authorized insurance company for purposes of furnishing information to the Centers for Medicare and Medicaid Services (this likely captures the recent reporting requirements under Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007). 

The law does not provide for a private right of action; it is enforced by Attorney General of the State and carries a civil penalty for a first offense of not more the $500 per violation ($1,000 for second offenses). However, the law seems to suggest that so long as reasonable measures have been adopted to avoid a violation, unintentional, bona fide errors will not result in penalties. 

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With some harsh words of warning, a judge in the U.S. District Court for the District of Minnesota has sanctioned another law firm for electronic filing of documents disclosing birth dates, names of minors, financial account numbers and at least one social security number in violation of Fed. R. Civ. P. 5.2(a).

In a decision issued on November 24, 2010 in the case of Allstate Insurance Company v. Linea Latina de Accidentes, Judge Joan N. Erickson noted that,

"Every federal district has now embraced electronic filing.  The days of attorneys being able to ignore the computer and shift blame to support staff in the event of an error are gone.  The consequences are simply too serious. To the extent there are attorneys practicing in federal court who are under the impression that someone in the Clerk's office will comb their filings for errors and call them with a heads-up, the court delivers this message: its is the responsibility of counsel to ensure that personal identifiers are properly redacted."

In this case, upon being notified of the problem, plaintiff's counsel initially moved to have the complaint and its attachments filed under seal.  The court responded by stating that there was no reason to seal the complaint if had been properly redacted, and then noted that plaintiff's motion showed no sense of urgency to remedy the fact the information was on the Internet, perhaps permanently.  Counsel then attempted to redact the information using Adobe Acrobat's rectangle tool, which the court found insufficient as the black rectangles could be removed with a few keystrokes. The court ultimately ordered the plaintiff's counsel to remedy the problem, notify each individual affected, provide credit monitoring,and to pay $300 to a charity.

 We previously warned you about similar sanctions in the case of Engeseth v. County of Isanti. Caveat jurisconsultor (lawyer beware)!

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On December 18, 2010 President Obama signed into law the Social Security Number Protection Act of 2010. The law has two key components. 

First, the law establishes that no Federal, State, or local agency may display the Social Security account number of any individuals or any derivative of such number, on any check issued for payment by said agency. 

Second, the law prohibits Federal, State, or local agencies from employing, or entering into a contract for the use or employment of, prisoners in any capacity that would allow such prisoners access to the Social Security account numbers of other individuals. 

As employers have been grappling with the recent uptick in state laws addressing safeguards for Social Security numbers, this new law tightens protections at the federal level.   Additionally, federal contractors may need to consider how this change impacts their other obligations under the Federal Information Security Management Act.

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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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