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

In distinct efforts to strengthen data security requirements, the California and Massachusetts legislatures recently passed bills affecting data breach notification requirements and data security notification, respectively.  

On April 14, 2011, the California senate approved S.B. 24, requiring California businesses and agencies to notify the state attorney general if more than 500 California residents are notified of a data breach. The California bill also would require certain information be included in the notices.

While similar attempts to modify California’s data breach law have been vetoed by then-Gov. Arnold Schwarzenegger (R), the state’s new governor, Edmund G. “Jerry” Brown, Jr. (D) may likely sign S.B. 24. The bill also would amend the substitute notice provisions for breaches to require placing a notice that a breach has occurred on the business’s website and in major statewide media and notifying the California Office of Privacy Protection. 

While California’s current breach notice statute does not specify the information that must be included in an individual breach notification, S.B. 24 would mandate the notice include, among other things, the type of information breached, the time of the breach, and a toll-free telephone number of major credit reporting agencies.

On April 13, 2011, Massachusetts H.B. 3360 was referred for committee consideration. Under the bill, vendors of photocopiers in Massachusetts that fail to adequately notify purchasers of potential data security risks would be subject to a civil fine of up to $50,000 and could be sued by customers whose personal information is subsequently compromised.  Also, Massachusetts businesses that sell photocopiers must tell customers if a particular machine is equipped with a hard drive capable of retaining information from copied documents. Vendors must provide a notice stating that "the photocopier does or does not contain an eraser that deletes and destroys any previously captured picture from the copier's hard drive.” The notice must “inform the user of the risk of retention of such private data or images.” In addition, if a machine is such a “digital copier,” the vendor also must place a “conspicuous,” written data-security warning on the top of the copier.

H.B. 3360 also authorizes the state attorney general to enforce the law by filing a civil action seeking a fine of up to $50,000. Additionally, the bill would permit a lawsuit by customers who did not receive the required notification and warnings and whose private data was subsequently “misused.”

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Federal contractors are subject to numerous requirements under federal law and, as we have previously highlighted here, need to keep pace with changes in law and regulation. 

Under the Federal Information Security Management Act of 2002 (FISMA) each federal agency is required to develop, document, and implement an agency-wide program to provide information security for the information and information systems that support the operations and assets of the agency, including those provided or managed by another agency, contractor, or other source. Accordingly, FISMA provides authority for the imposition of requirements on those companies which qualify as federal contractors. 

By way of example, the Centers for Medicare and Medicaid Services (CMS), as well as the Department of Veterans Affairs impose specific requirements on their contractors.   

Adding new data protection requirements for federal contractors who use or handle U.S. Department of Defense (DOD) information, the DOD earlier this year issued an advanced notice of proposed rulemaking regarding amendments, 75 F.R. 9563, to the Defense Federal Acquisition Regulation Supplement (DFARS). 

The proposed amendments require “adequate security,” defined as “protection measures … commensurate with the risks of loss, misuse, or unauthorized access to or modification of information,” and have three main subparts; basic safeguarding, enhanced safeguarding, and cyber intrusion reporting. 

Basic safeguards, required for any unclassified DOD information, include:

• Designating  the level of access and dissemination of informationProtecting DOD information on public computer or Web sites
• Transmitting electronic information using technology and processes that provide the best level of security and privacy
• Transmitting voice and fax information on with reasonable assurances that access is limited
• Protect information by at least one physical or electronic barrier
• Sanitize media in accordance with the National Institute of Standards and Technology (NIST) before external release or disposal
• Provide protection against computer intrusions and the unauthorized release of data. 

In addition to the basic safeguards outlined above, contractors are required to implement enhanced safeguards to certain types of data. The enhanced safeguards include:

• Encryption/Storage controls
• Network intrusion protection
• Implement information security controls

Additionally, a reporting requirement has now been proposed, requiring contractors to report to the DOD within 72 hours of any cyber intrusion event that affects DOD information resident on or transiting the contractor’s unclassified information systems.

The new proposed DOD amendments, along with the various other federal contractor requirements, including those imposed by CMS and the Department of Veterans Affairs, highlight the necessity for companies that qualify as federal contractors to be up to date on their legal obligations or risk loss of their federal contractor status. 

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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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