As the vast array of internet-connected devices mushrooms, and technologies permit those devices to communicate with one another, calls for privacy and security can be heard. On the heels of a recent victory in the ongoing LabMD case, the Federal Trade Commission (FTC) announced yesterday “concrete steps” businesses can take to enhance the privacy and security of IoT for consumers. According to FTC Chairwoman Edith Ramirez, “The only way for the Internet of Things to reach its full potential for innovation is with the trust of American consumers.”

Increasingly, computing devices are being embedded with capabilities to connect with one another via the Internet. The FTC report estimates that currently there are 25 billion of these devices worldwide. Many believe these technologies will yield immeasurable benefits including helping organizations to understand more efficient ways to do business, perhaps resulting in lower costs and risks. As the FTC notes, and many have experienced (even if not knowing about “IoT” specifically), IoT is already entrenched in our lives. For example, millions already use FitBit and other health and fitness monitoring devices, as have millions of others deployed these technologies in their home security systems and appliances.

The global consulting firm, McKinsey & Co., discussed a number of other examples of IoT at play today, such as:

  • Pill-shaped microcameras travel through the human digestive system and send back thousands of images to pinpoint sources of illness.
  • Farming equipment communicating with remote satellites and ground sensors to assess crop conditions and adjust farming techniques.
  • Billboards assess the consumer profiles of passersby and change displayed messages based on those assessments

These technologies also can “support longer-range, more complex human planning and decision making.” McKinsey sees this occurring in many industries, such as retail, where collecting and analyzing data from shoppers moving through stores can be particularly useful in understanding buying patterns and what factors may influence the ultimate decision to buy. Clearly, in all of these industries, these same technologies can be used to collect information about a company’s workforce with similar goals in mind, including increased efficiency, improved safety, cost containment and risk avoidance. But, alas, there are significant privacy and data concerns as devices silently capture vast amounts of information about such things as movement, communications, patterns, and surroundings.

Enter the FTC. Consistent with its mission, the FTC’s report states that its focus is on IoT devices that are sold to or used by consumers, not in a business-to-business context, nor does it address broader machine-to-machine communications. Some of the concerns identified by the FTC come from a workshop it held in November 2013 – The Internet of Things: Privacy and Security in a Connected World. The risks that could harm consumers according to the FTC include:

  • enabling unauthorized access and misuse of personal information;
  • facilitating attacks on other systems; and
  • enabling privacy risks from the collection of personal information, habits, locations, and physical conditions over time that companies might use to make credit, insurance, and employment decisions.

The FTC explained, for example, that data gathered by a fitness tracker for a wellness-related purpose such as participation in an employer sponsored wellness program, could be used in the future to price health or life insurance or to infer the individual’s suitability for credit or employment – people who exercise regularly make better credit risks, employees). This creates obvious potential risks under the Fair Credit Reporting Act, the Health Insurance Portability and Accountability Act, the Americans with Disabilities Act and other federal and state laws. The FTC report also called attention to a privacy risk involving use of these devices to enable remote eavesdropping into otherwise private spaces.

To address these risks, the FTC’s report makes a number of recommendations, with security being key. Below are some of these “recommendations””

  • build security into devices at the outset – at the design stage – assess risks, collect the minimum necessary information;
  • train employees about the importance of security;
  • make sure third-party service providers maintain appropriate privacy and security protocols – “trust, but verify”;
  • employ a “defense-in-depth” strategy to apply multiple layers of security to defend against a particular risk;
  • stop unauthorized users from accessing a consumer’s device, data, or personal information; and
  • monitor devices, update as needed to address developing risks.

The FTC also recommends that notice be provided to give choices to individuals about how their information will be used, particularly when the data collection is beyond reasonable expectations, and acknowledged there are many ways effective notice could be delivered.

Companies using these technologies should review the FTC report and guidelines and, where appropriate, consider applying them as they adopt IofT. While not currently mandated, many of these guidelines are based on existing principles, best practices and laws concerning the privacy and security of personal information.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with…

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Mr. Lazzarotti also is a member of the firm’s Employee Benefits Practice Group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Mr. Lazzarotti counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Mr. Lazzarotti’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Mr. Lazzarotti speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Mr. Lazzarotti served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.