If you’ve been following the headlines, you know that a day doesn’t pass without a reference to the “GDPR”. On May 25, 2018, the European Union (EU) General Data Protection Regulation (GDPR) will take effect, marking the most significant change to European data privacy and security in over 20 years. Most multinational companies, and of course EU-based companies should be in the process of ensuring GDPR compliance by May 2018. But what about if you are a US-based company with no direct operations in the EU? Do you think you are free of the GDPR’s reach? Think again!

In short, the GDPR aims to protect the “personal data” of EU citizens – including how the data is collected, stored, processed and destroyed. The meaning of “personal data” under the GDPR goes far beyond what you might expect considering how similar terms are defined in the U.S. Under the GDPR, “personal data” means information relating to an identified or identifiable natural person. A person can be identified from information such as name, ID number, location data, online identifier or other factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that person. This even includes IP addresses, cookie strings, social media posts, online contacts and mobile device IDs.

Territorial Scope

A major change made by the GDPR is the territorial scope of the new law. The GDPR replaces the 1995 EU Data Protection Directive which generally did not regulate businesses based outside the EU. However, now even if a US-based business has no employees or offices within the boundaries of the EU, the GDPR may still apply.

Under Article 3 of the GDPR, your company is subject to the new law if it processes personal data of an individual residing in the EU when the data is accessed.  This is the case where the processing relates to the offering of good or services or the monitoring of behavior that takes place in the EU.

Thus, the GDPR can apply even if no financial transaction occurs. For example, if your organization is a US company with an Internet presence, selling or marketing products over the Web, or even merely offering a marketing survey globally, you may be subject to the GDPR.  That said, general global marketing does not usually apply. If you use Google Adwords and a French resident stumbles upon your webpage, the GDPR likely would not apply to the company solely on that basis. If, however, your website pursues EU residents – accepts the currency of an EU country, has a domain suffix for an EU country, offers shipping services to an EU country, provides translation in the language of an EU country, or markets in the language of an EU country, the GDPR will apply to your company. Likewise, if your company is engaged in monitoring the behavior of EU residents (e.g. tracking and collecting information about EU users to predict their online behavior), the GDPR likely will apply to your company.

US-based companies with no physical presence in the EU, but in industries such as e-commerce, logistics, software services, travel and hospitality with business in the EU should already be in the process of ensuring GDPR compliance. However, all US-based companies, especially those with a strong Internet presence, should assess whether their business activity falls within the territorial scope of the GDPR.

Consequences of Non-Compliance

The GDPR imposes significant fines for companies that fail to comply. Penalties and fines, calculated based on the company’s global annual turnover of preceding financial year, can reach up to 4% or €20 million (whichever is greater) for non-compliance with the GDPR, and 2% or €10 million (whichever is greater) for less important infringements. So, for example, if a company fails to report a breach to a data regulator within 72 hours, as required under Article 33 of the GDPR, it could pay a fine of the greater of 2% of its global revenue or €10 million.

A report by Gartner predicted that more than 50% of companies within the scope of the GDPR will not be compliant by the end of 2018. Considering that one of the main objectives of the GDPR was to expand the territorial scope, companies based outside the EU should not be surprised to find that they are a particular target of data regulators.

Don’t let your company become next year’s headline! This article kicks off our GDPR series that will help your company navigate the key aspects of the regulation. Efforts toward compliance need to begin now.

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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.