Businesses are now prohibited from transferring employee personal data from the European Economic Area (EEA) to the U.S. under the EU-U.S. Privacy Shield program. The Court of Justice of the European Union (CJEU) declared the EU-U.S. Privacy Shield invalid in Data Protection Commissioner v. Facebook Ireland and Schrems (C-311/18) (Schrems II), effective immediately. Businesses that relied on the EU-U.S. Privacy Shield as an adequate transfer mechanism can no longer perform routine activities such as sending employee data from the EEA to U.S. headquarters for HR administration, accessing a global HR database from the U.S., remotely accessing EEA user accounts from the U.S. for IT services, providing EEA data to third party vendors for processing in the U.S., or relying on certain cloud-based services.

The EU-U.S. Privacy Shield program was designed to provide EEA data with a level of protection comparable to EU law upon transfer to the U.S. The CJEU invalidated the program stating that U.S. companies could not provide an essentially equivalent level of protection based on the breadth of U.S. national security surveillance laws, FISA 702, E.O. 12.333, and PPD 28.

U.S. businesses must now identify an alternate mechanism to transfer employee data from the EEA to the U.S. Many businesses rely on transfer mechanisms such as binding corporate rules (BCRs) for intragroup transfers, or standard contractual clauses (SCCs) for intracompany transfers as well as transfers to third parties. SCCs are clauses approved by the EU as providing reasonable safeguards to data transferred from the EEA. The CJEU did not invalidate either of these transfer mechanisms in Schrems II but placed SCCs under heightened scrutiny. The Court emphasized the data exporter’s obligation to verify the data importer’s ability to provide EEA data with an adequate level of protection. The data exporter must review each transfer to determine on a case by case basis whether the SCCs provide sufficient reasonable safeguards, particularly in light of the recipient country’s surveillance laws. As a result, data exporters must review applicable local legislation for each transfer to identify when SCCs are adequate, whether supplemental protective measures are required, or whether the transfer cannot occur. A comparable analysis will apply to BCRs.

Businesses seeking to find an alternate to the EU-U.S. Privacy Shield, BCRs, or SCCs should review whether a transfer may fall under one of several exceptions to the GDPR’s requirement of an adequate transfer mechanism. Many of these exceptions, however, apply only when the transfer is necessary, occasional, and affects a limited number of data subjects.

Under the GDPR, an impermissible transfer can result in assessment of fines up to €20,000,000, or, in the case of an undertaking, up to four percent of the total worldwide annual turnover of the preceding financial year, whichever is higher. In addition, EEA data subjects may bring a private cause of action against the data exporter for an illegal transfer, either individually or as part of a class action.

The CJEU’s decision creates great uncertainty about the future of transatlantic data transfers. As the EU and U.S. negotiate the path forward, U.S. businesses should review their employee data flows, identify whether they or their sub-contractors are subject to U.S. national security laws, and determine the feasibility of additional contractual or technical measures to supplement the reasonable safeguards.

Please see our full article (hereand FAQs (here) for additional information.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, 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, Joe 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 – Joe 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 – Joe’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.

Joe 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.

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