It usually happens after a reported data breach. The organization experiencing the breach sends notifications to affected individuals, as well as federal and or state agencies where appropriate and perhaps other parties. Not long thereafter, the organization receives an inquiry from one or more government agencies. These inquiries typically seek more information about the breach and its incident response process, but also the nature and extent of the organization’s data security policies and procedures in place prior to the breach. Deficiencies in any of these areas could support getting “whacked”!

On December 16, Pennsylvania’s Attorney General and soon to be Governor, Josh Shapiro, announced a settlement with a company that experienced a data incident in April 2021 that exposed 30,295 Pennsylvania consumers’ payment card information. Following an investigation jointly conducted by Mr. Shapiro’s office and its counterpart in New York, it was determined that the company “failed to properly employ reasonable data security measures in protecting consumers’ payment card information.”  The forensic investigation revealed that in December 2020, an unknown hacker exploited a vulnerability in the company’s web servers that allowed them to steal customers’ payment card information and other personal information.

The company has agreed to pay $100,000 each to both the Pennsylvania and New York Attorneys General Offices. It also agreed to implement several security policies designed to protect consumer personal information including: (i) designating an employee to coordinate and supervise its information security program; (ii) conducting annual security risk assessments of its networks; and (iii) conducting annual employee training.

Businesses are increasingly facing a multitude of data privacy and security frameworks. Healthcare providers, for example, have to consider the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and its privacy and security regulations, as well as more stringent state regulation. Of course, healthcare providers that process credit or debit cards for payment, also will have to consider the applicable provisions of the Payment Card Industry Data Security Standard (“PCI DSS”). A restaurant in New York will very likely need to consider the PCI DSS rules, but also the NY SHIELD Act when it considers what safeguards it needs to protect personal information. An insurance broker or agent also may have several frameworks to evaluate, such as HIPAA, if it is a business associate, and depending on the state of operation, that state’s version of the NAIC Data Security Model Law (nearly half of the states have adopted a version of this law).

In connection with his office’s announcement, AG Shapiro stated,

“Every corporation that does business in Pennsylvania needs to stay alert and protect their customer’s personal data or they will have to answer to my office in court.”

Pennsylvania Senior Deputy Attorney General Tim Murphy shared the announcement of the settlement on LinkedIn, noting,

Here is another data breach settlement following a joint investigation with my friends from the NY Office of Attorney General. My colleagues in the cyber community (especially insurers) should take note that some AG offices are going to keep whacking companies who lack basic components of an information security program.

Data breaches are difficult if not impossible to prevent in all cases, even when significant efforts are made to prevent them. When a breach happens, organizations should be prepared to respond, but also be positioned to avoid getting “whacked” should federal and/or state agency investigations follow. They can bolster their position in those cases with a strong compliance program that includes, among several other things, becoming more aware of their compliance requirements; conducting risk assessments; shaping their policies and procedures based on those assessments; documenting their processes, policies, procedures; and training employees.

Happy New Year and good luck in 2023!

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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.