When the California Privacy Rights Act (CPRA) was enacted, it created the California Privacy Protection Agency (CPPA) and delegated to the CPPA significant regulatory authority. One of the areas of that authority is cybersecurity, which includes performing cybersecurity audits annually. On September 8, 2023, the CPPA considered a draft set of regulations that would establish rules for conducting cybersecurity audits.

It is important to note that California currently mandates certain businesses to maintain reasonable security procedures and practices to protect personal information.

  • Civil Code Section 1798.100(e), under the CCPA, provides:

A business that collects a consumer’s personal information shall implement reasonable security procedures and practices appropriate to the nature of the personal information to protect the personal information from unauthorized or illegal access, destruction, use, modification, or disclosure in accordance with Section 1798.81.5.

  • Civil Code Section 1798.81.5, provides:

(b) A business that owns, licenses, or maintains personal information3 about a California resident shall implement and maintain reasonable security procedures and practices appropriate to the nature of the information, to protect the personal information from unauthorized access, destruction, use, modification, or disclosure.

(c) A business that discloses personal information about a California resident pursuant to a contract with a nonaffiliated third party that is not subject to subdivision (b) shall require by contract that the third  party implement and maintain reasonable security procedures and practices appropriate to the nature of the information, to protect the personal information from unauthorized access, destruction, use, modification or disclosure

A couple of observations about these provisions:

  • Section 1798.100 which is part of the CCPA, applies to “businesses” that are subject to the CCPA. Section 1798.80(a) defines “business” more broadly to include “a sole proprietorship, partnership, corporation, association, or other group, however organized and whether or not organized to operate at a profit.” For example, while the CCPA generally applies to for-profit entities, this section of the Civil Code applies to businesses whether or not organized for profit.
  • As the CPPA begins to establish regulations around a set of personal information for one set of “businesses,” those covered under the CCPA, there is also guidance in California for businesses covered by Civil Code Section 1798.81.5 which includes audit requirements as well. In February 2016, the then-California Attorney General and now Vice President, Kamala D. Harris, issued a California Data Breach Report. According to that report, a business’s failure to implement all of the controls set forth in the Center for Internet Security’s Critical Security Controls constitutes a lack of reasonable security. Of course, the CCPA appears to incorporate the requirements of Civil Code Section 1798.81.5. Nonetheless, businesses will need to figure out which cybersecurity standard applies to them.

So, what do the draft CCPA cybersecurity audit regulations say? Here is a summary of just some of the proposed requirements for such audits:

  • The requirement for a covered business to complete the audit will be based on whether the business’s processing of personal information presents a significant risk to consumers’ security. The draft regulations are beginning to craft the factors for determining when there will be a significant risk. One factor that would trigger the audit requirement is that the business derives 50 percent or more of its annual revenues from selling or sharing consumers’ personal information. However, the CPPA is considering other factors, such as the business having more than a to-be-determined amount of gross revenue or number of employees.  
  • Cybersecurity audits would be required to be performed by “qualified, objective, independent professional [auditor] using procedures and standards generally accepted in the profession of auditing.” However, the auditor would not need to be external to the business, provided such an auditor can exercise impartial judgment – e.g., such an auditor should not be auditing the cybersecurity program the auditor helped to create.  The audit would need to include the auditor’s name, affiliation, and relevant qualifications to complete the cybersecurity audit in such detail as necessary to fully describe the nature of their qualifications; and the number of hours that each auditor worked on the cybersecurity audit.
  • The cybersecurity audit would need to:
    • Assess, document, and summarize each applicable component of the business’s cybersecurity program;
    • Specifically, identify any gaps or weaknesses in the business’s cybersecurity program;
    • Specifically, address the status of any gaps or weaknesses identified in any prior cybersecurity audit; and
    • Specifically, identify any corrections or amendments to any prior cybersecurity audits.
  • The audit would have to assess and document certain components of the cybersecurity program with “specificity.” One such component is the safeguards the business has in place, such as multi-factor authentication, encryption, zero trust architecture, access management, audit log management, response to security incidents, etc. If a component is not available, the audit would be required to document and explain why it is not necessary and how other safeguards provide at least equivalent security; a standard not too dissimilar to the “addressable” rule for implementation specifications under the HIPAA Security Rule.
  • The cybersecurity audit would need to be reported to the business’s board of directors or governing body, or if no such board or equivalent body exists, to the highest-ranking executive in the business responsible for the business’s cybersecurity program. Notably, the audit would need to include certain statements, such as a certification that such governing body or highest-ranking executive has reviewed the cybersecurity audit and understands its findings.
  • If the business provided notifications to affected consumers under California’s breach notification law for businesses, the cybersecurity audit would have to include a description of those notifications and, where applicable, a description of the notification to the California Attorney General.
  • Service providers and contractors would be required to cooperate with businesses completing such audits, including making available all “relevant information that the auditor deems necessary for the auditor to complete the business’s cybersecurity audit.”
  • A written certification of completion of the audit would be required to be submitted to the CPPA, signed by a member of the board or highest-ranking executive.

If you have questions about the CPPA Cybersecurity Draft Regulations or related issues please reach out to a member of our Privacy, Data, and Cybersecurity practice group to discuss.

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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.