*This article originally appeared in L.A. Biz at bizjournals.com on Oct. 11, 2016.
Over the past few months, Taylor Swift and Kanye West’s feud over a recorded phone call has put the California Invasion of Privacy Act (CIPA) in the spotlight.
Who can record a call? What type of consent is needed? These questions are not just fodder for celebrity tabloids but fundamentally important issues for companies recording customer service calls.
CIPA, codified in California’s Penal Code Section 630 et seq., is an invasion of privacy statute originally designed to restrict wire-tapping and the recording of calls snatched from the airways at the dawn of the wireless telephone industry.
However, in recent years, plaintiffs’ lawyers have embraced Section 632.7 of the Act as a sword to attack companies that record customer service calls.
In a milestone decision on transatlantic data protection, the Court of Justice of the European Union (CJEU) issued its judgment in the Schrems case, declaring the Commission decision on the EU-U.S. Safe Harbor agreement invalid. The CJEU declared that such a decision requires a finding that the level of protection of fundamental rights and freedoms in the laws and practices of the third country is “essentially equivalent” to that guaranteed within the EU. Given the CJEU’s decision, the Commission and data protection authorities are now called upon to examine the legal order in the U.S. and compare its level of protection to that within the EU.
This report provides a roadmap and resource for this comparison. Following the analysis laid out by the CJEU in Schrems, it shows how privacy values deeply embedded in U.S. law and practice have resulted in a system of protection of fundamental rights and freedoms that meets the test of essential equivalency.
The National Telecommunications and Information Administration (“NTIA”), housed within the U.S. Commerce Department, has been facilitating a multistakeholder process to develop privacy safeguards for the commercial use of facial recognition technology since December of 2013—with the first in person meeting held in February 2014. NTIA seeks to create a voluntary, enforceable code of conduct applying the administration’s privacy framework, including its proposed Consumer Privacy Bill of Rights, to facial recognition technology in a commercial context. After a little over a year in talks, and shortly after the NTIA’s 12th meeting, the process has broken down. On Monday, June 15, a joint statement signed by representatives of multiple privacy advocacy groups, including the Center for Democracy and Technology, the Electronic Frontier Foundation, Consumer Watchdog and the ACLU, declared that they “have decided to withdraw from further negotiations” because the process has been unable to elicit agreement “on any concrete scenario where companies should employ facial recognition only with a consumer’s permission.” The joint statement further argues that “[t]he position that companies never need to ask permission to use biometric identification is at odds with consumer expectations, current industry practices, as well as existing state law.”
From Military to Civilian Use
Traditionally, it was militaries that developed, then deployed unmanned aerial vehicles (drones) for combat roles or intelligence-gathering missions. The use of drone technology in the recreational space, and a projected spike in the commercial exploitation of drones, have caught the attention of Hong Kong and Singapore’s regulators. The ongoing privacy debate about how best to regulate presently under-regulated commercial drone use is expected to intensify. Actual or prospective commercial drone operators are advised to monitor what is expected to be an evolving aviation and privacy regulatory environment in two of the Asia Pacific’s key commercial centers.
California has been experiencing a wave of putative class actions under the California Invasion of Privacy Act (“CIPA”). A decision this week by a federal court judge in California could halt new case filings and lay the groundwork for the dismissal of pending actions.
The European Parliament has voted in a plenary session on March 12, 2014 to fully endorse the draft EU Data Protection Regulation (the Regulation) and the draft EU resolution calling for the immediate suspension of Safe Harbor (the Resolution), both of which were adopted previously by the European Parliament’s Civil Liberties Committee (the LIBE Committee).
According to the European Commission’s press release “today’s plenary vote means the position of the Parliament is now set in stone and will not change even if the composition of the Parliament changes following the European elections in May.”
A draft report by the European Parliament’s Civil Liberties Committee (the LIBE Committee) indicates that it is attempting to fundamentally alter the existing compliance mechanisms for transferring personal data from Europe. The recently leaked draft is dated December 23, 2013 and expresses the LIBE Committee’s response to the U.S. NSA surveillance programs, surveillance in various EU Member States and the impact on EU citizen’s fundamental rights and on transatlantic cooperation (the Report).
The European Commission has released a comprehensive package of communications, reports and papers that set out actions which the Commission believes can restore trust in transatlantic data flows between the European Union and the United States following recent concerns over access to data by intelligence agencies.
The package included the following:
- Communication: ‘Rebuilding Trust in EU-U.S. Data Flows’;
- Communication: on the Functioning of the Safe Harbor from the Perspective of EU Citizens and Companies Established in the EU’;
- Report on the findings of the EU-U.S. Working Group; and
- Review of the existing agreements on Passenger Name Records and the Terrorist Finance Tracking Program.
The Commission’s announcement focused attention on the EU-U.S. Safe Harbor, which is discussed in below in this Alert, but a number of other key statements by the Commission are potentially relevant to multinationals, as well as Internet and technology companies. The Commission stressed the need for swift adoption of the EU’s data protection reform; strengthening data protection safeguards in the law enforcement area, including an agreement to guarantee a high level of protection for citizens who should benefit from the same rights on both sides of the Atlantic (EU citizens not resident in the U.S. should benefit from judicial redress mechanisms); addressing European concerns in the on-going U.S. reform process (including extending the safeguards available to U.S. citizens to EU citizens not resident in the U.S., increased transparency and better oversight); and promoting privacy standards internationally, advocating in particular that the U.S. should accede to the Council of Europe’s Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data (“Convention 108”). Significantly, the Commission also makes clear that standards of data protection will not be part of the on-going negotiations for a Transatlantic Trade and Investment Partnership. The Commission also noted that its proposed new data protection regulation “includes clear rules on the obligations and liabilities of data processors such as cloud providers, including on security. As the revelations about U.S. intelligence collection programs have shown, this is critical because these programs affect data stored in the cloud. Also, companies providing storage space in the cloud which are asked to provide personal data to foreign authorities will not be able to escape their responsibility by reference to their status as data processors rather than data controllers.”
One of the main actions by the Commission as part of the package is a review of the U.S.-EU Safe Harbor agreement that was agreed in 2000 and allows for transfer of personal data from the EU to companies in the U.S. that self-certify with the U.S. Department of Commerce as complying with certain privacy principles. Safe Harbor has proved popular as a means of allowing for international transfers of personal data from the EU to the U.S. with over 3,200 U.S. companies having self-certified.
However, there has been growing concern among some EU Data Protection Authorities about Safe Harbor and in particular its reliance on self-certification and lack of enforcement. In July 2013, Data Protection Authorities in the Germany commented that they had decided not to issue new permissions for data transfers to countries outside the EU and would examine whether data transfers on the basis of Safe Harbor should be suspended. The Commission in its Communication on the Functioning of Safe Harbor comments that “Given the weaknesses identified, the current implementation of Safe Harbor cannot be maintained. However, its revocation would adversely affect the interests of member companies in the EU and the U.S. The Commission considered that Safe Harbor should rather be strengthened.”
So Safe Harbor is to be retained but amended to add further privacy protections. More specifically, the European Commission makes thirteen recommendations that are designed to strengthen Safe Harbor related to transparency, enforcement, the Safe Harbor principles and the use of the exception for national security which allows for the principles to be limited “to the extent necessary” to meet national security, public interest or law enforcement requirements:
1. Self-certified companies should publicly disclose their privacy policies: this recommendation makes it clear that it is no longer sufficient for Safe Harbor companies to disclose a mere description of their policy. Privacy policies should be made publicly available on the company website.
2. Privacy policies of self-certified companies’ websites should always include a link to the Department of Commerce Safe Harbor website which has the list of all current members adhering to the scheme: this recommendation would allow for immediate verification of a Safe Harbor company and would lessen the ability for false claims of adherence by non-adhering companies.
3. Self-certified companies should publish privacy conditions of any contracts they conclude with subcontractors e.g. cloud computing services: Safe Harbor allows for onward transfers from the Safe Harbor company to third parties acting “as agents” (e.g. cloud providers) but the third party should enter into a contract with the Safe Harbor company under which the third party agrees to provide the same level of privacy protection as the Safe Harbor principles. The Commission recommends that the Department of Commerce should be notified of such contracts and the privacy safeguards should be made public.
4. Clearly flag on the website of the Department of Commerce all companies which are not current members of the scheme: the Commission recommends that the label ‘Not current’ be included on the Department of Commerce list of Safe Harbor members which should be accompanied by a clear warning that a company is currently not fulfilling Safe Harbor requirements.
5. The privacy policies on companies’ websites should include a link to ADR (Alternative Dispute Resolution) providers and/or the EU panel: the Safe Harbor principles require that a readily available and affordable independent mechanism must be in place by which complaints and disputes are investigated. The Commission considers that providing a link to the ADR provider or the EU panel would allow for an individual to immediately contact the ADR provider or the EU panel in the case of problems.
6. ADR should be readily available and affordable: this recommendation is meant to eliminate the charging of fees by some ADR providers under the Safe Harbor scheme.
7. Department of Commerce should monitor more systematically ADR providers regarding the transparency and accessibility of information they provide concerning the procedure used and follow-up they give to complaints: according to the Commission this recommendation should make the dispute resolution an effective and trusted mechanism with publication of findings for non-compliance included within sanctions of ADR providers.
8. A certain percentage of certified or re-certified companies under Safe Harbor should be subject to investigations of effective compliance of their privacy policies. This recommendation is based on the Commission’s view that although privacy policies are reviewed by the U.S. Department of Commerce when a company renews its certification there is no evaluation of the actual practice of compliance by that company with the Safe Harbor principles.
9. Whenever there has been a finding of non-compliance, following a complaint or an investigation, the company should be subject to a follow-up investigation after one year.
10. In the case of doubts about a company’s compliance or pending complaints, the Department of Commerce should inform the competent EU Data Protection Authority.
11. False claims of adherence of Safe Harbor adherence should continue to be investigated. According to the Commission companies that claim to be complying with Safe Harbor requirements while not listed by the Department of Commerce is misleading and weakens the credibility of the system and so such companies should be investigated.
Access by U.S. authorities
12. Privacy policies of self-certified companies should include information on the extent to which U.S. law allows public authorities to collect and process data transferred under the Safe Harbor scheme. This recommendation is also extended so privacy policies should explain how the company would apply exceptions to the Safe Harbor principles to the extent necessary to meet requirements of national security, public interest or law enforcement.
13. The exception of national security under Safe Harbor should only be used to the extent that it is strictly necessary or proportionate: the Safe Harbor Communication further specifies that EU data subjects have no opportunity for access, redress or rectification relating to the processing of their personal data under U.S. surveillance, therefore there is a need to restrict exceptions to that which is strictly necessary or proportionate to the reason for which the exception is being used.
According to the Commission for Safe Harbor to work as intended, the monitoring and supervision by U.S. authorities of compliance of self-certified companies with the Safe Harbor Principles needs to be more effective and systematic and the thirteen recommendations are intended to achieve this. The Commission will now engage with the U.S. authorities to discuss how to strengthen Safe Harbor with amendments to be identified by summer 2014 and, according to the Commission, implemented as soon as possible. At the same time the Commission will be undertaking a more detailed review of Safe Harbor which will involve an open consultation and a debate in the European Parliament and at the Council of Ministers.
For companies that are currently self-certified under Safe Harbor, or in the process of becoming self-certified, it will be a relief to know that the Commission is not currently intending to suspend Safe Harbor, however, it is likely that a number of measures will be looked at to strengthen it and therefore the position should be closely monitored with other international data transfer solutions such as Binding Corporate Rules also considered.
If you have any questions regarding this update, please contact the following or the Sidley lawyer with whom you usually work:
William Long, Partner
John Casanova, Partner
Edward McNicholas, Partner
Alan Raul, Partner
Sidley Austin provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
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