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Does the GDPR Apply to Your US-Based Business?

Does the European Union’s General Data Protection Regulation (GDPR) apply to your non-EU company? State-side, this is the million-dollar question that many US based companies are still grappling with today – some 8 months after the GDPR’s enactment.  

Long-promised and much-awaited Guidance from the European Data Protection Board (“Board”) on the territorial scope of the GDPR is here and attempts to provide clarification to that question.  

As adopted by the Board, the Guidance explains that the GDPR applies in situations where the “Establishment Test” or the “Targeting Test” is met – explained below.

The Establishment Test

The Board confirmed that the processing of certain personal data does not have to occur within the EU for the GDPR to apply.  Indeed, the “geographical location [of processing] is not important for the purposes of Article 3(1) with regard to the place in which processing is carried out, or with regard to the location of the data subjects in question.”

What is required, as per the Guidance, is that the entity be a processor or controller that is established in the EU and that the processing occur within the context of the activities of that establishment.

Establishment is a threshold of GDPR applicability.  So, what is establishment?  GDPR Article 3 defines establishment as “any effective and real exercise of activities”through “stable arrangements” in the EU.  Art. 3.  The Guidance further interprets the concept of establishment by citation to pre-GDPR case law from the Court of Justice of the European Union (CJEU) which found “establishment” where a company:

      – Had (a) a website in the Hungarian language for the purpose of advertising in Hungary; (b) a representative in Hungary serving as a point of contact between that company and the data subjects; (c) a Hungarian postal address and a letter box; and (d)a bank account intended for the recovery of debts. See Weltimmo v. NAIH;

      – Processed personal data where such processing was “inextricably linked to” and carried out “in the context of … activities” of the company’s subsidiary which was located in an EU member state. See Google v Costeja (Google Spain).

Got it?  Not quite.  The Guidelines also provided a handful of helpful case studies, including the following theoretical:

A China-based e-commerce website conducts data processing activities exclusively in China. The same company has established an office in Berlin to implement commercial prospection and marketing campaigns towards EU markets.

Does the GDPR apply?  Yes, according to the Guidance, the activities of the Berlin office are inextricably linked to the processing of personal data carried out by the Chinese company, insofar as the commercial prospection and marketing campaign towards the European Union markets notably serve to make the service offered by thee-commerce service profitable.

Lest application of the GDPR feel like a law school exam, there is a second test for applicability – the Targeting Test, which the Guidance also helps to clarify.

The Targeting Test

The GDPR also applies to the processing of personal data of data subjects who are in the European Union by a controller or processor not established in the European Union where the processing activities are related to: (a) the offering of goods or services to data subjects in the European Union (regardless of whether or not payment is required); or (b) the monitoring of the data subjects’ behavior as far as their behavior takes place within the European Union.

Let’s break that down.    

In the European Union

The Guidance confirms that the “in the EU” portion of the test does not require citizenship or residence in the EU.  Any data subject located in the European Union is entitled to the rights and privileges afforded by the GDPR, regardless of whether that subject is an EU citizen or resident of a member state.  

Offering Goods and Services

To determine whether your non-EU company is offering goods and services to data subjects located in the EU, the Guidance provides a series of factors for consideration:

     – paying a search engine operator to facilitate access to consumers in the EU;

      – mentioning contact details to be reached from a Member State;

      – using a top-level domain name other than that of the third country where the processor or controller is established;

      – offering the delivery of goods to Member States;

      – using a language or currency other than that generally used in the trader’s country;

      – offering a description of travel instructions from one Member State to the place where the service is provided;  

     – identifying international clientele in various Member States.

This Guidance, plus an earlier Recital of the GDPR, make clear the goods and services part of the Targeting Test remains highly fact-sensitive and subjective.

Monitoring Behavior

The Guidance provides most clarity when it comes to the monitoring behavior grounds of the Targeting Test.  There are numerous methods to monitor online activities including, most notably, the use of first-party cookies.  The use of cookies, or the “online collection or analysis of personal data of individuals in the EU” does not automatically constitute “monitoring” under this test. Rather, the collection must be for purposes of profiling or analyzing the behavior of that person. Specifically, and citing back to an earlier Recital, the Board states that to constitute monitoring, the purpose of the collection should be to “profil[e] a natural person, particularly in order to make decisions concerning her or him or for analy[z]ing or predicting her or his personal preferences, behaviors and attitudes.”  Indeed, the use of the word monitoring“implies that the controller has a specific purpose in mind for the collection and subsequent reuse of the relevant data about an individual’s behavior within the EU.”   Thus, it could be argued that the GDPR would not apply to a non-EU based company that “inadvertently” tracks EU-based persons through website cookies provided that information is not used for profiling and behavior monitoring.  

The Board clarified that other types of technology involving personal data processing, such as wearable and smart devices, may also be a method by which monitoring behavior subject to the GDPR can occur.  In sum, there are no hard and fast rules here.  A case-by-case assessment needs to be performed in order to establish whether “monitoring” is performed.

While some unanswered questions remain, the Guidelines set out to clarify the criteria for determining the applicability of the GDPR to your US-based company.  The attorneys at Beckage PLLC are fully equipped to help companies big and small navigate the territorial scope issues surrounding GDPR applicability and help reduce your risk and exposure under the new law.

DISCLAIMER: This alert is for general information purposes only. It does not constitute legal advice, or the formation of an attorney-client relationship, and may not be used and relied upon as a substitute for legal advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or practitioner licensed to practice in the jurisdiction where that advice is sought.  If you have any questions, please contact an attorney at Beckage. www.beckage.com or info@beckage.com.

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Next Compliance Milestone Approaches Under the NYS DFS Cybersecurity Regulation

The New York State Department of Financial Services issued a Cybersecurity Regulation (23 NYCRR 500)(“Regulation”) that went into effect on March 1, 2017.  The Regulation carried with it several compliance milestones applicable to “Covered Entities” under the Regulation, which includes those entities that are operating or required to operate under the New York insurance, finance and banking laws.  

SUMMARY OF COMPLIANCE MILESTONES TO DATE

The Regulation first required Covered Entities to establish a number of Cybersecurity and IT policies and procedures by August 28, 2017.  Next,Covered Entities were required to submit a Certification to the Department of Financial Services by February 5, 2018, that they complied with the first milestone under the Regulation.  By March 1, 2018, the Regulation required Covered Entities to additional CISO reporting,Annual Penetration Testing and Vulnerability Assessments, Risk Assessments and implement Multi-Factor Authentication where necessary based on the results of the Risk Assessments.

The most recent milestone was on September 3, 2018.  Covered Entities were responsible for establishing audit trails to reconstruct material financial transactions creating policies and procedures around in-house developed applications and assessing the security of externally developed applications.  In addition, Covered Entities were required to establish policies on Data Retention limitations, continue Cybersecurity training and monitoring and develop procedures for the encryption of Non-Public Information that is transmitted over external networks and at rest, unless infeasible.  

NEW MILESTONE – MARCH 1, 2019 DEADLINE

The next compliance milestone pertains to Third Party Service Providers. This milestone must be met by March 1, 2019 and involves the oftentimes complex process of evaluating the Third-Party Service providers utilized by your company.  This process can be a cumbersome and time-consuming given to the complexity of the relationships your company may have with a variety of Third-Party Service Providers.  Accordingly, it is recommended that you begin this process as soon as possible as there are often several components to the analysis.  

SUGGESTED NEXT STEPS

Moving towards the March deadline, Covered Entities should assess the risk that each Third-Party Service Provider poses to their data and systems and then determine an effective solution to address those risks.  It is insufficient to rely solely on the Certification of Compliance submitted by theThird-Party Service Providers the DFS under the Regulation as their only means of evaluating their compliance with this milestone.  

Covered Entities should take steps to determine what, if any, Third Party Service Providers are being utilized by the company, evaluate them as it relates to security, and review the relevant policies and procedures. Covered Entities should consider whether or not it makes sense to require Third Party Service Providers to carry adequate insurance including Cyber Insurance to cover both the entity and the Covered Entity should a breach occur.  

ADDITIONAL INSIGHT INTO THE REGULATION

It is helpful to note that the DFS regularly answers FAQs pertaining to the DFS Cybersecurity Regulation that provide valuable insight.  The complete list of FAQs can be found at the following link: https://www.dfs.ny.gov/about/cybersecurity_faqs.htm

The contents of  23 NYCRR Part 500 can be found here: https://www.dfs.ny.gov/legal/regulations/adoptions/dfsrf500txt.pdf

The attorneys at Beckage PLLC are fully equipped to help you navigate through the Third-Party Service Provider Risk Assessment and all other components required under the Regulation by offering practical legal advice that will help arm your company with the knowledge to assist in making sound business decisions.  

DISCLAIMER: This alert is for general information purposes only. It does not constitute legal advice, or the formation of an attorney-client relationship, and may not be used and relied upon as a substitute for legal advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or practitioner licensed to practice in the jurisdiction where that advice is sought.  If you have any questions, please contact an attorney at Beckage. www.beckage.com.or info@beckage.com.

Attorney Adverting: Prior results to not guarantee a similar outcome.

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The Importance of an Incident Response Plan

As recent news headlines confirm, data breaches continue to be a threat to companies regardless of size. From reputational harm, disruption to your daily business, to significant monetary penalties and litigation, the potential consequences of a data breach are significant. It is more important than ever that companies evaluate their cybersecurity readiness plan, from policies and procedures to privacy concerns under the GDPR to ensure they are ready if a breach occur. While there is no one-size fits all approach to preventing data breaches, there are many best practices companies can employ to help minimize the risk of being breached. From regular conducting risk assessments and inventorying of the data that you collect to developing and testing your incident response plan, preparation is the name of the game. One component of your data security program, an Incident Response Plan, is an important step you should have in place to help mitigate and contain an incident if one occurs.

What is an Incident Response Plan?

An Incident Response Plan sets forth the company’s procedure for identifying, reporting and responding to an incident should one occur. It ensures that everyone is on the same page if a data breach happens. At a minimum, here are some key elements that an Incident Response Plan should include:  

   1) Policy scope and definitions.

   2) Identify Incident Response Team Members and outline roles for each.

   3) Outline procedures for identifying, reporting and responding to an incident.

   4) Set forth the legal obligations for reporting and notice to potentially impacted persons.

   5) Identify how often the Incident Response Plan will be reviewed and updated.

   6) Post-incident analysis procedures.

Developing an Incident Response Plan is not the end of the road, however. Your Incident Response Plan is a living and breathing document and the best way to know if it actually works is to test it consistently. Simulated cyber incidents that force your company to work through the procedures in your plan must be tested, gaps fixed, and improvements made. Simulated incidents with counsel are ideal to help identify legal risks along the way and help put the company in a legally defensible position.

It is very important to have your Incident Response Plan reviewed by Legal Counsel to ensure it satisfies your legal obligations under various state, federal and international laws. Beckage attorneys are fully equipped to help you navigate this process and help reduce your risk and exposure should a data breach occur.

DISCLAIMER: This client advisory is for general information purposes only. It does not constitute legal advice, and may not be used and relied upon as a substitute for legal advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or practitioner licensed to practice in the jurisdiction where that advice is sought.

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Preparing for New York’s New Sexual Harassment Laws

In the wake of the #MeToo movement and widespread attention on sexual harassment in the workplace, on April 12 Governor Cuomo passed into law the 2019 Budget, which included a package of laws aimed at combating sexual harassment.  These laws apply to employers of all sizes – even those with only one employee and obligates employers, among other things, to 1) distribute a written sexual harassment policy, and 2) perform annual sexual harassment training.  Now is the time to revisit your anti-sexual harassment programs and policies and make the necessary changes to ensure compliance with these laws. Here are a few key elements employers need to know.  

Sexual Harassment Policy:
By Oct. 9, every employer in New York state must have a written sexual harassment prevention policy in place and distribute it to its employees.

Employers can use the model policy created by the New York State Department of Labor and the New York State Division of Human Rights, or they can create their own policy provided that it equals or exceeds the minimum standards set forth in the model policy.   

Some key elements the policy must include:  

  • A statement prohibiting sexual harassment;  
  • Examples of prohibited conduct that would constitute unlawful sexual harassment;
  • Information concerning the federal and state statutory provisions concerning sexual harassment, remedies available and a statement that there may be applicable local laws;
  • A standard complaint form;
  • A prohibition on retaliation;  
  • A procedure for the timely and confidential investigation of complaints and ensure due process for all parties;
  • An explanation to employees of their rights of redress and all available forums for adjudicating sexual harassment complaints administratively and judicially; and
  • A statement that sanctions will be enforced against those who engage in sexual harassment and managers and supervisors who knowingly allow sexual harassment.  

A sexual harassment policy can be provided to employees in hard copy or electronically but must also be accessible and printable during working hours.  Employers are required to prepare and distribute a compliant written policy by October 9, 2018.  

Mandatory Sexual Harassment Training:
Beginning Oct. 9, every New York state employer must provide sexual harassment prevention training to all employees on an annual basis. Employers can either use the model sexual harassment prevention training program created by the New York State Department of Labor and the New York State Division of Human Rights or establish their own training program that equals or exceeds the minimum standards provided by the model.  While it hasn’t been officially confirmed, it seems likely that this training can be given online provided it is interactive. The training must include the following:

  • An interactive component;
  • An explanation and examples of prohibited sexual harassment;
  • Information on federal and state statutes prohibiting sexual harassment;
  • Remedies and rights of redress under the applicable statutes; and
  • An explanation of added responsibilities for supervisory employees.

Employers may satisfy the “interactive” training requirement by: (1) asking questions of the employees as part of the program; (2) including question and answer portion to accommodate employee questions; (3) using a live trainer to conduct the training or making a live-trainer available to answer questions; or (4) requiring employee feedback about the training. Employers should implement as many of the above interactive components as is feasible. All employees must receive a compliant sexual harassment training on or before October 2019.

New hires must receive a compliant sexual harassment training within 30 calendar days of hire.  

Special Provisions for New York City Employers:
Beginning April 1, 2019, all New York City employers with 15 or more employees must provide interactive (but not necessarily live) sexual harassment prevention training to all full- and part-time employees and interns annually, and to new employees within 90 days of hire.

The NYC Commission on Human Rights will create an interactive training module that will be available to employers free of charge.  While these government-created training programs will meet minimum legal requirements, employers should consider providing more detailed, in-person sexual harassment and anti-discrimination training programs.

Beckage attorneys are available to help employers navigate these new sexual harassment laws, including drafting and reviewing sexual harassment policies as well as offering webinars and interactive training programs to ensure compliance with the new laws.    

DISCLAIMER: This client advisory is for general information purposes only. It does not constitute legal advice, and may not be used and relied upon as a substitute for legal advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or practitioner licensed to practice in the jurisdiction where that advice is sought.

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Privacy Statements and Terms of Use – Low Cost Updates Can Provide High Impact Results

If you have not noticed, most websites have Terms of Use and Privacy Statements. What is the difference between them, what do they mean, and why are they important?

In short, Terms of Use – also called Terms and Conditions or Terms and Conditions of Use – all explain the rights and responsibilities of parties using a company’s website. It typically addresses intellectual property rights and proper use of the website.

Privacy Statements – or Privacy Policies – help companies tell website users about the information the company collects from the user and how the company will use that information. This would include information the user enters into the site, or information that is automatically collected through the use of cookies or web beacons or other behavior tracking methods, which may provide information to the company or simply just assist with the user’s navigation and use of the website.

With the EU’s new General Data Protection Regulation (GDPR) in place, Privacy Statements are even more important now. Legal counsel should review these statements to ensure that they are accurate and legally compliant.  

Understanding the technology being used as part of the website development process is critical and companies may struggle in putting them together. The risks of not having an accurate site, however, are significant. While there are some common elements that may be included, the specific content included in privacy statements and terms of use will be unique to your business and website type.

Beckage is made up of former owners of a web development company, technologists, and lawyers certified as Certified Information Privacy Professionals, United States (CIPP/US), and have developed many privacy statements and terms of use. We are happy to help review your Privacy Statement and Terms of Use – a low cost project that delivers a high impact for your organization.

DISCLAIMER: This client advisory is for general information purposes only. It does not constitute legal advice, and may not be used and relied upon as a substitute for legal advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or practitioner licensed to practice in the jurisdiction where that advice is sought.

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