United States: California Amends Landmark Privacy Law Delaying Enforcement And Making Revisions

With only hours left to the 2018 legislative session, the California Legislature has amended the California Consumer Privacy Act of 2018 (CCPA) by passing SB-1121. The legislature was expected to amend the CCPA, which passed in just about one week after it was proposed, in a rush to avoid a different version of the act being finalized as a ballot initiative that would have been on the November ballot. We wrote about that process here and here. A summary of the CCPA as originally passed is here, and recommendations on how to start to prepare are here.

Assuming it is signed by Gov. Brown by Sept. 30, 2018, SB-1121 will make both modest and material changes to the CCPA but, as we recently reported, does not fix many of the problems with the CCPA. It does, however, do the following:

Material changes to the CCPA:

  • Removes the one-year requirement for the attorney general to establish certain rules and procedures (e.g., opt-out), puts a deadline of July 1, 2020, on the attorney general to adopt regulations furthering the purpose of the act, and limits enforcement by the attorney general until six months thereafter or July 1, 2020, whichever is sooner. This may buy businesses up to an additional six months depending on how long it takes to promulgate regulations. However, covered businesses will still need to start tracking data and data practices as of Jan. 1, 2019, to comply with the one-year look-back we previously explained here. Practically, the enforcement delay will serve as a delay also for that obligation.
  • Prohibits application of the act to personal information collected, processed, sold or disclosed pursuant to the federal Gramm-Leach-Bliley Act (governing financial institutions), and its regulations, or the California Financial Information Privacy Act, protected health information collected by a covered entity or business associate governed by the federal Health Insurance Portability and Accountability Act (HIPAA), or medical information governed by the California Confidentiality of Medical Information Act. This expands existing original carve-outs.
  • Prohibits application of the act to a provider of healthcare governed by the Confidentiality of Medical Information Act, or a covered entity governed by the privacy, security and breach notification rules issued under HIPAA by the U.S. Department of Health & Human Services to the extent the provider or covered entity maintains patient information in the same manner as medical information or protected health information as described in Section 1798.145(c)(1)(A) of the act. This expands existing original carve-outs.
  • Revises the definition of personal information to clarify that data that falls into the categories of personal information described will be personal information only if "it identifies, relates to, describes, is capable of being associated with, or could be reasonably linked, directly or indirectly, with a particular consumer or household." In other words, data falling into one of the specified categories is not per se personal information. However, the definition is still unreasonably broad, applying not just to information that identifies or is linkable to a particular person or household, but also to information that "is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household." A better approach would be to define personal information as it is defined under the California Shine the Light Act, which governs disclosures for third-party marketing purposes – "any information that when it was disclosed identified, described or was able to be associated with an individual...." Hopefully the legislature will revisit this issue in the next session, or the regulations can be used to clarify what is intended by "capable of being associated with."
  • Makes a business, service provider or other person that violates the act subject to an injunction in a civil action brought by the attorney general.
  • Makes the pre-emption of local laws immediate.
  • Eliminates the requirement that a consumer must give the attorney general notice within 30 days that an action has been filed in order to move forward with the action as well as the attorney general's power to prohibit the private action from going forward. This was at the request of the attorney general, who is also urging the legislature to expand the private right of action to permit claims for more than inadequate security that causes a security incident. So far, the legislature has rejected calls for expanding the limited private right of action. Rather, it has amended the CCPA to try to clarify its limits. SB-1121 adds a sentence to 1798.150(c) clarifying that the private right of action set forth in Section 150(a) applies only to "violations" that are security incidents as described in California Civil Code Section 1798.150(a) and not any other violations of "any other sections of this title." This merely clarifies the provision, presumably to try to address ambiguities arising from the use of the term "violations" of the CCPA, which itself has no security duty provisions other than in the remedy provision itself. For a deeper analysis on the scope of the CCPA's private right of action, see here.
  • Allocates all civil penalties assessed for a violation of the act and the proceeds of any settlement of an action brought under Section 1798.155(b) of the act to the Consumer Privacy Fund and eliminates the requirement that 80 percent of such penalties and proceeds be allocated to the jurisdiction on whose behalf the action leading to the civil penalty was brought. Earlier versions of AB 375, which was the bill that became the CCPA, had provided for enforcement by local jurisdictions rather than only a very limited private right of action and attorney general enforcement. Interestingly, the recitals still retain the description of the 80 percent revenue share, demonstrating that again the legislature has rushed to pass a bill before it is fully vetted.

Modest changes to the CCPA:

  • A business would not be required to disclose a consumer's deletion right on its website or in its online privacy policy(ies). Rather, it must provide notice "in a form that is reasonably accessible to consumers." Thus, a business could provide notice through its privacy policy but is not required to.
  • Adds a Section (k) to 1798.145, which states that the rights and obligations under the CCPA do not apply if they infringe on a business's noncommercial speech rights. This is a further attempt to guard against a First Amendment challenge to the law.
  • Adds that the CCPA will not apply if its application is pre-empted by or is in conflict with the U.S. Constitution. The CCPA, as passed, already stated that it will not apply if its application is pre-empted by or is in conflict with federal law or the California Constitution.
    • Changes the civil penalty provisions available to the Attorney General by making them independent of Section 17206 of the Business and Professions Code. The penalty provisions still provide that penalty for each violation can be up to $2500, or up to $7500 for each intentional violation. This change was responsive to the California Attorney General's request in his letter to the California legislature, in which he advised that the CCPA's penalty provisions as passed are likely unconstitutional because they purport to amend and modify the Unfair Competition Law's (UCL) civil penalty provisions as applied to CCPA violations. The California Attorney General explained that "the UCL's penalty provisions were enacted by the voters through Proposition 64 in 2004 and cannot be amended through legislation."
  • Makes various grammatical, technical and clarifying changes to the CCPA. For example, it would change "business'" to "business's" and "opt out" to "opt-out."

While SB 1121 does make needed changes, many more issues need to be addressed, as we have written. Chief among these are the need to harmonize the CCPA, which is Title 1.81.5, with existing Title 1.81. The legislature should amend Title 1.81 to do away with the existing private right of action for "customers" under Title 1.81 and have the new private right of action under Title 1.81.5 for "consumers" be the exclusive private right of action for data security failures. Moreover, it should repeal the Shine the Light Act in Title 1.81, which regulates sharing of "customers'" personal information for third-party marketing, altogether now that the CCPA's more comprehensive consumer privacy rules are in place, or at least sunset the Shine the Light Act when the CCPA becomes effective. Otherwise, covered businesses will struggle with two different but overlapping California transparency and choice regimes – including the need to post home page links on their websites to both "Your California Privacy Rights" and "Shine the Light Act" rights along with a "Do Not Sell My Personal Information" link to the CCPA opt-out. We will follow future legislative and regulatory efforts regarding the CCPA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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