Client Alert
Billee Elliott McAuliffe, J. Cole Newkirk
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On May 25, 2018, the European Union (EU) General Data Protection Regulation (GDPR) goes into effect, and its effect will be felt globally. Regardless of where your business is located, if your business holds or processes the personal data of EU citizens and you are not compliant with the GDPR by its effective date, you could face fines ranging from the greater of 10 million Euros or 2% of worldwide annual turnover1 per breach to the greater of 20 million Euros or 4% of worldwide annual turnover per breach. As such, it is important to understand whether the GDPR applies to your business, and if it does, what you must do to comply.
The GDPR is a comprehensive regulation meant to protect the personal data of EU citizens, wherever that data might be processed. It replaces the 1995 Data Protection Directive (the "Directive").
In the twenty-two years since the Directive was passed by the EU Parliament, the technology landscape has changed dramatically. With the growth of e-commerce, social media and mobile technology, the cross-border transmission of personal data has exploded. To keep up with such changes, the EU Parliament felt the Directive needed an overhaul and that overhaul is the GDPR.
Additionally, the Directive was just that, a directive (i.e., instruction) to the EU members with regard to the minimum standards that they were to include in their individual states' data protection laws. This has resulted in a patchwork of laws across the EU member states that has made compliance difficult for companies wanting to do business throughout the EU. In order to correct this problem and to make it easier for businesses to operate throughout the EU, the EU Parliament passed the GDPR, a regulation (rather than a mere directive) that imposes an overarching, EU-wide data protection regime.
The GDPR was also intended to ensure the protection of EU citizens’ personal data, wherever that data might be processed. As such, the GDPR greatly expands the geographical scope of the EU data protection laws. In fact, the GDPR applies not only to organizations located within the EU, but also to organizations located outside of the EU if they offer goods or services to, or monitor the behavior of, EU residents. Consequently, US-based companies will need to be comply with the GDPR if they are doing business (or attempting to do business) in the EU and are handling or storing any personal data of individuals residing in the EU. For example, if your business’s marketing efforts into the EU include gathering EU residents' names and/or email addresses, you could be subject to the GDPR.
“Personal data” under the GDPR means “any information relating to an identified or identifiable natural person (“data subject”); an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity."2 So, if a person can use such information to identify the particular natural person using “all means reasonably likely to be used,” the given information is “personal data” under the GPDR. Thus, data may be “personal data” even if the organization holding such data cannot itself identify a natural person.3 Furthermore, a name is not necessary for the information to “identifiable;” any identifier such as an identification number, location data, an online identifier or other factors may be used to identify that natural person. Online identifiers are expressly called out as ways to identify a natural person in Recital 30 of the GDPR with IP addresses, cookies and RFID tags all listed as examples. Hence, “personal data” is broadly defined and covers far more information than one may initially believe. However, it is important to note that although these definitions are broader than those used in the Directive, they are merely codifications of the current guidance and case law on the definition of “personal data” under the Directive.
The first step in compliance with the GDPR is to analyze and understand your current state of affairs – review what kinds of data you handle, from where and how you are gathering such data, how that data are processed, and what security mechanisms, policies, and procedures you have in place already. Then, if you believe you are subject to the GDPR, you will need to review the GDPR to see what you may need to add or modify in order to comply. As you begin this analysis, you might keep in mind the following key components to the regulation:
If you have any questions about data privacy and regulatory compliance, or you need assistance ensuring your compliance with the new EU General Data Protection Regulation, please contact an attorney in our Cybersecurity & Data Privacy Practice Group.
The author thanks J. Cole Newkirk for his contributions to this article.
1 "Annual Turnover" means "annual sales volume net of all discounts and sales taxes." http://www.businessdictionary.com/definition/turnover.html
2Article 2(a) of the GDPR.
3Recital 26 of the GDPR.