Privacy Compliance 101: Why Massachusetts Data Security Standards DO Affect You

Beginning May 1, 2009, businesses will need to pay more attention to data governance; a higher standard will go into effect in an effort to protect Massachusetts residents’ personal information. Companies will now be required to implement written programs for the protection of personal information. The standards, 201 C.M.R. 17.00, set out in detail the standards to be met by persons or businesses who own, license, store, or maintain personal information about a Massachusetts consumer or employee (the “standards”). Noteworthy in the scope of data standards, the standards apply to paper as well as to electronic records.

What You Need to DO

Implementation and development of a written, comprehensive security program and establishment of a security system covering businesses’ computers are at the heart of the standards. The standards provide a detailed list of comprehensive security system and security system requirements.

Comprehensive, Written Information Security Program

Section 17.03 of the standards requires covered entities to “develop, implement, maintain and monitor a comprehensive, written information security program (“program”) applicable to any records containing” protected information which is consistent with industry standards. A program must contain “administrative, technical, and physical safeguards to ensure the security and confidentiality” of the records. Additionally, such safeguards must be consistent with the requirements established by any state or federal standards by which a given organization may be regulated.

The standards specify mandatory minimum requirements to every program. Each program shall:

• Designate one or more employees to maintain the program;
• Identify and assessing reasonably foreseeable internal and external risks to the security, confidentiality and integrity of the records containing personal information and—evaluating and improving—the effectiveness of the current safeguards for limiting such risks;
• Develop security policies for employees as to whether and how employees should be allowed to keep, access and transport records containing personal information outside of business premises;
• Impose disciplinary measures for violation of the program;
• Prevent terminated employees from accessing records containing personal information by immediately terminating their access to such records;
• Take reasonable steps to verify that third-party service providers with access to personal information have the capacity to protect such personal information;
• Limit the amount of personal information collected to that reasonably necessary to accomplish a legitimate purpose for which it is collected; limiting the time such information is retained to that reasonably necessary to accomplish such purpose; and limiting access to such persons who are reasonably required to know such information in order to accomplish such purpose or to comply with state or federal record retention requirements;
• Identify records and devices used to store personal information, to determine which records contain personal information;
• Place reasonable restrictions upon physical access to records containing personal information;
• Monitor regularly to ensure that the program is operating in a manner reasonably calculated to prevent unauthorized access to or unauthorized use of personal information; and upgrading information safeguards as necessary to limit risks;
• Review the scope of the security measures at least annually or whenever there is a material change in business practices that may reasonably implicate the security of records containing personal information;
• Document responsive actions taken in connection with any incident involving a breach of security or integrity of records.

Computer System Security Requirements

The standards also list mandatory minimum elements to be included in the security system (the “system”). Briefly, they include:

• Secure user authentication protocols;
• Secure access control measures;
• Encryption of transmitted records and files, to the extent feasible;
• Reasonable monitoring of systems, for unauthorized access to personal information;
• Encryption of all personal information stored on laptops or other portable devices;
• Reasonable up-to-date firewall protection for files containing protected information on a system that is connected to the Internet;
• Reasonably up-to-date versions of system security agent software which must include malware protection and reasonably up-to-date patches and virus definitions;
• Education and training of employees on the proper use of the system and the importance of personal information security.

The standards also specify features required for secure user authentication protocols and secure access control measures.

Recommendations for Compliance

Companies should begin now to audit and review its policies and procedures currently in place to determine what changes should be made in order to comply with the statute and Standards. Companies should also review termination policies of employees and their potential access to confidential information. They should also consider when drafting contracts or entering into independent consultant agreements obtaining written verification that the other party has a compliant program in place. Lastly, companies must ensure encryption of all personal information stored on computers, laptops, Blackberrys, iPhones and other portable devices. It should be noted that it remains unclear what is considered a “portable device” under the standards. This term could include USB drives, cell phones, PDAs and even Blackberrys.

What If I’m Not Located In Massachusetts?

The standards apply to your company. The standards apply to any business—wherever located—that own, license, maintain or store the “personal information” of Massachusetts residents.

What Happens If You DON’T Comply: Penalties

It is crucial for businesses to understand and comply with the newly enacted data breach legislation to avoid potentially severe monetary penalties. Massachusetts, unlike the majority of states, provides for civil penalties in cases of non-compliance with its data breach notification statute, Massachusetts General Law 93H. In particular, a civil penalty of $5,000 may be awarded for each violation of 93H. In addition, under the portion of 93H concerning data disposal, businesses can be subject to a fine of up to $50,000 for each instance of improper disposal. Therefore, while implementation of the standards might require additional expenditures and seem costly, potential fines might result in greater financial damage to a business, not to mention the likely negative publicity. May 1, 2009 is right around the corner.

Cynthia Larose is a member in Mintz Levin’s Boston office and is a Certified Information Privacy Professional (CIPP). She heads the firm’s Privacy and Security practice. Elissa Flynn-Poppey is an associate in Mintz Levin’s Boston office.