CCPA Imposes Many New Compliance Requirements on Businesses With Personal Information on CA Residents

Comprehensive FAQs on the CCPA Will Guide You Through These Rules

The California Consumer Privacy Act (CCPA) has created compliance challenges across the country for businesses – but they often stem from the fact that businesses are confused about some of the law’s basic principles. This series of Frequently Asked Questions, prepared by the GBS + Leavitt Group’s preferred partner for employment law, Fisher Phillips, will clear up some of that confusion. The Fisher Phillips’ Consumer Privacy Team, offers complete services related to CCPA and privacy rules applicable to employers. Contact your GBS Consultant to learn more.

What is the difference between the CCPA and the CPRA?

The CCPA, or California Consumer Privacy Act of 2018, was passed in 2018. The CPRA, or California Privacy Rights Act of 2020, amended the CCPA. Some portions of the CPRA are already in effect, but other portions do not go into effect until January 1, 2023.

Shot of a businessman making notes while sitting at his desk

It can be useful to think of the CCPA as the law as it is now, and the CPRA as the law as it will be in 2023. But they are the same statute and, starting in 2023, there will be no distinction between the CCPA and CPRA.

Who is a “consumer” whose personal information is protected?

Despite the word choice, the CCPA and CPRA are not limited to just transactional customers of a business, as in end-users or members of the public who directly purchase goods or services. A consumer for purposes of the CCPA/CPRA is any natural person who is a California resident. This includes job applicants, employees, or the employees of other businesses. It also includes independent contractors, members, visitors, guests, and website or app users.

Is my business subject to the CCPA?

Before January 1, 2023, the CCPA only covered businesses that do business in California, operate for the profit or financial benefit of their shareholders or owners, collect personal information from one or more California residents (including even a single employee or customer), and exceed certain revenue or business thresholds ($25 Million annually). There were many exceptions per-2023, including for employers with personal information on employees.

As of January 1, 2023, however, the CPRA will fully kick in and modify the threshold requirements. making CCPA applicable to nearly all for-profit businesses with personal information on California residents.

There are other ways in which a business could be subject to CCPA. Such as:

  • If your business controls or is controlled by a CCPA-covered business while also sharing common branding and sharing personal information;
  • If you operate a joint venture or partnership comprised of covered businesses in which any covered business has at least a 40% interest; Or,
  • If you voluntarily certify to the California Privacy Protection Agency that you are in compliance with and agree to be bound by the CCPA.

You can dive deeper into this subject by reviewing our helpful summary, “Does the CCPA Apply to Your Business?

Note: the CCPA generally does not apply to nonprofit organizations (unless sharing the branding of a covered business, or unless the nonprofit is entirely member-owned and provides goods or services for the financial benefit its members/owners), or to government agencies. However, there is a critical difference between “nonprofit” and “not-for-profit” institutions, the latter of which may operate for the “financial benefit of its shareholders or other owners.”  

Is my business subject to the CCPA even if my business is based outside of California?

Potentially, yes, if you meet one of the four tests under the CCPA or CPRA. The CCPA applies to businesses that do business in California, even if not organized under California law and even with no physical presence in California.

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What does it mean to “do business” in California?

Unfortunately, the CCPA and the CPRA do not specify what this critical phrase means. A company might be considered to “do business” in California even if it merely operates a website in which California residents are allowed to provide their personal information, even just their email for the purpose of subscribing to a newsletter.

The CCPA carves out a narrow exception if every aspect of commercial conduct takes place wholly outside of California. What that means is:

  • The business collects personal information of California residents while they are outside of California;
  • No sale of the California resident’s personal information occurs in California; and
  • No personal information collected while the California resident was in California is sold.

The following is a non-exhaustive list of what may potentially constitute doing business in the State of California:

  • Engagement in any transaction for the purpose of financial gain within the state
  • Domiciled in or maintains a physical location

  • Has one or more employees or independent contractors located in the state

  • Recruits potential job applicants from within the state

  • Markets or sells its products or services in the state

Is the revenue threshold just for revenue generated in California?

No. The revenue threshold is established by gross revenue regardless of source, location of where the revenue is generated, or any other factor.

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Over what period is revenue measured?

Currently, revenue is calculated on an annual basis, but the law does not specify whether that is on an annual basis, follows the calendar year, or by some other metric.

Starting in 2023, however, the CPRA clarifies the calculation is based on all revenue generated during the prior calendar year (that is, from January 1 through December 31). That means that as of January 1 in any given year, if the business did not meet the revenue threshold in the prior calendar year, then the next time the CCPA may begin to apply to the business is the following January 1.

Will collecting data through our website count towards the “buy, receive, or share” criteria which is currently the law and the “buy, sell, or share” criteria coming in 2023?

Under the current version of the CCPA, yes. Collection of a California resident’s data through a website satisfies the initial requirement for CCPA coverage. This includes IP addresses and other internet activity information such as device ID, browser ID, what the user clicked on, etc. Data collected through a website can qualify as “personal information” of a California resident even if the business does not actually collect the person’s name and contact information, so long as the data collected can reasonably be used (by the business or by any third party with whom the data can be shared) to identify or link to the individual consumer.

Accordingly, the second criteria under the current test for CCPA applicability is met and the CCPA currently applies to your website if your website collects on an annual basis personal information from over 50,000 California residents, households, or devices.

Diverse entrepreneurs and small business owners working in coworking space.Programmers and software engineers working in office

However, starting on January 1, 2023, your website will continue to meet the second criteria only if the collection includes the selling or sharing of personal information from over 100,000 California residents or households on an annual basis. Selling and sharing have special meanings under the CCPA and CPRA, and they can potentially include analytics and use of personal information for targeted advertising. Data about/from “devices” will no longer be part of this criteria, however, but it is yet to be seen whether the removal of this term from the criteria as of January 1, 2023 will be interpreted to mean that collection of data about website visitors through cookies and pixels and then sharing or selling this data would bring a business within the scope of this criteria.

If we operate a franchisee, subsidiary, or parent company, how do we know if the CCPA or CPRA applies to us?

Even if you are not a covered business, as discussed above, entities that control or are controlled by a covered business, along with those that share common branding with a covered business (such as a shared name, service mark or trademark that the average consumer would understand that two or more entities are commonly owned) are covered by the law. In such cases, your business is not exempt from CCPA coverage merely by being a franchisee or subsidiary.

Starting in 2023, however, this additional test will only apply if there is also the sharing of California residents’ personal information.

To be clear, starting in 2023, the test will have three parts:

  1. control;
  2. common branding; and
  3. sharing of personal information.

Control can be established in any of the following ways:

  • ownership of, or the power to vote, more than 50% of the outstanding shares of any class of voting security of a business;
  • control in any manner over the election of a majority of the directors, or of individuals exercising similar functions; or
  • the power to exercise a controlling influence over the management of a company.

How long do I have to comply with the CCPA?

The CCPA went into effect on January 1, 2020, so you should already be compliant with the current provisions of the law.

In November 2020, California voters approved the CPRA to expand the reach of and not replace the CCPA. As such, the CCPA requirements unchanged by the CPRA are now and will remain in effect after the CPRA is implemented.

You have until January 1, 2023, to bring your business into compliance with the additional requirements of the CPRA.

When will California begin enforcing CCPA requirements?

CCPA regulations and requirements are enforceable now by the California Attorney General, and the CPRA expands the scope of enforceability. As of July 1, 2023, the California Privacy Protection Agency will share authority with the California Attorney General to enforce the CCPA against non-compliant businesses. The Agency will have broad authority to investigate and audit businesses.

Writing, creative and man with laptop in office for business, project or research in startup. Computer, notes and African professional copywriter working on book for planning, web schedule and email.

In addition, starting on January 1, 2023, the CPRA eliminates the mandatory “cure provision” that currently allows businesses a 30-day period to bring itself into compliance without being subject to penalties.

What are the consequences for non-compliance? Are there enforcement penalties?

Any business that violates a provision of the CCPA or CPRA may be liable for a civil penalty up to $2,500 for each violation or $7,500 for each intentional violation. Civil penalties can only be imposed in enforcement actions by the Attorney General or the California Privacy Protection Agency.

Under the CCPA, the consequences for a data breach involving certain sensitive personal information are severe. This is in large part due to the CCPA’s “private right of action” allowing California residents who prove a violation to recover statutory damages between $100 and $750 per personper incident, even if the person cannot prove actual harm. These penalties can add up quickly, particularly in a class action context. Your defense against any statutory damages is being able to demonstrate that you implemented and maintained reasonable security procedures and practices.

What is the significance of the CCPA and CPRAs “private right of action”?

Under the CCPA, individuals have a “private right of action” against a business if certain categories of their nonencrypted and unredacted sensitive personal information was stolen in a data breach resulting from the business’s failure to maintain reasonable security procedures and practices.

Currently, the CCPA limits a data breach to only unauthorized access and exfiltration, theft, or disclosure of an individual’s first name or first initial and the individual’s last name in combination with any one or more of the following data elements, when either the name or the data elements are not encrypted or redacted:

  • Social security number
  • Driver’s license number, California identification card number, tax identification number, passport number, military identification number, or other unique identification number issued on a government document commonly used to verify the identity of a specific individual
  • Account number or credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual’s financial account
  • Medical information
  • Health insurance information
  • Unique biometric data generated from measurements or technical analysis of human body characteristics, such as a fingerprint, retina, or iris image, used to authenticate a specific individual. Unique biometric data does not include a physical or digital photograph, unless used or stored for facial recognition purposes
  • Genetic data

The CPRA, effective January 1, 2023, expands the scope of privately enforceable violations to include email addresses in combination with a password or security question and answer that would permit access to the California resident’s account.

Do we qualify for any CCPA exemptions?

The CCPA does not have entity-level exemptions. It is possible that some types of data used for particular purposes may be exempt, but the law does not blanketly carve out certain businesses or types of businesses. If one of the tests applies to you, the CCPA and CPRA apply to your business.

For example, data that is entirely subject to the Gramm-Leach-Bliley Act (GLBA) is not subject to the CCPA so long as it is collected, processed, sold, or disclosed for a GLBA-covered purpose, meaning for the purpose of providing a financial product or service by a financial institution. If the same data is used for marketing purposes not covered by GLBA, then the use of the data for such purpose would still be subject to the CCPA.

Similarly, a HIPAA-covered entity is not automatically exempt from the CCPA. Only the data may be subject to the HIPAA exemption from the CCPA and only to the extent the data itself qualifies as protected health information (PHI) and is used for HIPAA-covered purposes. If data that is not PHI is shared with a HIPAA-covered entity, the HIPAA-covered entity and the business’s sharing of such non-PHI data with such HIPAA-covered entity would still be subject to the CCPA.

What are the current training requirements under the CCPA?

Under current law, covered businesses must ensure that all individuals responsible for CCPA compliance or handling responses to consumer inquiries are informed of CCPA requirements. This includes knowing how to direct consumers to exercise their rights under the CCPA.

Business lady raising hand and asking a question during a discussion

The CCPA regulations contain a similar training obligation, but in addition require businesses to establish, document, and comply with a training policy if they know, or reasonably should know, that they buy, receive, sell, or share, for commercial purposes, the personal information of 10 million or more consumers in a calendar year.

Will the CCPA training requirements change when the CPRA takes effect?

No. The training requirements will remain the same.

Who should we train?

Compliance requires employers to ensure that any employee involved in implementing, managing, or overseeing compliance with the CCPA receives training. This includes executives, general managers, human resources employees, directors of marketing, social media managers, and information technology employees. Additionally, any employee responsible for handling consumer requests through the business’s CCPA toll-free hotline must receive the training.

Finally, you should train employees that regularly interface with consumers – such as sales representatives – on the basic requirements of the CCPA and where to direct consumer questions and requests regarding data privacy.

What must the training cover?

Employees must understand their role in CCPA compliance. Beginning on January 1, 2023, this includes understanding that employees and job applicants are “consumers” under the law and have the same rights, including the right to be free of retaliation from exercising their CCPA rights.

Training must cover consumer rights created under the CCPA. Specifically, training should cover the consumer’s individual right to request any of the following:

  • Copies or deletion of specific personal information collected;
  • Disclosure of the categories of personal information collected, the source(s) from which the information was collected, the business purpose for collecting or selling that information, and the categories of third parties with which that information was shared up to 12 months prior;
  • For businesses selling or disclosing their personal information for any business purpose, disclosure of the categories of personal information collected, sold, or disclosed;
  • Limiting the use or disclosure of “sensitive personal information” (a sub-category of personal information); and
  • Corrections to personal information.
  • Training should also encompass the following:
  • A consumer’s right to not be discriminated against for exercising any right under the CCPA;
  • How businesses should inform consumers of their rights under the CCPA;
  • CCPA requirements for offering financial incentives to consumers in exchange for the collection of their personal information; and
  • Methods for delivering requested information to a consumer after receiving a consumer’s request.

How long must the training be?

The law does not specify. Practically, however, the training for managerial employees may take up to two hours in length or more, as it should cover all aspects of compliance with the CCPA.

Training for non-managerial, consumer-facing employees may be shorter and cover the main provisions of the CCPA based on the employees’ level of involvement with compliance. For example, they may need to know about the specific forms and notices they may need to give consumers.

Who can provide the training?

The law does not require any minimum qualifications for those who provide training. However, as the CCPA and CPRA are highly technical, we recommend that someone with data privacy experience provide the training. Leavitt Group preferred partner for employment law, Fisher Phillips, offers training for employers and can do so across all industries.

How often is the training required?

Currently, the law does not specify how often employers must provide training. New regulations may provide additional guidance in the future, but for now we recommend that employees receive a refresh on CCPA compliance on an annual basis.

Will businesses face penalties for failing to provide training?

In the context of training, it is yet to be determined whether the penalty would be established on a “per employee basis” (for each employee who did not receive adequate training) or counted as single violation for not providing adequate training to all persons required. Therefore, it is important to comply with your training obligation and document employees’ attendance at all training events to establish a record of compliance.

Conclusion

The privacy rules in California is just one new set of rules intended to protect personal information on its residents. It is just the start of a privacy wave that will eventually make its way across the US. Illustrated by the influx of new privacy rules coming into play. GBS will continue to monitor CCPA obligations and enforcement efforts and provide updates as warranted.

Originally published by Fisher Phillips, a Leavitt Group partner for compliance (Usama Kahf, CIPP/US; Darcey M. Groden, CIPP/US; Anne Yarovoy Khan, Of Counsel; Jenna Rogenski, Associate; Christopher M. Champine, Associate; Anthony Isola, Partner; and, Benjamin M. Ebbink, Partner). Republished with permission. Some content by Leavitt Group.
March 2023 This document is not intended to be exhaustive, nor should any information be construed as tax or legal advice. Readers should contact a tax professional or attorney if legal advice is needed. Although we have made every effort to provide complete, up-to-date, and accurate information in this document, such information is meant to be used for reference only. If there is any inconsistency between the information contained in this document and any applicable law, then such law will control.
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