Mandatory data breach notification: how will the new laws in Australia impact your business? - Data Protection

Australia's Federal Parliament has now passed the Privacy Amendment (Notifiable Data Breaches) Bill 2016, which will introduce mandatory data breach notification obligations for all organisations that are subject to Australia's Privacy Act 1988 (Cth). This includes all Australian-registered companies, but will also capture many foreign-registered companies that carry on business in Australia and interact with Australian data subjects.

The new laws are likely to take effect in the next 12 months, so it's time for organisations to prepare.

WHAT YOU NEED TO KNOW

'Eligible Data Breach'

The new regime will require notification of "eligible data breaches". These are defined as data breaches, including data loss incidents, where a "reasonable person would conclude that [the breach] would be likely to result in serious harm to any of the [affected individuals]".

'Serious harm' could include physical, psychological, emotional, economic and financial harm, as well as harm to reputation.

In making an assessment of harm, an organisation needs to consider the nature and sensitivity of the personal information, whether the information is protected by security measures (e.g. encryption), who has obtained or accessed, or could obtain or access, the information, and the nature of the harm to affected individuals.

The "serious harm" test does not require the harm to be suffered by all affected individuals – rather, this must be assessed on a case-by-case basis. The test is satisfied if any individual whose information has been breached would suffer the harm. There are no prescribed "triggers" for notification in the legislation, such as a threshold number of affected individuals.

Notifying affected individuals and the Privacy Commissioner

If there are reasonable grounds to suspect that an eligible data breach has occurred, an organisation must:

carry out a "reasonable and expeditious" assessment as to whether there has been an eligible data breach, taking all reasonable steps to complete the assessment within 30 days after becoming aware; and
if an eligible data breach has occurred, notify affected individuals as soon as practicable, with a notification containing certain prescribed information, including:
- the identity of the organisation;
- the description of the breach;
- the kind of information concerned; and
- recommendations to the individual as to steps to take in response to the breach.

The regime makes certain allowances for organisations to investigate and remediate data breach incidents before determining whether the incident meets the "likely to result in serious harm" threshold (and is therefore notifiable).

Under this 'remedial action' exception to the notification requirement, if there is a data breach but the organisation takes action before it results in any serious harm to affected individuals, and as a result of that remedial action a reasonable person would conclude that the breach is not likely to result in serious harm, then the breach will not be an eligible data breach.

This gives organisations important flexibility in managing less severe incidents, and also means that strong data breach management processes may (in some cases) remove the need for notification, by mitigating a breach before serious risk to the data subjects arises.

Where notification is required, the organisation must notify both the affected individuals and the Australian Privacy Commissioner.

Failure to comply with the notification requirements is subject to the standard penalty regime under the Privacy Act, which allows for monetary penalties of up to $1.8 million for companies and $360,000 for individuals for serious or repeated breaches.

HOW CAN YOU BEST PREPARE?

Failing to meet your privacy obligations can be costly, in terms of monetary penalties but also customer complaints and reputational damage.

Our fundamental advice is: be prepared. Having a comprehensive data breach response plan, a well-trained team and an awareness of how to adapt is key. Understanding how you respond to a data breach depending on the type of incident and the information concerned, will result in a better outcome for both affected individuals and your organisation.

Here are our recommendations as to the steps you can take before the new data breach notification laws take effect:

Get ready for new responsibilities by identifying and training the relevant people in your organisation. Who is best placed to evaluate the likely harm of a data breach and whether there is a risk of serious harm? Your organisation should have internal guidance, policies and procedure to define what constiutes serious harm in the context of your organisation's business and to outline your information collection practices.
Focus on your organisation's ability to remediate a breach. An organisation need not notify individuals if it takes action before any serious harm arises. Being pro-active about information security will place you in a better position to remediate harm before the obligation to notify affected individuals arises.
Review contracts with service providers to ensure they contain privacy and data breach notification obligations on the service provider that will allow you to comply with your obligations. It might be important to ensure that your organisation retains the obligation to notify individuals, so you retain control of drafting the notification statement, and communicating with customers.
Update your data breach response plan. This is important to ensure that your people are best equipped to deal with data breaches, and may also be effective evidence of your organisation's privacy practices if you are involved in an investigation by the Privacy Commissioner.
Have a draft notification ready to go. This will enable you to act promptly. Ensure the notification includes the information specified in the new law and can be adapted to a particular breach.
Prepare channels of communication to publicise a notification. The regime requires an organisation to take steps that are reasonable in the circumstances to notify individuals of a data breach. This may require notification via the usual channels an organisation generally uses to interact with individuals (e.g. by email and SMS). Where this is not practicable you will need to publish the notice on its website and take reasonable steps to publicise the notice.

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.