This article appeared in Cybersecurity Law & Strategy, an ALM publication for privacy and security professionals, Chief Information Security Officers, Chief Information Officers, Chief Technology Officers, Corporate Counsel, Internet and Tech Practitioners, In-House Counsel. Visit the website to learn more.

The California Consumer Privacy Act (CCPA) is a comprehensive new consumer protection law set to take effect on Jan. 1, 2020. In the wake of the CCPA's passage, approximately 15 other states introduced their own CCPA-like privacy legislation, and similar proposals are being considered at the federal level. However, so far only Nevada has passed new consumer privacy laws, adding a do-not-sell right to its existing online privacy law, effective Oct. 1, 2019.

Among the many differences between the CCPA and existing U.S. privacy legislation, the definition of personal information (PI) under the new law is very broad and includes data elements not previously considered PI under any U.S. law. In addition, the CCPA introduces new privacy rights for Californians, such as the right to know what PI a business has collected about them, details on how the business uses and discloses the data, and the right to request that the business delete that information.

The CCPA will apply to a wide range of businesses that handle Californians' PI, obligating such businesses to comply with a host of new requirements governing their collection, use and sharing of PI. Most will need to update the disclosures in their privacy notices, establish processes for responding to consumer rights requests, observe restrictions on data monetization practices and revisit relationships with vendors that handle PI on their behalf.

The California legislative season ended on September 13 with six bills passed that will amend the CCPA if signed and not vetoed by the governor prior to October 13. Most notable is a one-year respite for human resources data and business-to-business communications. By mid-October, the first drafts of proposed regulations interpreting and implementing the CCPA are also expected to be available. Although some aspects of CCPA readiness should wait until that time to be addressed, there is much that can and should be done between now and then.

Below are responses to questions businesses frequently ask about the impacts of the CCPA. Implementation challenges inevitably will arise as a company works to apply these new requirements to its business practices. The time is now to start preparing for the CCPA, as well as for other new U.S. privacy laws that are likely to follow.

Part One of this article covers how the CCPA applies to businesses — both in and outside California, the revenue threshold, proposed amendments and other open issues. Part Two, in the next issue, will cover the rights that CCPA grants to Californians, the CCPA's impact on company privacy policies, how other states' privacy laws compare to the CCPA, exceptions and penalties for violating the Act.

Does the CCPA apply to my business? What if we don't have operations in California?

The CCPA will impact many businesses and business activities not previously subject to privacy regulations in the United States. The law is not limited in scope to entities that have physical operations in California; it applies to for-profit entities "doing business" in the state that either:

• Have a gross annual revenue in excess of $25 million; or
• Annually buy, receive for commercial purposes, sell, or share for commercial purposes PI of 50,000 or more California consumers, households or devices; or
• Derive 50% or more of their annual revenues from selling California consumers' PI.

The CCPA also applies to any entity that: 1) controls, or is controlled by, a business that meets the above criteria; and 2) shares common branding with that business.

Does the $25 million revenue threshold apply to California revenue specifically, or is it $25 million for the business as a whole?

Unclear. Because the text of the law does not specify, the prevailing consensus seems to be that the threshold is $25 million overall, regardless of the total amount of revenue generated in California. This assumption seems validated by the fact that the other two prongs of the definition specify that they apply to California consumers. The same qualification could have been inserted in the first prong, but it was not.

Will the CCPA be amended? What are the open issues?

The CCPA was amended back in 2018, including to delay enforcement by the attorney general to provide more time to promulgate regulations — and the 2019 California Legislature has since then passed six amendment bills that the governor has until Oct. 13 to sign or veto.

A little more than 100 days prior to the effective date of the CCPA, six amendments (AB 25, AB 874, AB 1146, AB 1202, AB 1355 and AB 1564) to the act were approved by California lawmakers at the close of the legislative session, which ended on September 13. The governor must sign or veto these bills by October 13. Most notably, if they become law, the bills would delay implementation of most of the CCPA's data subject rights to human resources data and business-to-business transaction communications data for one year. A bill (AB 846) that would have clarified that certain data collection and use in connection with loyalty programs was permissible was pulled by the author but may be brought back up in the next legislative season if the regulations implementing the act, a first draft of which is expected from the California attorney general's (Cal AG) office in late September or early October, do not address the issue. The proposed amendments also would require a business that collects and sells consumer PI but does not have a direct relationship with those consumers to register with the state as a data broker. In addition, the bills address the scope of PI that is covered by the act, the meaning of certain consumer rights and how those rights are to be administered, and what training is required of personnel who will handle privacy inquiries and requests.

Data Broker Registry

AB 1202 would require "businesses" that knowingly collect and sell consumer PI but lack a direct relationship with those consumers to register with the Cal AG, whose office would then publish the names and contact information of the registrants on the Cal AG's website. A prior version of the bill would have also required data brokers to give consumers certain pre-collection notice of the categories of PI collected and the purposes for the collection, which could have been satisfied by posting such notice on the data broker's website, but those provisions were struck prior to passage. The intent of the law is to provide consumers with a way to identify and contact businesses that may be collecting and selling their information, so that consumers can determine whether such businesses have collected their PI and can exercise their do-not-sell and other consumer privacy rights (e.g., to obtain a copy of the PI and/or request its deletion).

Scope of Coverage Delayed (Employees and Transactional)

AB 25 provides that until Jan. 1, 2021, only the pre-collection notice requirement of Section 1798.100(b) and the private right of action for data security incidents of Section 1798.150 will apply to PI that is collected by a business in the course of a person's acting as a job applicant, employee or contractor who is performing services under a written agreement. AB 1355 provides a similar one-year delay in the imposition of the obligations of Sections 1798.100, .105, .110, .115, .130 and .135 on a business with respect to communications with a person acting on behalf of another business with regard to providing or receiving products or services to or from such business. Californians whose PI is collected in such communications while they are acting on behalf of a business would not, however, see a delay in their ability to exercise their do-not-sell rights (Section 1798.120) with respect to such data. It is important to note that this does not include communications when the person is acting on behalf of themselves or other consumers, but rather addresses only business-to-business transactional communications. The issue of what the proper scope of coverage should be for human resources data and business-to-business communications data is likely to be revisited next legislative season.

Exceptions to Statutory Coverage

AB 1146 adds exemptions for certain vehicle information shared in connection with warranty repairs and recalls. AB 1355 would amend the Fair Credit Reporting Act (FCRA) exclusion of Section 1798.145(d) to clarify that it applies only to PI furnished to credit reporting agencies to the extent such information is subject to regulation by the FCRA and is not used, communicated, disclosed or sold except as authorized by the FCRA.

Exceptions to Scope of PI

AB 874 amends the definition of "publicly available information," which is deemed not to be PI regulated by the CCPA, by removing the government-purpose limitation of Section 1798.140(o)(2). Currently, the CCPA does not apply the exception if "the data is used for a purpose that is not compatible with the purpose for which the data is maintained and made available in the government records …." If AB 874 becomes law, all that will be required to take data out of the scope of the CCPA's rights and obligations is to show that it is lawfully made available from federal, state or local government records and does not include biometric information collected by a business about a consumer without the consumer's knowledge. AB 874 also clarifies that de-identified information and aggregate consumer information are also not within the definition of PI. Efforts to further refine the definition of de-identified information to loosen the de-identification standards were not successful. AB 874 further would add the word "reasonably" before "capable" as part of "capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household" in the definition of PI.

Consumer Rights, Notices and Requests

The bills would make changes to the scope and management of consumer rights requests, including:

• No Toll-free Number for Online Businesses: Removing the toll-free method of receiving consumer rights requests requirement for a "business that operates exclusively online and has a direct relationship with a consumer."
• Specific Pieces of PI: Changing the language of Sections 1798.110(c)(1) and (5) to make it clear that privacy notices are to include instructions to the consumer on how they can obtain their specific pieces of PI and not that the notice must, as the language currently reads, include the specific pieces of information. If this becomes law, it should settle the debate as to whether "specific pieces" means the actual pieces of PI or a description of data types (g., your name and address) that are more granular than the enumerated categories of PI set forth in the definition of PI required to be used in notices and information request responses.
• No Collection or Retention Obligations: Clarifying that a business need not collect PI it would not normally collect or retain PI it would not normally retain just to have such information available to satisfy consumer rights.
• Use of Account: Permitting the ability to require that consumer requests be made through an account if the consumer has an account. However, it would still be impermissible to require account creation merely to make a request.
• Verification: Allowing a business to "require authentication in light of the nature of the PI requested" before disclosing or delivering responsive PI. In addition, the definition of "verifiable consumer request" is expanded to apply not only to Sections 1798.110 and .115 (information rights) but also to Sections 1798.100 (copies of PI) and .105 (deletion of PI), but remains silent as to Sections 1798.120 and .135 (do not sell). However, the Cal AG's regulations are meant to provide more detail on both verification and the process for exercising do-not-sell rights, and this continuing ambiguity regarding verification of opt-out requests may be clarified as part of the rule-making process.
• Children: Clarifying that the category of children who may exercise their own do-not-sell opt-in rights under Section 1798.120(c) are those at least 13 and less than 16 years old, making it clear that opt-in does not apply to 16-year-olds.
• Privacy Notice: Adding that the online privacy notice must include a description of consumer rights under Sections 1798.100 (access and copy) and .105 (deletion), not just Sections 1798.110 (collection information), .115 (sale information) and .125 (nondiscrimination). The privacy notice disclosure of do-not-sell rights is covered in Section 1798.135, so now it is clear that privacy notices must explain all the various consumer rights.

Scope of Nondiscrimination (Value + Loyalty)

AB 1355 clarifies that the standard for evaluating the value of PI to determine the reasonableness of financial incentives and differential pricing exemptions to the nondiscrimination requirements of Section 1798.125 is the value to the business, not to the consumer.

As noted, AB 846 would have allowed retailers and other businesses with loyalty programs to collect, use and, in some circumstances, disclose PI as part of loyalty programs without fear of violating the nondiscrimination provision of the CCPA if certain conditions were met. Late in the session, the legislature continued to amend the bill regarding the scope of what would or would not be permissible, and Assemblywoman Autumn Burke pulled the bill from vote eligibility on September 12. It is a two-year bill, so it can be renewed in January when the Legislature reconvenes. However, this is an issue the Cal AG has indicated interest in, and clarifications could arise from the regulatory process prior to the next legislative session.

Training

AB 25 expands the provision in Section 1798.130(a)(6) regarding training personnel responsible for handling privacy inquiries to address additional provisions of the title previously omitted (as to copy and deletion requests). Training about the do-not-sell right is covered in Section 1798.135(a)(3), so the amendment would make it clear that the appropriate personnel must be trained on all of the CCPA's consumer rights.

Assuming California's governor signs the bills into law in the coming weeks, businesses will receive a one-year respite from having to address fully their human resources and business-to-business communications data. However, they should beware that the private right of action for security incidents attributable to failure to maintain reasonable security still applies to such data. The bills that have passed provide some welcome clarifications regarding the CCPA, but it will be incumbent upon the Cal AG to provide further guidance, particularly regarding verification. In the meantime, businesses should be working toward the January 1 implementation deadline, at least with regard to the data that the bills do not propose to except from coverage.

*****

Alan L. Friel is a partner at BakerHostetler in California and a professor at UCLA and Loyola Law School. A member of the Board of Editors of Cybersecurity Law & Strategy, he may be reached at [email protected]. He thanks his colleagues who helped develop this article, including Laura Jehl ([email protected]) and Melinda McLellan ([email protected]).