Human Resources (HR) encompasses two of the most vital elements of any organization—the humans behind the work and the resources they need to perform their jobs effectively. Regardless of whether your HR function is handled internally, on a fractional basis, or outsourced to a third party, laws like the GDPR, CCPA, and HIPAA may require your organization to manage employee or prospective employee data with the same level of care as customer data.
Privacy Requirements in HR Operations
Privacy laws across many jurisdictions set clear requirements for how HR must handle personal data. These typically include:
- Notice (Transparency): Organizations must clearly inform employees, contractors, and applicants about the personal data being collected, the reasons for its collection, and how it will be used, stored, shared, and retained.
- Consent: In many jurisdictions, organizations must obtain valid consent before collecting or processing certain types of personal data, particularly sensitive data. This includes data such as social security numbers, health records, or criminal background checks. That said, in some contexts it will be inappropriate to rely on employees’ consent as a legal basis for processing due to the power imbalance between employers and employees.
- Data Minimization: Organizations must only collect the data necessary for a specifically outlined purpose.
- Data Security: Organizations must ensure employee data is protected from unauthorized access, disclosure, alteration, and destruction.
- Retention: Organizations must follow records schedules for the maintenance and destruction of employee data.
Organizations are increasingly relying on data to make informed decisions about recruitment, retention, performance, and operations. While data-driven insights can improve consistency and quality, they must be balanced with ethical practices and responsible data use. Prioritizing data protection safeguards employees, ensures regulatory compliance, and preserves the organization’s reputation and employees’ trust.
Non-Compliance with Legal Requirements
HR data is subject to various data protection laws and regulations. Non-compliance with legal requirements can lead to investigations, litigation, and financial penalties that take both time and money to resolve. Notably, we often see regulatory inquiries in the EU that begin with a data subject rights request from a current or former employee.
Cybersecurity Threats to HR Data
HR systems store vast amounts of sensitive data, making them prime targets for cyberattacks. A strong data protection framework is crucial to avoid fallout from a data breach. Data breaches often cause severe reputational harm and financial costs related to investigation, remediation, and notification of regulators and affected individuals.
A well-formed data protection program and information security policy that includes proper access controls, encryption, audits, and analysis is necessary to prevent data breaches. These also save time in implementing mitigation practices in case of a breach.
It is important to note that under regulations such as the GDPR, your organization may remain responsible for data breaches occurring on HR vendors’ systems. These laws place much of the burden for managing breaches on the party that controls the data. Therefore, thoroughly evaluating the security posture of HR vendors is a vital step in effective risk management.
Maintaining Operational Continuity and Employee Trust
Employees share extensive personal information with their employers, ranging from basic demographic details to sensitive health data. Organizations are entrusted with safeguarding this information. Mishandling employee data can lead to a significant, and avoidable, decline in trust, which may negatively impact team morale and retention.
Any loss or breach of HR data can result in vital disruptions to operations. When your data is compromised, payroll, benefits, and performance management can be impacted. A strong information security incident response procedure and data breach notification policy can include steps to minimize the impact on your operations in case of a data loss or breach.
Regulations Governing HR Data
General Data Protection Regulation (GDPR)
While the principles of the GDPR are for the European Union, this regulation’s influence on data protection frameworks is global. Select notable principles include transparency, purpose limitation, and data minimization.
United Kingdom General Data Protection Regulation (UK GDPR)
This adaptation of the GDPR following Brexit largely restates the EU version with certain variations surrounding supervisory authority and provisions from the Data Protection Act of 2018. It applies to any organization operating or processing data of individuals in the United Kingdom.
Recent reforms under the UK’s Data (Use and Access) Act introduce significant changes, including regarding management of data subject rights requests. Updated rules on automated decision-making will be rolled out too. Organizations should monitor guidance from the Information Commissioner’s Office and prepare for these compliance changes.
U.S. State Privacy Laws
Many U.S. states have enacted privacy laws that apply to the collection of all types of personal data. You will need to evaluate if your organization meets the thresholds for applicability, which vary by state and often depend on the number of individuals whose data you process from that state. This includes not only customers but also website visitors—meaning if you have significant website traffic from certain states and collect data through cookies, you may fall within the scope of more state laws than you realize. Apart from the California Consumer Privacy Act (CCPA), most state privacy laws currently exempt HR data from applicability though.
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
HIPAA and its accompanying regulations govern how covered entities, and their business associates use and disclose protected health information (PHI) within the scope of U.S. jurisdiction. Not all entities are subject to HIPAA, so it is important to consult your legal team to determine if and how HIPAA applies to your operations. Within an HR function, this may include employer-sponsored health plans. Along with the Americans with Disabilities Act of 1990 (ADA), HIPAA can also impact the reasonable accommodations process.
Other National Laws
Most countries worldwide now have privacy laws that can affect the collection, processing, storage, use, and sharing of HR data. If you are hiring or evaluating candidates internationally, it is essential to consider which privacy regulations may apply.
Conclusion
An organization’s HR function handles sensitive data daily. From reviewing applications containing personal data to processing payroll and benefits, it is essential that HR creates, implements, and audits safeguards for this data. From recruitment to termination, HR must uphold a strong data protection culture. This includes developing, implementing, and auditing policies on how it collects, stores, accesses, and uses employee data. These policies should include best practices in data security, including proper collection and sorting of data before storage, security safeguards such as user authentication and data encryption, and employee training to raise data privacy awareness and to ensure potential or actual breaches are identified.
Proper planning enables HR to effectively support the organization’s operational mission by ensuring alignment with all relevant laws and regulations while protecting the organization and its employees. VeraSafe specializes in helping organizations navigate complex privacy and data protection requirements tailored to their operations. Whether you require a targeted audit, strategic compliance advice, or ongoing risk management and support, our experienced professionals deliver actionable insights to strengthen your privacy program and reduce regulatory risk. Contact us today to learn how we can assist you in implementing a responsible HR data protection strategy.
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