With the growing risk of cybersecurity attacks, the landscape of state-specific data breach notification laws continues to evolve. Companies and industries must stay aware of changes in the legal framework if they are to meet their emerging obligations. While federal laws addressing specific types of sensitive information may apply, state laws have led the way in setting standards for how data security incidents must be addressed. In the past few months there have been three notable developments in state notification laws: New Mexico enacted a new data breach notification law; Tennessee further amended its existing law to reinstate the encryption exemption; and Virginia amended its existing laws to address the continuing trend involving the compromise of personal information that could lead to tax fraud.
On April 6, 2017, New Mexico enacted the Data Breach Notification Act (H.B. 15), making it the 48th state to enact a data breach notification law and leaving only Alabama and South Dakota without any such law. Overall, New Mexico’s new law is similar to that of many other states, but there are some notable differences.
Typically, the 48 state laws define “personal identifiable information” as an individual’s first name or initial and last name in combination with one or more of the following: a social security number; driver’s license number or state identification card number; or financial account number, credit or debit card number in combination with a security code or password. New Mexico’s new law defines “personal identifiable information” consistently with most other states, and joins a growing number of states that have broadened the definition to include “biometric data,” which is defined to include “fingerprints, voice print, iris or retina patterns, facial characteristics or hand geometry.”
New Mexico also joins a minority of states that impose a specific notification deadline of 45 days from discovery of a breach. The new law provides that notification shall be made to affected individuals “in the most expedient time possible, but not later than forty-five calendar days following discovery of the security breach.” If notification to more than 1,000 individuals is required, notification also must be provided to the New Mexico Office of the Attorney General and major consumer reporting agencies within that same time frame.
Effective date of New Mexico law: June 16, 2017.
On April 4, 2017, Tennessee again amended its data breach notification law, T. C. A. § 47-18-2107, to restore the encryption safe harbor to its notification requirements, consistent with most other states. This new amendment not only harmonizes Tennessee law with that of most other states but also creates a clear policy incentive to encrypt data.
Tennessee’s original data breach notification laws provided for an encryption safe harbor by creating an exception to notification requirements if compromised data were encrypted. However, in 2016, Tennessee enacted an amendment that created uncertainty over whether such a safe harbor continued to exist. The new amendment serves to clear up this uncertainty and provides that the breach of encrypted data does not trigger notification to affected individuals unless the encryption key also is compromised. By definition, “encrypted” data must be in accordance with the current version of the National Institute of Standards and Technology’s (NIST’s) Federal Information Processing Standard (FIPS) 140-2, which is a new requirement as to the standard of encryption under Tennessee law.
Effective date of Tennessee amendment: April 4, 2017.
On March 13, 2017, Virginia amended its data breach notification law, Va. Code Ann. § 18.2-186.6(M), expanding the requirement for notification to its Office of Attorney General to include income tax information. This amendment is notable in that it addresses a specific risk, as it was likely enacted in response to the rise in Form W-2 tax fraud incidents over the past few years.
In addition to notifying affected individuals, the new amendment requires employers and payroll services providers to notify the Virginia Office of Attorney General upon discovery of a breach of unencrypted or unredacted “taxpayer identification information in combination with the income tax withheld for that taxpayer,” provided that there is a reasonable expectation of identity theft or other fraud as a result of the breach. Such notification must be made “without unreasonable delay,” and must include the name and federal employer identification number of the employer. The Office of Attorney General will then notify the Department of Taxation.
Effective date of Virginia amendment: July 1, 2017.
These developments underscore the fact that states continue to lead the way when it comes to the protection and security of individuals’ information. Notably, state regulators are moving in the direction of enacting laws addressing how companies protect information, such as the regulation enacted by the New York State Department of Financial Services. Additionally, Colorado's Department of Regulatory Agencies, Division of Securities recently proposed to its securities act two new rules involving cybersecurity, potentially putting requirements in place for broker-dealers and investment advisors operating in the state.