SENATE BILL REPORT

SB 6281

As Reported by Senate Committee On:

Environment, Energy & Technology, January 23, 2020

Ways & Means, February 6, 2020

Title: An act relating to the management and oversight of personal data.

Brief Description: Concerning the management and oversight of personal data.

Sponsors: Senators Carlyle, Nguyen, Rivers, Short, Sheldon, Wellman, Lovelett, Das, Van De Wege, Billig, Randall, Pedersen, Dhingra, Hunt, Salomon, Liias, Mullet, Wilson, C., Frockt, Cleveland and Keiser.

Brief History:

Committee Activity: Environment, Energy & Technology: 1/15/20, 1/23/20 [DPS-WM].

Ways & Means: 1/30/20, 2/06/20 [DP2S, w/oRec].

Majority Report: That Substitute Senate Bill No. 6281 be substituted therefor, and the substitute bill do pass and be referred to Committee on Ways & Means.

Signed by Senators Carlyle, Chair; Lovelett, Vice Chair; Ericksen, Ranking Member; Fortunato, Assistant Ranking Member, Environment; Sheldon, Assistant Ranking Member, Energy & Technology; Brown, Das, Hobbs, Liias, McCoy, Nguyen, Rivers, Short, Stanford and Wellman.

Staff: Angela Kleis (786-7469)

Majority Report: That Second Substitute Senate Bill No. 6281 be substituted therefor, and the second substitute bill do pass.

Signed by Senators Rolfes, Chair; Frockt, Vice Chair, Operating, Capital Lead; Mullet, Capital Budget Cabinet; Braun, Ranking Member; Brown, Assistant Ranking Member, Operating; Honeyford, Assistant Ranking Member, Capital; Becker, Billig, Carlyle, Dhingra, Hunt, Liias, Muzzall, Pedersen, Rivers, Schoesler, Van De Wege, Wagoner, Warnick and Wilson, L..

Minority Report: That it be referred without recommendation.

Signed by Senators Conway, Darneille, Hasegawa and Keiser.

Staff: Sarian Scott (786-7729)

Background: The Federal Trade Commission (FTC) has been the chief federal agency on privacy policy and enforcement since the 1970s when it began enforcing the Fair Credit Reporting Act, one of the first federal privacy laws. The FTC uses its broad authority to prohibit unfair and deceptive practices, but also enforces more specific privacy statutes, such as the Gramm-Leach Bliley Act and the Children's Online Privacy Protection Act.

Personal information and privacy interests are protected under various provisions of state law. The Washington State Constitution provides that no person is disturbed in their private affairs without authority of law.

Summary of Bill (Second Substitute): Short Title. This act is known as the Washington Privacy Act.

Jurisdictional Scope. This act applies to legal entities conducting business in Washington or producing products or services targeted to Washington residents, and:

• controlling or processing personal data of 100,000 or more consumers during a calendar year; or

• deriving 50 percent of gross revenue from the sale of personal data and processing or controlling personal data of 25,000 or more consumers.

This act does not apply to state agencies, local governments, tribes, municipal corporations, personal data regulated by certain federal and state laws, or data maintained for employment records purposes.

Responsibility According to Role. Controllers and processors are responsible for meeting set obligations. Processors must adhere to instructions of the controller and assist controllers in meeting set obligations. Notwithstanding the instructions of the controller, processors must implement reasonable security procedures, ensure the confidentiality of the processing of personal data, and engage with a subcontractor only after certain requirements are met.

Processing by a processor is governed by a contract between the controller and the processor that is binding on both parties and that sets out the processing instructions to which the processor is bound. Contractual requirements are specified.

Consumer Personal Data Rights. Consumer Rights. Except as provided in this act, a consumer has the following rights:

• access—confirm whether a controller is processing their personal data and access such data;

• correction—correct inaccurate personal data, taking into account the nature of the personal data and the purposes of the processing of the personal data;

• deletion—delete their personal data;

• data portability—obtain their personal data, which they previously provided to the controller, in a format that allows the consumer to transmit the data to another controller; and

• opt out—opt out of the processing of their personal data for purposes of targeted advertising, the sale of personal data, or profiling in furtherance of decisions that produce legal effects concerning a consumer or similarly significant effects concerning a consumer.

In the case of processing of personal data concerning a known child, the parent or legal guardian of the known child shall exercise these rights on the child's behalf.

Responding to Consumer Requests. A controller must inform a consumer of any action, including an extension, taken on a request within 45 days of receipt of a request. This timeframe may be extended once for an additional 45 days. If a controller does not take action on a request, the controller must inform the consumer within 45 days of receipt of the request with the reasons for not taking action and instructions on how to appeal the decision with the controller. Controllers must establish an internal process for consumers to appeal a refusal to take action.

Information must be provided by the controller free of charge, up to twice annually, to the consumer. When requests from a consumer are manifestly unfounded or excessive, the controllers may either charge a reasonable administrative fee or refuse to act on the request. The controller bears the burden of demonstrating the manifestly unfounded or excessive character of the request.

A controller is not required to comply with a request to exercise a consumer personal data right if the controller is unable to authenticate the request using commercially reasonable efforts. In such cases, the controller may request additional information.

Processing Deidentified Data or Pseudonymous Data. Controllers or processors are not required to take certain actions in order to comply with this act, such as reidentifying deidentified data or maintaining data in an identified form. The consumer rights identified in this act do not apply to pseudonymous data in cases where the controller is able to demonstrate that it is not in a position to identify the consumer. A controller or processor that uses deidentified data or pseudonymous data must monitor compliance with any contractual commitments.

Responsibilities of Controllers. Controllers responsibilities include:

• providing consumers with a meaningful privacy notice that meets certain requirements, such as including instructions on how to exercise the consumer rights of this act;

• limiting the collection of personal data to what is required for a specified purpose as disclosed to the consumer;

• limiting the collection of data to what is relevant to a specified purpose as disclosed to the consumer;

• prohibiting processing for purposes not compatible with a specified purpose as disclosed to a consumer;

• establishing and implementing data security practices;

• prohibiting processing which violates state or federal law and discriminating against a consumer for exercising any of the consumer rights of this act; and

• obtaining consumer consent in order to process sensitive data.

Data Protection Assessments. Controllers must conduct and document a data protection assessment (assessment) of each of the following processing activities involving personal data:

• the processing of personal data for the purposes of targeted advertising;

• the sale of personal data;

• the processing of personal data for purposes of profiling, where such profiling presents one of the following foreseeable risks to consumers:

  • unfair impact;

  • financial, physical, or reputational injury;

  • intrusion on private affairs that would be offensive to a reasonable person; or

  • substantial injury;

• the processing of sensitive data; and

• any processing activities involving personal data that present a heightened risk of harm to consumers.

The attorney general (AG) may request, in writing, that a controller disclose any assessment relevant to an investigation conducted by the AG. The AG may evaluate the assessment with the controller responsibilities and with other laws. Assessments are confidential and exempt from public inspection.

Assessments conducted by a controller for the purpose of compliance with other laws or regulations may qualify if they have a similar scope and effect.

Limitations and Applicability. Several exemptions to the obligations imposed on controllers or processors are specified such as complying with federal, state, or local laws, and providing a service specifically requested by a consumer.

Personal data that is processed by a controller pursuant to an exemption must not be processed for any other purpose than those expressly listed. Personal data processed pursuant to an exemption may be processed solely to the extent that such processing is proportionate and limited to what is necessary in relation to a specified purpose. If a controller processes personal data pursuant to an exemption, the controller bears the burden of demonstrating that such processing qualifies for the exemption and complies with specified requirements.

Liability. Any violation shall not serve as the basis for, or be subject to, a private right of action under this act or under any other law.

Enforcement. The AG has exclusive enforcement authority. Any controller or processor that violates this act is subject to an injunction and liable for a civil penalty of not more than $7,500 for each violation.

The Consumer Privacy Account is created. All receipts from the imposition of civil penalties, except for the recovery of costs and attorneys' fees accrued during enforcement, must be deposited into the Consumer Privacy Account. Expenditures from the account may only be used for the purposes of the OPDP.

Preemption. This act supersedes and preempt laws, ordinances, regulations, or the equivalent adopted by any local entity regarding the processing of personal data by controllers or processors.

Reports and Joint Research Initiatives. The AG must evaluate the liability and enforcement provisions and submit a report of its finding and recommendations to the Governor and the Legislature by July 1, 2022.

The Governor may enter into agreements with British Columbia, California, and Oregon to share personal data for joint research initiatives. Such agreements must provide reciprocal protections that the respective governments agree appropriately safeguard the data.

Commercial Facial Recognition Services. Processors that provide facial recognition services (services) must make available an application programming interface (API) to enable independent tests of the service for accuracy and unfair performance differences across distinct subpopulations. However, making an API available does not require the disclosure of certain information such as proprietary data or if doing so would increase the risk of cyberattacks. If results of the independent testing identify material unfair performance difference across subpopulations and those results are validated, then the provider must develop and implement a plan to address the identified performance differences.

Processors that provide services must also provide documentation that includes specific general information and prohibits, in the required contract, the use of a service by controllers to unlawfully discriminate under federal or state law.

Controllers must provide a conspicuous and contextually appropriate notice that meets certain minimum requirements and obtain consumer consent prior to enrolling a consumer's image in a service used in a physical premise open to the public. A controller may enroll a consumer's image in a service without first obtaining consent from that consumer if certain requirements are met, such as the controller must hold reasonable suspicion, based on a specific incident, that the consumer has engaged in criminal activity.

Controllers using a service to make decisions that produce legal effects on consumers must ensure that those decisions are subject to meaningful human review.

Controllers shall not knowingly disclose personal data obtained from a service to law enforcement except when such disclosure is

• pursuant to consumer consent;

• required by law;

• necessary to prevent or respond to an emergency; or

• to the National Center for Missing and Exploited Children.

Controllers deploying services must respond to a consumer request to exercise the consumer personal data rights and fulfill controller responsibilities. Voluntary services used to verify an aviation passenger's identity in connection with services regulated by the secretary of transportation that meet certain requirements an exempt from the facial recognition regulations of this act.

EFFECT OF CHANGES MADE BY WAYS & MEANS COMMITTEE (Second Substitute):

• Adds intent language related to delaying the date of application for institutions of higher education and nonprofit corporations.

• Adds definitions for institutions of higher education, local government, nonprofit corporation, and state agency.

• Clarifies the entities to which this act does not apply.

• Provides a delayed date of application of July 31, 2024, for higher education institutions and nonprofit corporations.

• Removes the qualification that consumers only have the right to data portability when exercising the right to access.

• Provides that a consumer may not be enrolled in a facial recognition service in connection with a bona fide loyalty, rewards, premium features, discounts, or club card program.

• Removes the requirement that an investigation be of the controller in order for the attorney general to request a data protection assessment.

• Clarifies exemptions regarding protecting an interest that is essential for the life of a consumer and processing for reasons of public interest.

• Removes the exemption for developing products, services, or technology to conduct internal research.

• Specifies that the obligations of this act do not restrict a controller's or processor's ability to collect, use, or retain data to perform solely internal operations.

• Makes technical corrections.

EFFECT OF CHANGES MADE BY ENVIRONMENT, ENERGY & TECHNOLOGY COMMITTEE (First Substitute):

• Modifies definitions.

• Specifies that the threshold of 100,000 or more consumers applies during a calendar year.

• Add exemptions for personal data used or shared in research, healthcare information regulated by specified federal laws, and personal data collected or processed pursuant to the federal Farm Credit Act.

• Provides that a processor may, with the controller's consent, arrange for an independent auditor to conduct audits.

• Removes the requirement for a controller to notify third parties of a consumer's request to exercise certain consumer rights.

• Clarifies that controllers must provide information regarding any appeals process to the attorney general upon request.

• Removes the requirement for the attorney general to make documentation provided regarding an appeal process publicly available.

• Requires controllers to provide consumers with secure and reliable means to submit a request to exercise a consumer right.

• Authorizes a controller to offer different prices or rates of service to a consumer who voluntarily participates in a loyalty or reward program.

• Prohibits the sale of a consumer's personal data collected as part of a loyalty program to a third-party controller unless the sale provides a benefit to a consumer, the sale was disclosed to the consumer, and the third-party only uses the personal data to facilitate the provision of benefit to which the consumer is entitled.

• Removes the requirement for controllers to conduct data protection assessments for each of their processing activities and specifies the activities for which controllers must conduct and document data protection assessments.

• Provides that assessments conducted by a controller pursuant to other laws or regulations may qualify for the data protection assessment required under this act.

• Removes the authorization for controllers and processors to allocate liability by contract.

• Clarifies that services must be tested for unfair performance differences across distinct subpopulations as defined by visually detectable characteristics.

• Requires disclosure of independent testing methodology and data, in addition to results, to a processor to allow for full reproduction of testing.

• Provides an exemption for voluntary services used to verify an aviation passenger's identity in connection with services regulated by the secretary of transportation that meet certain requirements from the facial recognition regulations of this act.

• Provides that making available an API for tests does not require the disclosure of certain information such as proprietary data or if doing so would increase the risk of cyberattacks.

• Requires review of a service annually rather than biannually.

• Removes the requirement to remove facial templates that are more than three years old.

• Clarifies that testing in operational conditions applies to controllers using a service to make decisions that produce legal effects on consumers or similarly significant effects on consumers.

• Removes the privacy office study regarding global opt out technologies.

• Makes technical corrections.

Appropriation: None.

Fiscal Note: Available.

Creates Committee/Commission/Task Force that includes Legislative members: No.

Effective Date: The bill takes effect on July 21, 2021.

Staff Summary of Public Testimony on Original Bill (Environment, Energy & Technology): The committee recommended a different version of the bill than what was heard. PRO: This takes the best elements from international and other state privacy laws and customizes them in a responsible way for Washington. Washington could be the model for data privacy laws for the nation. Consumers have the right to know what companies are doing with their personal data and companies should have certain obligations regarding that data. This bill is an opportunity to provide protections that do not exist today.

CON: The facial recognition regulations of this bill do not adequately protect Washington residents, and there needs to be a moratorium on the use of the technology. The communities that are most impacted by the use of facial recognition technology should be able to decide if it should be used. This technology should not be used for decisions that have legal effects. In order to provide the best protections to consumers, this bill needs to have a private right of action as well as increased resources to the attorney general. We think the definition of public information should include photos taken in public places.

OTHER: Although we understand the need to protect consumer personal data, we would prefer a federal data privacy law rather than a patchwork of state privacy laws. We have concerns with the definitions of deidentified data and sale. It would be helpful if there was a method of measurement with regards to thresholds for the scope of the bill. The Gramm-Leach Bliley Act exemption should be absolute. The requirement to notify the attorney general of all appeals may be burdensome. The loyalty program provisions are problematic; we will provide amendments. Local government should be able to pass laws regarding consumer privacy. We believe facial recognition should be addressed in a separate bill. The facial recognition regulations make it seems as though law enforcement is something that people need to be protected from.

Persons Testifying (Environment, Energy & Technology): PRO: Senator Reuven Carlyle, Prime Sponsor; Alison Phelan, BECU; Joe Adamack, Northwest Credit Union Association; Ryan Harkins, Microsoft. CON: Cameron Cantrell, University of Washington School of Law; Jevan Hutson, University of Washington School of Law; Jennifer Lee, ACLU of Washington; Mark Streuli, Motorola Solutions; Neil Beaver, Washington Defenders Association and Washington Association of Criminal Defense Lawyers. OTHER: Michael Schutzler, CEO, WTIA; Mark Johnson, Washington Retail Association; Eric Ellman, Consumer Data Industry Association; Bill Ronhaar, Washington Land Title Association; Stuart Halsan, Washington Land Title Association; Larry Shannon, Washington State Association for Justice; Trent House, Washington Bankers Association; Samantha Kersul, executive director Washington and the Northwest, TechNet; Justin Brookman, Consumer Reports; Andrew Kingman, general counsel, State Privacy & Security Coalition, senior managing attorney, DLA Piper; Rick Gardner, corporate counsel, LexisNexis Risk Solutions; James McMahan, Washington Association of Sheriffs and Police Chiefs; Rose Felciano, Internet Association; Fielding Greaves, Advanced Medical Technology Association; Robert Battles, Association of Washington Businesses; Julia Gorton, Washington Hospitality Association; Andrea Alegrett, Attorney General's Office.

Persons Signed In To Testify But Not Testifying (Environment, Energy & Technology): No one.

Staff Summary of Public Testimony on First Substitute Bill (Ways & Means): The committee recommended a different version of the bill than what was heard. PRO: Customers private information and data is very important to be protected and enforced, if there is a violation. It would provide robust and comprehensive privacy protections to Washingtonians. Much needed regulation of facial recognition.

OTHER: Modest investment to protect the rights of the people in Washington in terms of privacy. We need a form of consumer remedy in the bill. Long process, and appreciate all the hard work. I am here to support the concept that the AGO needs the funding to do the enforcement. Extensive outreach to the stakeholder community. I think this bill has been well worked and is an important piece of legislation and it recognizes the already robust federal regulatory structure that exists for financial services. It is fiscally responsible and prudent, because it does not have duplication or overlap with federal regulations. Unintended consequences for non-profit organizations that can make it costly to comply with data privacy laws. Every dollar to comply with this, is a dollar that we can not then use to fund our mission. Consumer privacy rights are of upmost concern to Washingtonians. However, without the changes we will not be able to enforce these data privacy rights as consumers as consumers will be barred from going to court to enforce their rights on their own. We will need resources to investigate the alleged violations. We expect our fees and costs to easily run $1 million or more per case, if it went to trial.

Persons Testifying (Ways & Means): PRO: Senator Reuven Carlyle, Prime Sponsor; Mark Johnson, Washington Retail Association; Ryan Harkins, Microsoft. OTHER: Robert Battles, Association of Washington Business; Larry Shannon, Washington State Association for Justice; Lindsay Hovind, American Heart Association; Trent House, Washington Bankers Association; Andrea Alegrett, Attorney General's Office.

Persons Signed In To Testify But Not Testifying (Ways & Means): No one.