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The Importance of Protecting Employee Data

As a business owner, prioritizing HR data compliance is imperative. This includes securing and maintaining data privacy and protection for your employees so that their personal and professional information cannot be accessed, shared, or manipulated by internal or external parties.

This can be challenging in today's increasingly complex cyber workplace, where technology innovations, ever-increasing cyberattacks, and evolving regulatory requirements are part of our 21st-century landscape. It requires time, knowledge, and attention to stay on top of potential cybersecurity threats that can put your employees' data and privacy at risk, including:

  • Employee errors
  • Lack of — or insufficient — system controls
  • Remote workers using unencrypted technologies
  • Risks posed by employees and employers using public servers – or cloud-based technologies
  • Inability to monitor devices not connected to the company's system
  • Loss or theft of devices or failure to retrieve confidential information from departing employees
  • Internal attacks

To help you protect your employees' confidential information and keep pace with evolving data privacy requirements, G&A Partners' team of data security and HR experts share knowledge and best practices that can help you augment your company's cybersecurity shield and comply with state and federal labor and privacy laws. In this article, you can find answers to the following:

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What is employee data protection?

Each phase of the employment life cycle — recruitment, hiring, onboarding, development, retention, and separation — involves collecting sensitive data and, of course, protecting that data.

Employee data protection refers to the processes, practices, and policies businesses implement to protect employees’ personal data from breaches, misuse, or unauthorized access and to ensure compliance with applicable privacy data protection laws. Examples of sensitive and identifiable personal data that should be protected include:

  • Name
  • Address
  • Phone number(s)
  • Date of birth
  • Social Security number
  • Educational information
  • Resume — including past employment history
  • Medical history and records
  • Performance reviews
  • Marital status
  • Gender and sex
  • Disability status
  • Marital status
  • Race, national origin, or citizenship

Some practices, processes, and policies your company adopts to protect this sensitive employee data will be based on state and federal laws that apply to your business or industry, while others will incorporate best practices that go beyond legal requirements to keep employees’ personal data secure through access controls, data encryption, and data minimization practices.

Why is workplace data security important?

Prioritizing workplace privacy and implementing employee data compliance safeguards prevents your employees’ sensitive data from falling into the wrong hands. When cybercriminals or bad actors gain access to sensitive data, it can lead to fraud, identity theft, and repetitional damage for your workers and business.

Protecting your employees is the primary reason for implementing data security measures, but there are several benefits your business can realize by taking proactive steps to ensure data privacy, including:

  • Maintaining compliance with laws and regulations. Many federal labor laws include components that govern specific areas of data protection and privacy. Some states have also enacted data privacy laws.
  • Protecting employees' information in case of a data breach. Forty-six percent of all cyberattacks worldwide affect businesses with fewer than 1,000 employees, and 41% of all small businesses have experienced a cyber threat, according to recent study by Embroker. The impact can be devastating for small businesses, including financial and reputational damage.
  • Preventing employees from accessing other employees' data. It's crucial to have solid policies and access controls that limit access to sensitive data based on job roles. Additionally, password management and data encryption technology tools help deter individuals working to bypass access controls.
  • Building trust with your employees. Safeguarding personal information demonstrates that your business values employees' privacy and helps to cement a foundation of trust.
  • Minimizing financial losses. A data breach can lead to significant economic costs from legal battles, reputational damage, and potential loss of clients/customers. The average cost of a single ransomware attack is $1.85 million, according to Embroker's "Cyberattack Statistics 2024."
  • Creating sound hybrid/remote work cybersecurity policies. Remote work can be compromised without adequate and secure technology. A remote/hybrid work policy outlines expectations when employees work outside of the office and cybersecurity measures required to support your digital workplace strategy and safeguard your workforce.
  • Adhering to employer recordkeeping requirements during and after employment tenure. Most privacy regulations require employers to notify their employees before collecting, processing, and retaining their data. Employers should update and maintain accurate employee records, delete inaccurate information, and follow a robust policy governing data retention and removal procedures for current and former employees.

What employee data protection laws apply to businesses in the USA?

No single, comprehensive federal law regulating privacy exists within the United States, but several federal laws govern data privacy for employees or have privacy protections embedded in them, including (but not limited to):

  • Privacy Act of 1974 – Governs the collection, processing, and sharing of personally identifiable information about individuals maintained in systems of records by federal agencies.
  • Health Insurance Portability and Accountability Act of 1996 (HIPAA) – Protects people's personal health information, including their medical records, and controls how a health plan or a covered healthcare provider shares employees' protected health information with an employer.

Find out if your business is HR HIPAA compliant with G&A Partners' checklist.

  • Genetic Information Nondiscrimination Act (GINA) – Provides workplace privacy protections by prohibiting employers with 15 or more employees from making job-related decisions, such as hiring and firing, based on genetic information. If an employer has genetic information about an employee, the information must be maintained on separate forms and in separate medical files and be treated as a confidential medical record of the employee.
  • Title I of the Americans with Disabilities Act (ADA) – Allows employers to secure information about an employee's medical status and condition through worker self-disclosure, a medical examination after a job offer is made, or as part of the process of offering reasonable accommodation to the worker. Employers must keep this information as a confidential medical record separate from an employee's personnel file or record.
  • Fair Credit Reporting Act (FCRA) – Covers rules employers must follow when conducting a credit or background check on employees or job applicants, including how you must safely destroy information from the report.
  • General Data Protection Regulation (GDPR) – Applies to workers in the European Union (EU) and to businesses (outside the EU) that have workers in the EU, and allows companies to use "legitimate interests" (such as banking information for direct deposits) to process employee data and to get employee data by asking workers for consent. It limits how long employers can keep employee data and gives employees the right to request data subject rights (DSR) to access, correct, dispute, and remove data from their records.

In addition to federal laws and regulations, nineteen U.S. states have enacted comprehensive privacy laws, and three more are advancing bills. These laws address a broad range of data protection rights for consumers and employees.

For example, California's Consumer Privacy Act (CCPA), which is the successor of the California Privacy Rights Act (CPRA), grants employees the right to:

  • Know when their employers are collecting data on them
  • Access their data
  • Correct and delete their data
  • Opt out of an employers' sale or sharing of their data
  • Limit employers' use of their sensitive data

Illinois, Washington, Texas, and Colorado have passed biometric privacy laws, which regulate the collection and use of biometric information, with more states expected to follow. And all 50 states – and U.S. territories – also have breach notification laws that require companies to notify consumers – and some state officials and agencies – when sensitive, protected, or confidential data is copied, transmitted, viewed, stolen, or used by an unauthorized individual.

Best Practices for Protecting Employee Data

Employees increasingly seek proof that businesses protect their information and implement the latest employee data protection solutions. These emerging expectations mean your organization must continually implement strategies and cybersecurity tools that track and protect your company data from cyberattacks, malware, ransomware, and data breaches. Businesses also need to safeguard and track employee data and promptly fulfill requests to revise, delete, or limit the use of that information in the workplace.

As you assess your company’s data protection strategies, consider these data privacy and protection best practices:

  • Assess your compliance responsibilities. Determine which federal, state, and local laws apply to your business, the requirements you must adhere to, and stay current on new laws or pending legislation. A professional employer organization like G&A Partners can help your company comply with applicable data protection, privacy, and breach laws and monitor pending legislation.
  • Analyze your employee data-collection sources. When you gather data about team members, assess why you need the information. Certain employee data may be necessary for administrative and HR purposes, but collecting employee data unnecessarily could lead to discrimination claims. Identify employee data sources, including your personal information and documents, where it is stored, how long you’ve had it, and what retention rules apply. Keeping documents longer than required is unnecessary, so consider purging what you no longer need.
  • Audit and assess your needs. Organize a team from various departments — legal, IT, HR, for example — to discuss your risks, vulnerabilities, and requirements and how to address them based on your company’s needs. Then, assess your current technology resources to determine if what you have is adequate to fulfill your needs.
  • Assess technological systems and how they can help you protect your data. If you’re utilizing an HR outsourcing service or software, do a proper evaluation to ensure their systems can accommodate your data privacy and protection requirements.
  • Develop and update employee privacy and data protection policies and procedures to comply with laws. Your company’s employee privacy and data protection policies communicate why, how, and what you’re doing to keep employees’ personal information safe. Within your policies, define roles and who should be able to access data. Build mechanisms to limit access and parameters on when and how you request, access, store, revise, and purge data. Ensure employees know policies (by utilizing employee acknowledgments) and follow through when employees violate policies.
  • Provide training to employees on privacy requirements and policies/procedures. Employees are your main line of defense when protecting your company data, so it’s important to build a culture that prioritizes data protection. Regular education and training for employees and managers should be provided and should begin with new-hire onboarding.
  • Create an employee data breach response plan. Despite your best efforts, your company may fall victim to a data breach at some point. Plan now so you can immediately act when that occurs. The Federal Trade Commission recommends taking the following steps:
    • Designate a senior staff member to coordinate and implement the response plan.
    • If a computer is compromised, disconnect it immediately from your network.
    • Investigate security incidents immediately and take steps to close off existing vulnerabilities or threats to personal information.

Consider whom to notify in the event of an incident inside and outside your organization, including employees, law enforcement, customers, credit bureaus, and other businesses affected by the breach.

How G&A Can Help

G&A Partners’ team of HR professionals can help your business comply with applicable data protection, privacy, and recordkeeping requirements. With G&A, you also gain access to state-of-the-art, integrated HR technology that helps protect employee data while also streamlining processes and improving efficiencies.