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Protecting Employee Data: Essential Privacy Practices

Protecting Employee Data- Essential Privacy Practices
Photo: Unsplash.com


By: John Glover (MBA)

There have been various regulations that have been implemented across the world over the past few years regarding data privacy. As societal awareness regarding the importance of data privacy continues to evolve, businesses are increasingly looking to design and employ comprehensive policies and practices to protect the various data that they handle. This article will focus specifically on employee records or data and what, why and how to handle these employee records.

The first task that a small business owner should carry out is to spend the time to carefully and thoroughly understand all relevant federal, state, and foreign privacy regulations that directly or indirectly affect and are relevant to their business.

This article aims to assist employers in understanding some of the legal rules associated with managing employee data. It’ll explore federal and state privacy laws, practices for data protection, handling data breaches, and the key guidelines to follow to protect your employees’ personal information and avoid costly penalties that non-compliance attracts.

Understanding Data Privacy and Data Privacy Laws

When speaking about data privacy, we refer to how personal information is collected, processed, stored, and shared or transmitted. These data can sometimes be sensitive information that includes social security numbers, medical information, employment contracts, personal contact details, and account details of your employees. A good understanding of data privacy laws or best practices goes beyond just being concerned with compliance. It should also be a fundamental part or element of establishing trust between your business and your employees.

Data privacy laws, on the other hand, are designed to protect individuals’ personal information from misuse. For employers, this means implementing strict and robust measures to protect your employee records. These laws vary significantly state-wide, so it’s vital to know the specific regulations that apply to where your business and staff are located.

Federal Laws: At the federal level, the most relevant laws include:

  • Fair Credit Reporting Act (FCRA): This law regulates employers’ use of credit reports and background checks during hiring.
  • Health Insurance Portability and Accountability Act (HIPAA): Establishes the national standards for protecting health information.
  • General Data Protection Regulation (GDPR): If your business interacts with individuals in the European Union, then you must comply with GDPR.
  • Federal Trade Commission (FTC): Enforces data security regulations that cover all businesses.

State Laws: State laws can be even more stringent. For example, California’s Consumer Privacy Act (CCPA) imposes strict requirements on how businesses collect, store, and share personal information. 

Similarly, the New York SHIELD Act mandates that businesses implement specific security measures to protect private data. 

The Illinois Biometric Information Privacy Act (BIPA) specifically deals with the biometrics of employees.

Key Practices for Data Protection

For you to comply with these laws, you should adopt best practices for data protection. Here are some essential steps:

  1. Limit Access: Only authorized personnel like the HR department should have access to employee records. Implementing role-based access controls can help you ensure that sensitive information is only available to those who need it for legitimate business purposes.
  2. Secure Storage: Employee records should be stored securely, whether in physical or digital form. For physical records, this means they must be in locked cabinets in secure areas. For digital records, use encryption and secure servers to protect against unauthorized access.
  3. Regular Audits: Conduct regular audits to identify and address potential security vulnerabilities. This includes reviewing access logs, checking for unauthorized access attempts, and updating security protocols as necessary.

Employee Rights and Employer Responsibilities

Employees have the right to privacy regarding their personal information. As an employer, it’s your responsibility to respect these rights and handle their data with care.

  • Notification: Inform employees about the types of personal information you collect, how it will be used, and who it may be shared with. This transparency helps build trust and ensures compliance with legal requirements.
  • Consent: Obtain explicit consent from employees before collecting or sharing their personal information. This is particularly important for sensitive data, such as medical records or financial information.
  • Correction and Access: Employees should have the right to access their personal records and request corrections if there are inaccuracies. Implement procedures to facilitate these requests promptly and efficiently.

Handling Data Breaches

Despite your best efforts, data breaches can still occur. Your response can significantly impact the reputation of your business and legal standing. Some important tasks you should take include:

  • Take Immediate Action: Act swiftly to contain the breach and prevent further unauthorized access. This may involve isolating affected systems, notifying IT personnel, and securing vulnerable data.
  • Notify Affected Parties: Notify affected employees and relevant authorities as soon as possible. State laws often have specific requirements regarding the timeline and content of these notifications. Failure to comply can result in hefty fines.
  • Take Remedial Action: Take steps to resolve the impact of the breach. This might include offering credit monitoring services to affected employees or implementing additional security measures to prevent future incidents.

Importance of Compliance

Non-compliance can result in heavy financial penalties and legal action. In addition to financial fines, an employee data breach could also harm your company’s reputation. So data entrusted into the hands of an employer should be kept safe. 

Therefore, it will be an added benefit if business owners get the assistance of a business attorney to ensure they are compliant with these laws.

The Role of a Business Attorney

Although you likely have created an LLC or any other appropriate legal business structure to run your business under and protect your personal assets, it won’t shield your business from liability if there is a breach that affects your employee data. Given the complexity of data privacy laws, it is a plus to consult a business attorney. They can be invaluable because they can help you understand your legal obligations, develop compliant data protection policies, and respond effectively to data breaches.


Protecting employee records is not just about complying with the law—it’s about creating a trustworthy work environment. By understanding and implementing these legal guidelines, you can safeguard your employees’ personal information, strengthen your business’s reputation, and contribute to a more secure and trustworthy working environment for everyone involved.

However, any business that ignores the protection of employee privacy interests does so at their peril. With a little foresight, a business can properly balance employee privacy interests with legitimate management needs.

Disclaimer: “The content in this article is provided for general knowledge. It does not constitute legal advice, and readers should seek advice from qualified legal professionals regarding particular cases or situations.

Published by: Nelly Chavez

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