COVID-19: How to Keep Cybersecurity in Mind When Negotiating Work-From-Home Vendor Contracts

COVID-19 spurred an overnight surge in demand for work-from-home vendors — from videoconferencing companies to cloud service providers. This caused some companies to rush into service contracts without fully appreciating the privacy and cybersecurity risks involved.

Indeed, news of the meteoric rise and sudden scrutiny of some videoconferencing vendors shows just how important privacy and cybersecurity issues are when retaining a vendor. Even companies with long-standing contracts in place with these types of vendors may find those contracts outdated and in need of renegotiation in light of the growing demand for privacy legislation.

To consider privacy and cybersecurity appropriately when entering into, or renegotiating, vendor contracts, businesses should answer the following questions during the vendor negotiation process:

• What personal information is the vendor collecting, using, and transferring in providing the service?
• Does the vendor qualify as a "service provider" under the California Consumer Privacy Act, or a "processor" under the European Union's General Data Protection Regulation?
• Does the business need to update its privacy policy to reflect the new vendor relationship or new data flows?
• Does the contract reflect applicable cybersecurity standards and include breach notification provisions?
• Does the contract define the events that may trigger the cancellation of service and provide for a certain level of uptime?

Each question is explained in greater detail below.

Understand How Personal Information Will Be Collected, Used and Transferred

To start, businesses should understand the depth of access the vendor will have to personal information or other sensitive information, how the vendor will use that information, and whether the vendor will transfer that information to any third parties. Vendors oftentimes default to giving themselves wide latitude with the personal information they process, which can trigger legal obligations for the companies using their services. Businesses should review their vendor contracts and vendors' privacy policies closely and consult with their information security personnel to identify inconsistencies and limit access and use to only that which is appropriate under the circumstances. They should then ensure the vendor contract accurately reflects their understanding of the vendor's use of personal information.

Identify Any Legal Obligations Implicated By the Contract

Next, businesses should ask whether employing the vendor triggers any obligations under data privacy laws, such as the California Consumer Privacy Act (CCPA) or the General Data Protection Regulation (GDPR).

Under the CCPA, a "sale" of information comes with stringent opt-out and notice obligations, even if no money is exchanged. Transfers to "service providers," however, are exempted. For a vendor to qualify as a "service provider," the transfer of personal information to them must be necessary for a "business purpose," as defined by California law, and the contract must contain certain provisions, such as a restriction on the vendor's ability to sell, retain, use, or disclose the personal information, and a certification that the vendor knows, understands, and will comply with the CCPA.

Under the GDPR, a business is required to enter into more robust contracts known as data processing agreements. The terms that must be included in these contracts depend on whether the vendor qualifies as a "processor," "joint controller," or an independent controller with shared access to the data. It is common for a vendor to purport to be a processor, but act like a controller. Understanding the vendor's data handling practices will help the business identify any inconsistencies and negotiate the appropriate contract.

Review Your Privacy Policy

Regulators and litigants are increasingly suing businesses that don't accurately disclose their data handling practices, so it is important that businesses update their privacy policies to accurately reflect the personal information collected, used, and shared with any new vendors. In addition, some vendors require that particular terms be included in their contractual partners' privacy policies. If your vendor is one of them, make sure you know it and comply.

Consider the Contract's Cybersecurity Standards and Breach Notification Obligations

Businesses should evaluate the vendor's cybersecurity practices and think about what will occur in the event of a data breach. This may require an examination of the parties' contractual cybersecurity obligations, including the cybersecurity standards that the parties follow as a matter of course, any industry standards or best practices, and proof in the form of an audit. The contract should also address the parties' obligations in the event of a cybersecurity incident or breach. Compare the definition of a "cybersecurity incident" in the contract to your information security team's understanding of the term. It should be sufficiently broad to include incidents that may not rise to the level of a data breach under state notification laws.

Understand the Vendor's Service Obligations and Plan for Interruptions

Many contracts promise uptime levels or percentages of uninterrupted service. As entire workforces work from home, there is unusual stress on technology, making system interruptions more likely. Knowing what the vendor contract promises in advance can help the business plan for interruptions and add certainty in uncertain times.

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Steve Blickensderfer and Trish Carreiro are cybersecurity and privacy attorneys at Carlton Fields in Miami. This article also appeared in Daily Business Review, the Miami-based ALM sibling of Cybersecurity Law & Strategy.