Impact of Multi-jurisdiction Privacy Compliance on Businesses

Data privacy laws are becoming increasingly important in the digital age. As businesses collect and store more personal data than ever before, it is essential that they understand the implications of state data privacy laws and how they can affect their operations. Organizations operating across state lines face complex compliance tasks due to a patchwork of sectoral and state data privacy laws and regulations in the absence of comprehensive federal data protection legislation in the United States. In a business environment where data flows easily across state lines, how can you be sure you follow the laws in each jurisdiction?

State and Federal Data Privacy Legislation

Despite numerous proposals over the years, no comprehensive federal law governs data privacy in the U.S. As a result, a patchwork of hundreds of laws exists at both the federal and state levels to protect the personal data of U.S. residents. The American Data Privacy Protection Act (ADPPA) has made it further along the legislative process than any of its predecessors, but it still faces significant hurdles, namely pre-emption of state laws and a private right of action whereby individuals can sue an organization for violating the provisions of the statute. In the meantime, individual states have enacted comprehensive data privacy legislation rather than waiting on the federal government.

The first step toward ensuring your business can operate across state lines related to data privacy is to know the existing legislation. As of this writing, six states have passed comprehensive data privacy legislation:

  • California Consumer Privacy Act (CCPA) 
    • Enacted 2018 
    • Effective January 1, 2020 
  • 2020 Amended the CCPA with the California Privacy Rights Act (CPRA) 
    • Effective January 1, 2023 
  • Virginia Consumer Data Protection Act (CDPA) 
    • Enacted 2021 
    • Effective January 1, 2023 
  • Colorado Privacy Act (CPA) 
    • Enacted 2021 
    • Effective July 1, 2023 
  • Utah Consumer Privacy Act (UCPA) 
    • Enacted March 2022 
    • Effective December 31, 2023 
  • Connecticut Privacy Act (CPA) 
    • Enacted May 2022 
    • Effective July 1, 2023 
  • Iowa Consumer Data Protection Act (CDPA) 
    • Enacted March 2023 
    • Effective January 1, 2025 

The momentum for state-level comprehensive privacy bills is at an all-time high. There are currently 25 comprehensive privacy bills before state legislatures and over a hundred proposed laws ranging from biometric or genetic data to children’s online privacy. Although no two laws are alike, they all deal with common components such as consent and personal data collection, use, and retention.

Even if a business has no physical presence in a particular state, it may need to comply with the state's laws regarding the personal information it collects, holds, transfers, or processes about its residents. There are varying thresholds across the states regarding the amount of data an organization is processing or the amount of business an organization does in the state to make the law applicable to such an organization. The types of information subject to these laws vary, with most states defining personal information to include an individual's first name or first initial and last name, together with a data point including the individual's SSN, driver's license, or state identification card number, financial account number or payment card information. 

Understanding state and federal data privacy laws and how they can affect your business operations.

These laws vary from state to state but generally require businesses to take certain steps to protect the data they collect and store.  For example, businesses may be required to:

  • Notify customers about how their data is being used
  • Obtain consent from customers before collecting or using their data
  • Provide customers with the ability to access and delete their data

The impact of state data privacy laws on businesses can be significant. Businesses must comply with the laws in the states where business is conducted or risk facing fines and other penalties. Additionally, businesses must invest in the necessary technology and processes to safeguard customer data and comply with the laws. This can be costly, but protecting customers' data and ensuring businesses operate within the law is necessary. Finally, businesses must also be aware of the potential reputational damage that can occur if they are found to be in violation of data privacy laws. Customers may be less likely to trust a business that is not compliant with the laws, which can harm the business’s bottom line. 

How can you ensure you follow the laws in each jurisdiction in a business environment where data flows easily across state lines? Regardless of which privacy law is applicable, creating a complete data map for your business is an important component of compliance. The creation of a data map takes a bit of preparation, but once completed, it can be used to build compliance with all the various data privacy laws because the information tends to be similar across the various states. There may need to be a few tweaks from jurisdiction to jurisdiction, but the definition of “personal data” in each law is similar enough to be more or less universal, and the collection points and disclosures are often the same as well.   

Overall, state data privacy laws are important for businesses in the digital age. Businesses must understand the laws in the states where business is being conducted and take the necessary steps to ensure compliance. A sound strategy to follow in building your compliance program is to take the most restrictive law and use it as a baseline for your compliance program. Doing so can help protect customers' personal data and ensure your business operates within the law. 

A robust IT compliance strategy helps your organization meet the privacy and security requirements of your market, customer base, and government. Start your compliance journey today with a free consultation