Understanding Data Processing Agreements: The Definitive Guide
Data Processing Agreement (DPA) is the contract between the company that needs personal data to be processed and the company that processes data on behalf of other companies. Read all about DPAs here.
Data processing agreements (DPA) are an essential but often overlooked part of data security for businesses. In this definitive guide, we'll break down what a DPA is, p;l09how it works, and why businesses need them. To protect your organization’s data assets, get ready for a comprehensive walkthrough of everything you need to know about DPAs!
Introduction to Data Processing Agreements
If you’re handling data from others, you need a data processing agreement in place. This legally binding contract establishes the roles and responsibilities of both parties and sets out the terms under which data will be processed.
A data processing agreement is also known as a data processing addendum (DPA) or a data protection agreement (DPA). Regardless of the name, its purpose is to protect both you and your customers by setting out clear expectations regarding the handling of data.
This type of agreement is becoming increasingly common as organizations worldwide scramble to comply with new regulations, such as the EU’s General Data Protection Regulation (GDPR). If you’re processing the personal data of individuals in the European Union, you must have a DPA for the protection of personal data before collecting or receiving that data.
Data processors can be held liable for damages if they breach the terms of a DPA, so it’s important to understand what goes into these agreements. In this definitive guide, we’ll cover everything you need to know about DPAs, including:
- Which data protection laws require DPAs?
- What are the key elements of a DPA?
- How can I get started drafting my own DPA?
- What are the privacy and security considerations for DPAs?
What is a Data Processing Agreement?
Under the GDPR, a data processing agreement is a contract between a data controller and data processor that sets out their respective rights and obligations concerning the nature of the processing activities of the personal data being handled. The DPA is intended to give processors some legal certainty and help them comply with their DPA obligations.
DPAs typically address issues such as:
- The specific purposes for which the personal data will be processed;
- The categories of personal data that will be processed;
- The duration of the processing;
- The geographic scope of the processing;
- The security measures that will be implemented to protect personal data;
- The rights of individuals with respect to their personal data; and
- The obligation of the parties to comply with applicable law.
Although not required by law, it is generally advisable for controllers to have a DPA in place with any third-party processors they use. This is because DPAs can help processors understand their data protection obligations and provide some legal certainty in areas with significant potential liability.
The benefits of having a DPA in place include the following:
- Ensuring compliance with data protection laws;
- Protecting the rights of individuals or natural persons;
- Safeguarding the confidentiality of personal data;
- minimizing the risk of unauthorized access to personal data; and
- Establishing an accountability framework for the handling of personal data.
Which Data Protection Laws Require a Data Processing Agreement?
The GDPR has popularized DPAs, but practically every data protection authority in the world now requires them in one form or another. Wherever a law requires written instructions for data processing, the controller and processor require a DPA.
The following data protection laws require DPAs:
- EU GDPR
- UK GDPR
- Brazil LGPD
- California CCPA/CPRA
- Virginia CDPA
- Colorado CPA
- Connecticut DPA
- Dubai PDPA
- Thailand PDPA
- South African POPIA, and many others.
Key Clauses In a DPA
DPAs ensure that all parties involved in the processing of personal data comply with the requirements for protecting personal data. Key clauses in a DPA include:
- The specific purposes for which the personal data will be processed;
- The specific types of personal data that will be processed;
- The duration of the DPA;
- The obligations of each party;
- The rights of individuals for their personal data;
- The security measures for violating the DPA, such as with data breaches;
- The use of sub-processors and their obligations;
- The obligations on data transfers; and,
- Indemnity and liability of the data controller, data processor, and sub-processors.
A DPA should be reviewed and updated periodically to ensure it complies with the GDPR and other applicable laws. Non-compliance will most likely result in penalties and hefty fines.
These key clauses (including, where appropriate, the Standard Contractual Clauses or SCCs) should be included in any DPA to ensure compliance with the relevant data protection acts and to protect such personal data of all parties involved.
Who Needs to Sign a Data Processing Agreement?
The data controller and the data processor must sign a DPA. The GDPR and many other governing laws worldwide require the controller to provide the processor with written instructions on the processing. These instructions usually come in the form of a DPA.
The data controller needs the DPA to provide the processor with such instructions. Without them, the processing violates the laws.
The data processor needs the DPA because it must not process customer personal data without written instructions.
As a result, without a written DPA between them, both parties would be accountable for the infractions.
Signing a DPA as the Data Controller
Suppose your business hires a service provider or partners with a third-party data processor. In that case, a DPA will ensure that you and the data processor you hired will follow the data privacy laws necessary for your customers. A data processor is any business or entity not from your business that collects, stores, and communicates data on your behalf. As a result, a data processing agreement is required.
Check out the elements of a DPA listed above, and ensure they are detailed enough so as not to leave room for interpretation when presented with one.
The controller can be held liable for a data breach, even if it was caused by an error on the part of the processor, in the case of a GDPR data processing agreement. Ensure that the processor has sufficient bandwidth to protect data and organizational measures to respond quickly to any issues that arise.
Signing a DPA as the Data Processor
Data processing companies, especially those who work with data from users from regions that require DPAs, should be familiar with DPAs.
As the data processor, you ensure that applicable data protection laws process all personal data. This includes ensuring that appropriate technical and organizational measures are in place to protect personal data from accidental or unauthorized access, destruction, alteration, or use. You must also ensure that personal data is accurate and up-to-date and that individuals have the right to have their personal data erased or corrected if it is inaccurate. These responsibilities also extend to any such sub-processors you may hire, including any sub-processing activities.
The DPA will also set out your obligations in relation to such transfers of personal data to third countries. Suppose you transfer personal data outside the European Economic Area (EEA). In that case, you must ensure that adequate protections are in place to safeguard individuals' rights and freedoms.
How to Draft A Data Processing Agreement
When you’re ready to start drafting your data processing agreement, there are a few key elements you’ll want to make sure to include:
1. The parties involved. Be sure to identify the data processor and the data controller in the agreement.
2. The purpose of the agreement. This should spell out exactly what data will be processed and for what purpose.
3. The roles and responsibilities of each party. This is critical in ensuring both parties understand their obligations under the agreement.
4. The duration of the agreement. This will protect both parties by setting a clear timeframe for the arrangement.
5. The terms of confidentiality. This subject matter is important in ensuring that any sensitive information stays protected throughout the course of the agreement.
6. Any other relevant terms and conditions. This could include any applicable laws and regulations that must be followed or other important details about the arrangement.
It should also be noted that it is standard for all capitalized terms in a DPA will follow the
DPA templates are readily available online, such as this EU GDPR DPA template provided by the European Commission.
How To Negotiate A Data Processing Agreement
When negotiating a data processing agreement, including any amendments that may come up in the future, there are a few key things to keep in mind. First, you must ensure that the agreement meets all of the requirements of the governing law. Second, you must negotiate favorable terms for yourself and your business. Here are a few tips on how to do both:
1. Make sure the agreement meets all data protection requirements.
Most data protection laws require that data processing agreements include certain clauses, such as specifying the purpose of the processing, the duration of the processing, and the rights of the data subjects.
2. Negotiate terms that are favorable to you and your business.
When negotiating a data processing agreement, consider your own needs and objectives and those of your business. For example, you may want to include provisions that protect your trade secrets or limit liability in case of a breach.
3. Get help from a lawyer if needed.
If you’re not comfortable negotiating an agreement on your own, or if you want to ensure all requirements are met, you can hire a lawyer to help you with the process.
Privacy and Security Considerations for DPAs
When it comes to sensitive personal data, DPAs help ensure that adequate security and privacy safeguards are in place. But what exactly do these agreements need to include to be effective? Here are some key considerations for DPAs when it comes to privacy and security:
1. Data minimization. DPAs should include provisions requiring data controllers only to collect and process the minimum personal data necessary for the purposes specified in the agreement. This helps reduce the risk of accidental or unauthorized access, use, or disclosure of sensitive information.
2. Access controls. DPAs should require data controllers to implement appropriate physical, technical, and organizational measures to protect personal data from unauthorized access, use, or disclosure. These information security measures might include encryption, token authentication, firewalls, and password protection.
3. Processing limitations. DPAs can help ensure that personal data is only processed following the specific purposes authorized by the individual concerned. For example, a DPA could stipulate that personal data can only be used for marketing purposes with the express consent of the individual concerned.
4. Data quality and accuracy. DPAs can help ensure that personal data is accurate and up-to-date by requiring data controllers to take reasonable steps to verify the accuracy of any personal data they collect and process. They should also put in place procedures for individuals to correct any inaccuracies in their personal data.
5. Data retention periods. DPAs can help ensure that personal data is only retained for as long as is necessary for the purposes specified in the agreement. This helps reduce the risk of unauthorized access or use and also ensures that individuals’ personal data is not kept longer than necessary.
6. Data subject rights. DPAs should include provisions requiring data controllers to honor individuals’ rights concerning their personal data. This might include allowing individuals to access and correct their personal data or even deletion if there is no legitimate reason for keeping it.
7. Privacy policies. DPAs should require data controllers to put in place comprehensive privacy policies that clearly explain how personal data is collected, used, and protected. The policy should also contain contact information for individuals to make data subject requests or exercise their rights under the agreement.
8. Personal data breaches. DPAs should require the data processor to provide the data controller without undue delay a description of the personal data breach, the type of data that was the subject of the personal data breach, the categories of data subjects affected, and other information required by applicable data protection law, as soon as such information can be collected or otherwise becomes available. The data processor must also provide reasonable assistance with any reasonable request made by the data controller relating to the personal data breach.
8. Audits and assessments. DPAs can help ensure that data controllers are meeting their obligations with regards to security and privacy by stipulating regular audits or data protection impact assessments (DPIAs) on the effectiveness of their measures. This can help identify any weaknesses in their processes so they can be fixed before a breach occurs.
Data processing agreements are essential for any company that deals with personal information and needs to comply with the data protection regulations set out by different jurisdictions. We hope this guide has helped you better understand what a data processing agreement is and why it's important to have one, as well as how to make sure your own DPAs are up-to-date and compliant with all relevant laws. With clear guidelines in place, you can protect both yourself and your customers from privacy breaches or other undesirable events when handling sensitive data.
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