Fiscal Summary
NOT SIGNIFICANT
Bill Summary
APPLICABILITY
This bill applies to persons that conduct business in this state or produce products or services that are targeted to residents of this state and that:
(1) During a calendar year, control or process personal information of at least 100,000 consumers; or
(2) Control or process personal information of at least 25,000 consumers and derive more than 50 percent of gross revenue from the sale of personal information.
DATA CONTROLLER RESPONSIBILITES
This bill requires the natural or legal person that, alone or jointly with others, determines the purpose and means of processing personal information ("controller") to:
(1) Limit the collection of personal information to what is adequate, relevant, and reasonably necessary in relation to the purposes for which the data is processed, as disclosed to the consumer;
(2) Not process personal information for purposes that are beyond what is reasonably necessary to and compatible with the disclosed purposes for which the personal information is processed, as disclosed to the consumer, unless the controller obtains the consumer's consent;
(3) Establish, implement, and maintain reasonable administrative, technical, and physical data security practices, to protect the confidentiality, integrity, and accessibility of personal information;
(4) Not be required to delete information that it maintains or uses as aggregate or de-identified data, provided that such data in the possession of the business is not linked to a specific consumer;
(5) Not process personal information in violation of state and federal laws that prohibit unlawful discrimination against consumers, nor discriminate against a consumer for exercising the consumer rights contained in this part, including denying goods or services, charging different prices or rates for goods or services, or providing a different level of quality of goods and services to the consumer. However, this provision does not require a controller to provide a product or service that requires the personal information of a consumer that the controller does not collect or maintain, or prohibit a controller from offering a different price, rate, level, quality, or selection of goods or services to a consumer, including offering goods or services for no fee, if the consumer has exercised the right to opt out pursuant or the offer is related to a consumer's voluntary participation in a bona fide loyalty, rewards, premium features, discounts, or club card program; and
(6) Not process sensitive data concerning a consumer without obtaining the consumer's consent, or, in the case of the processing of sensitive data concerning a known child, without processing the data in accordance with the federal Children's Online Privacy Protection Act.
This bill provides that, if a controller sells personal information to third parties or processes personal information for targeted advertising, then the controller must clearly and conspicuously disclose the processing, as well as the manner in which the consumer may exercise the right to opt out of such processing.
This bill further requires a controller to provide a consumer, upon an authenticated request, a reasonably accessible, clear, and meaningful privacy notice. A controller is further required to provide, and describe in its privacy notice, at least one of the following methods for consumers to submit a request to exercise consumer rights: a toll-free telephone number; an email address; a web form; or a clear and conspicuous link on the controller's main internet homepage to an internet webpage that enables a consumer to exercise the consumer's rights described below. The controller must ensure the method is capable of authenticating the identity of the consumer making the request and must not require a consumer to create a new account in order to exercise such rights.
CONSUMER PERSONAL INFORMATION RIGHTS
This bill authorizes a consumer to invoke the consumer rights authorized below at any time by submitting a request to a controller specifying the consumer rights the consumer wishes to invoke. A known child's parent or legal guardian may invoke the consumer rights authorized on behalf of the child regarding processing personal information belonging to the known child. A controller is required to comply with an authenticated consumer request to exercise the right to:
(1) Confirm whether a controller is processing the consumer's personal information and to access the personal information;
(2) Correct inaccuracies in the consumer's personal information, taking into account the nature of the personal information and the purposes of the processing of the consumer's personal information;
(3) Delete personal information provided by or obtained about the consumer. However, a business is not required to delete information that it maintains or uses as aggregate or de-identified data, provided that such data in the possession of the business is not linked to a specific consumer;
(4) Obtain a copy of the consumer's personal information that the consumer previously provided to the controller in a portable and, to the extent technically feasible, readily usable format that allows the consumer to transmit the data to another controller without hindrance, where the processing is carried out by automated means;
(5) Request that a controller that sold personal information about the consumer, or disclosed the information for a business purpose, to disclose to the consumer:
(A) The categories of personal information about the consumer the business sold;
(B) The categories of third parties to which the personal information about the consumer was sold by category of personal information for each category of third parties to which the personal information was sold; and
(C) The categories of personal information about the consumer that the business disclosed for a business purpose; and
(6) Opt out of a controller's selling personal information about the consumer.
A controller is required to comply with a request by a consumer to exercise the consumers rights as follows:
(1) A controller must respond to the consumer without undue delay, but in all cases within 45 days of receipt of a request submitted by a consumer. The response period may be extended once by 45 additional days when reasonably necessary, taking into account the complexity and number of the consumer's requests, so long as the controller informs the consumer of the extension within the initial 45-day response period, together with the reason for the extension;
(2) If a controller declines to take action regarding the consumer's request, then the controller must inform the consumer without undue delay, but in all cases and at the latest within 45 days of receipt of the request, of the justification for declining to take action and instructions for how to appeal the decision;
(3) Information provided in response to a consumer request must be provided by a controller free of charge, up to twice annually per consumer. If requests from a consumer are manifestly unfounded, technically infeasible, excessive, or repetitive, then the controller may charge the consumer a reasonable fee to cover the administrative costs of complying with the request or decline to act on the request. The controller bears the burden of demonstrating the manifestly unfounded, technically infeasible, excessive, or repetitive nature of the request; and
(4) If a controller is unable to authenticate the request using commercially reasonable efforts, then the controller is not required to comply with a request to initiate an action and may request that the consumer provide additional information reasonably necessary to authenticate the consumer and the consumer's request.
This bill further requires a controller to establish a process for a consumer to appeal the controller's refusal to take action on a request within a reasonable period of time after the consumer's receipt of the decision of the controller's refusal. The appeal process must be made available to the consumer in a conspicuous manner, must be available at no cost to the consumer, and must be similar to the process for submitting requests to initiate action. Within 60 days of receipt of an appeal, the controller must inform the consumer in writing of action taken or not taken in response to the appeal, including a written explanation of the reasons for the decisions. If the appeal is denied, then the controller must also provide the consumer with an online mechanism, if available, or other method through which the consumer may contact the attorney general and reporter to submit a complaint.
RESPONSIBILITIES OF CONTROLLERS AND PROCESSORS
This bill requires a natural or legal entity that processes personal information on behalf of a controller ("processor") adhere to the instructions of a controller and assist the controller in meeting its obligations under this bill.
This bill provides that a contract between a controller and a processor governs the processor's data processing procedures with respect to the processing performed on behalf of the controller. The contract is binding and must clearly set forth instructions for processing data, the nature and purpose of the processing, the type of data subject to processing, the duration of processing, and the rights and obligations of both parties. The contract is required to also include requirements that the processor must:
(1) Ensure that each person processing personal information is subject to a duty of confidentiality with respect to the data;
(2) At the controller's direction, delete or return all personal information to the controller as requested at the end of the provision of services, unless retention of the personal information is required by law;
(3) Upon the reasonable request of the controller, make available to the controller all information in its possession necessary to demonstrate the processor's compliance with the obligations in this part;
(4) Allow, and cooperate with, reasonable assessments by the controller or the controller's designated assessor; alternatively, the processor may arrange for a qualified and independent assessor to conduct an assessment of the processor's policies and technical and organizational measures in support of the obligations under this part using an appropriate and accepted control standard or framework and assessment procedure for the assessments. The processor must provide a report of each assessment to the controller upon request; and
(5) Engage a subcontractor pursuant to a written contract that requires the subcontractor to meet the obligations of the processor with respect to the personal information.
This bill provides that determining whether a person is acting as a controller or processor with respect to a specific processing of data is a fact-based determination that depends upon the context in which personal information is to be processed. A processor that continues to adhere to a controller's instructions with respect to a specific processing of personal information remains a processor.
PRIVACY PROGRAM
This bill requires a controller or processor to create, maintain, and comply with a written privacy program that reasonably conforms to the National Institute of Standards and Technology privacy framework. When a subsequent revision to the NIST privacy framework is published, a controller or processor must reasonably conform its privacy program to the revised framework not later than one year after the publication date stated in the most recent revision. A controller or processor's privacy program must provide an individual with the substantive rights required under this bill. This bill further requires the program to disclose the commercial purpose for which the controller or processor collects, controls, or processes personal information.
This bill provides that a controller or processor's failure to maintain a privacy program that reflects their data privacy practices to a reasonable degree of accuracy is considered an unfair and deceptive act or practice under present law. However, a consumer is not entitled to a private right of action.
DATA PROTECTION ASSESSMENTS
This bill requires a controller to conduct and document a data protection assessment of each of the following processing activities involving personal information:
(1) The processing of personal information for purposes of targeted advertising;
(2) The sale of personal information;
(3) The processing of personal information for purposes of profiling, where the profiling presents a reasonably foreseeable risk of:
(A) Unfair or deceptive treatment of, or unlawful disparate impact on, consumers;
(B) Financial, physical, or reputational injury to consumers;
(C) A physical or other intrusion upon the solitude or seclusion, or the private affairs or concerns, of consumers, where the intrusion would be offensive to a reasonable person; or
(D) Other substantial injury to consumers;
(4) The processing of sensitive data; and
(5) Processing activities involving personal information that present a heightened risk of harm to consumers.
The data protection assessments conducted must identify and weigh the benefits that may flow, directly and indirectly, from the processing to the controller, the consumer, other stakeholders, and the public against the potential risks to the rights of the consumer associated with the processing, as mitigated by the safeguards that can be employed by the controller to reduce the risks.
The attorney general is authorized to request that a controller disclose the data protection assessment that is relevant to an investigation conducted by the attorney general, and the controller must then make the assessment available. The attorney general is also authorized to evaluate the assessment for compliance with the responsibilities set forth by this bill. Data protection assessments are confidential and not open to public inspection and copying.
This bill provides that data protection assessment requirements apply to processing activities created or generated on or after July 1, 2024, and are not retroactive.
PROCESSING DE-IDENTIFIED DATA AND EXEMPTIONS
This bill requires that a controller in possession of de-identified data must take reasonable measures to ensure that the data cannot be associated with a natural person; publicly commit to maintaining and using de-identified data without attempting to reidentify the data; and contractually obligate recipients of the de-identified data to comply with this bill. However, a controller or processor is not required to:
(1) Reidentify de-identified data or pseudonymous data;
(2) Maintain data in identifiable form, or collect, obtain, retain, or access data or technology, in order to be capable of associating an authenticated consumer request with personal information; or
(3) Comply with an authenticated consumer rights request, if:
(A) The controller is not reasonably capable of associating the request with the personal information or it would be unreasonably burdensome for the controller to associate the request with the personal information;
(B) The controller does not use the personal information to recognize or respond to the specific consumer who is the subject of the personal information, or associate the personal information with other personal information about the same specific consumer; and
(C) The controller does not sell the personal information to a third party or otherwise voluntarily disclose the personal information to a third party other than a processor, except as otherwise permitted in this section.
The consumer rights provided by this bill do not apply to pseudonymous data in cases where the controller is able to demonstrate information necessary to identify the consumer is kept separately and is subject to effective technical and organizational controls that prevent the controller from assessing that information. A controller that discloses pseudonymous data or de-identified data must exercise reasonable oversight to monitor compliance with contractual commitments to which the pseudonymous data or de-identified data is subject and must take appropriate steps to address breaches of those contractual commitments.
INVESTIGATIVE AUTHORITY OF THE ATTTORNEY GENERAL
This bill authorizes the attorney general to issue a civil investigative demand if it has reasonable cause to believe that an individual, controller, or processor has engaged in, is engaging in, or is about to engage in a violation of this bill.
ENFORCEMENT, CIVIL PENALTIES AND EXPENSES
This bill gives the attorney general the exclusive authority to enforce this bill. The attorney general is authorized to develop reasonable cause to believe that a controller or processor is in violation of any of the requirements, based on the attorney general and reporter's own inquiry or on consumer or public complaints. Prior to initiating an action, the attorney general and reporter must provide a controller or processor 60 days' written notice identifying the specific provisions of this part the attorney general alleges have been or are being violated. If within the 60-day period, the controller or processor cures the noticed violation and provides the attorney general an express written statement that the alleged violations have been cured and that no further violations must occur, then the attorney general and reporter must not initiate an action against the controller or processor.
This bill provides that if a controller or processor continues to violate this bill following the cure period or breaches an express written statement provided to the attorney general and reporter, then the attorney general is authorized to bring an action in a court of competent jurisdiction seeking any of the following relief:
(1) Declaratory judgment that the act or practice violates this bill;
(2) Injunctive relief, including preliminary and permanent injunctions, to prevent an additional violation of and compel compliance with this part;
(3) Civil penalties as described below;
(4) Reasonable attorney's fees and investigative costs; or
(5) Other relief the court determines appropriate.
This bill authorizes a court to impose a civil penalty of up to $15,000 for each violation. When calculating civil penalties, a court may consider the number of affected consumers; the severity of the violation; the size, nature, and complexity of the controller or processor's business; the sensitivity of the information in question; and the precautions taken by the controller or processor to prevent a violation.
If the court finds the controller or processor willfully or knowingly violated this bill, then the court may award treble damages. Appropriate relief may also be awarded to each identified consumer affected by a violation, regardless of whether actual damages were suffered. The attorney general is also able to recover reasonable expenses incurred in investigating and preparing a case, including attorney fees, in an action initiated.
AFFIRMATIVE DEFENSES
This bill establishes that a controller or processor has an affirmative defense to a cause of action for a violation of this bill if the controller or processor creates, maintains, and complies with the privacy program described above.
CONTRACT WAIVERS
This bill provides that a provision of a contract of agreement that waives or limits a consumer's rights provided by this bill is void and unenforceable. However, a consumer is not prevented from declining to request information form a controller, declining to opt out of the controller's sale of the consumer's personal information, or authorizing a controller to sell the consumer's personal information after previously opting out.
LIMITATIONS
This bill does not restrict a controller's or processor's ability to:
(1) Comply with federal, state, or local laws, rules, or regulations;
(2) Comply with a civil, criminal, or regulatory inquiry, investigation, subpoena, or summons by federal, state, local, or other governmental authorities;
(3) Cooperate with law enforcement agencies concerning conduct or activity that the controller or processor reasonably and in good faith believes may violate federal, state, or local laws, rules, or regulations;
(4) Investigate, establish, exercise, prepare for, or defend legal claims;
(5) Provide a product or service specifically requested by a consumer, perform a contract to which the consumer is a party, including fulfilling the terms of a written warranty, or take steps at the request of the consumer prior to entering into a contract;
(6) Take immediate steps to protect an interest that is essential for the life or physical safety of the consumer or of another natural person, and where the processing cannot be manifestly based on another legal basis;
(7) Prevent, detect, protect against, or respond to security incidents, identity theft, fraud, harassment, malicious or deceptive activity, or illegal activity; preserve the integrity or security of systems; or investigate, report, or prosecute those responsible for such action;
(8) Engage in public- or peer-reviewed scientific or statistical research in the public interest that adheres to all other applicable ethics and privacy laws and is approved, monitored, and governed by an institutional review board, or similar independent oversight entity that determines whether:
(A) Deletion of the information is likely to provide substantial benefits that do not exclusively accrue to the controller;
(B) The expected benefits of the research outweigh the privacy risks; and
(C) The controller has implemented reasonable safeguards to mitigate privacy risks associated with research, including risks associated with reidentification; or
(9) Assist another controller, processor, or third party with the obligations under this part.
Processing personal information for the purposes described above does not solely make an entity a controller with respect to the processing. Further, the obligations imposed on controllers and processors by this bill do not restrict their ability to collect, use, or retain data to:
(1) Conduct internal research to develop, improve, or repair products, services, or technology;
(2) Effectuate a product recall;
(3) Identify and repair technical errors that impair existing or intended functionality; or
(4) Perform internal operations that are reasonably aligned with the expectations of the consumer or reasonably anticipated based on the consumer's existing relationship with the controller or are otherwise compatible with processing data in furtherance of the provision of a product or service specifically requested by a consumer or the performance of a contract to which the consumer is a party.
The obligations imposed on controllers and processors do not apply where compliance by the controller or processor with this part would violate an evidentiary privilege under the laws of this state. This does not prevent a controller or processor from providing personal information concerning a consumer to a person covered by an evidentiary privilege under the laws of this state as part of a privileged communication.
This bill further provides that a controller or processor that discloses personal information to a third-party controller or processor, in compliance with this bill, is not in violation if the third-party controller or processor that receives and processes the personal information is in violation of this part; and, at the time of disclosing the personal information, the disclosing controller or processor did not have actual knowledge that the recipient intended to commit a violation. Likewise, a third-party controller or processor that receives personal information is not in violation for the violations of the controller or processor from which it received such personal information.
This bill does not impose an obligation on controllers and processors that adversely affects the rights or freedoms of a person, such as exercising the right of free speech pursuant to the First Amendment to the United States Constitution, or applies to the processing of personal information by a person in the course of a purely personal activity.
This bill prohibits a controller from processing personal information for purposes other than those expressly listed below. Personal information processed by a controller may be processed to the extent that the processing is:
(1) Reasonably necessary and proportionate to the purposes listed above; and
(2) Adequate, relevant, and limited to what is necessary in relation to the specific purposes listed in this section. Personal information collected, used, or retained must, where applicable, take into account the nature and purpose or purposes of the collection, use, or retention. The data is subject to reasonable administrative, technical, and physical measures to protect the confidentiality, integrity, and accessibility of the personal information and to reduce reasonably foreseeable risks of harm to consumers relating to the collection, use, or retention of personal information
EXEMPTIONS
This bill does not apply to:
(1) A body, authority, board, bureau, commission, district, or agency of this state or of a political subdivision;
(2) A financial institution, an affiliate of a financial institution, or data subject to Title V of the federal Gramm-Leach-Bliley Act;
(3) An individual, firm, association, corporation, or other entity that is licensed in this state under law as an insurance company and transacts insurance business;
(4) A covered entity or business associate governed by the privacy, security, and breach notification rules issued by the United States department of health and human services and the federal Health Information Technology for Economic and Clinical Health Act;
(5) A nonprofit organization;
(6) An institution of higher education;
(7) Protected health information under HIPAA;
(8) Health records for purposes of state law concerning health, safety, and environment protection;
(9) Patient identifying information for purposes of federal law in regard to confidentiality of records;
(10) Personal information processed for purposes of research conducted of human subjects; or processed or sold in connection with research conducted in accordance with applicable law;
(11) Information and documents created for purposes of the federal Health Care Quality Improvement Act of 1986;
(12) Patient safety work product for purposes of the federal Patient Safety and Quality Improvement Act;
(13) Information derived from the healthcare-related information listed in this subsection that is de-identified in accordance with the requirements for de-identification pursuant to HIPAA;
(14) Information originating from, and intermingled to be indistinguishable with, or information treated in the same manner as, information exempt under this bill that is maintained by a covered entity or business associate as defined by HIPAA or a program or a qualified service organization as defined by federal law;
(15) Information used only for public health activities and purposes as authorized by HIPAA;
(16) The collection, maintenance, disclosure, sale, communication, or use of personal information bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living by a consumer reporting agency or furnisher that provides information for use in a consumer report, and by a user of a consumer report, but only to the extent that such activity is regulated by and authorized under the federal Fair Credit Reporting Act;
(17) Personal information collected, processed, sold, or disclosed in compliance with the federal Driver's Privacy Protection Act of 1994;
(18) Personal information or educational information regulated by the federal Family Educational Rights and Privacy Act (FERPA);
(19) Personal information collected, processed, sold, or disclosed in compliance with the federal Farm Credit Act;
(20) Data processed or maintained:
(A) In the course of an individual applying to, being employed by, or acting as an agent or independent contractor of a controller, processor, or third party, to the extent that the data is collected and used within the context of that role;
(B) As the emergency contact information of an individual under this part used for emergency contact purposes; or
(C) That is necessary to retain to administer benefits for another individual relating to the individual under subdivision (a)(20)(A) and used for the purposes of administering those benefits;
(21) Information collected as part of public- or peer-reviewed scientific or statistical research in the public interest; or
(22) An insurance producer licensed under state law.
Further, this bill does not require a controller, processor, third party, or consumer to disclose trade secrets.
ON APRIL 10, 2023, THE HOUSE ADOPTED AMENDMENT #1 AND PASSED HOUSE BILL 1181, AS AMENDED.
AMENDMENT #1 makes various technical changes and additions to this bill, along with the following significant modifications:
(1) Clarifies that consent under this bill may include, rather than shall include, a written statement or an unambiguous affirmative action;
(2) Specifies that a natural person acting in a commercial or employment context is not a consumer for purposes of this bill;
(3) Defines "decisions that produce legal or similarly significant effects concerning the consumer" to mean decisions made by a controller that result in the provision or denial by the controller of financial or lending services, housing, insurance, education enrollment or opportunity, criminal justice, employment opportunities, healthcare services, or access to basic necessities. This amendment requires a controller to comply with a consumer request to exercise the right to opt out of a controller's processing of personal information for purposes of selling personal information about the consumer, targeted advertising, or profiling in furtherance of decisions that produce legal or similarly significant effects concerning the consumer. Such compliance requirement replaces provisions of this bill that would require disclosure of certain information concerning that a controller sold or disclosed for a business purpose;
(4) Specifies that an entity owned or controlled by a nonprofit organization is exempt from this bill as a nonprofit organization;
(5) Replaces this bill's definition of "personal information". This bill specifies various classes of information that are personal information. This amendment instead defines personal information to mean information that is linked or reasonably linkable to an identified or identifiable natural person;
(6) Changes the threshold for this bill to apply to a person conducting business in Tennessee to persons producing products or services that target residents of Tennessee and that:
(A) Exceed $25,000,000 in revenue; and
(B) Either control or process personal information of at least 25,000 consumers and derive more than 50 percent of gross revenue from the sale of personal information or, during a calendar year, control or process personal information of at least 175,000 consumers;
(7) Adds courses of conduct by which a controller that obtained personal information about a consumer from a source other than the consumer complies with the consumer's request to delete such information;
(8) Makes various changes concerning the information that a controller must include in consumer disclosure statements and privacy notices;
(9) Exempts from this bill information that is included in a limited data set to the extent that the information is used, disclosed, and maintained in the manner specified in federal regulations promulgated under HIPPA and the American Recovery and Reinvestment Act of 2009;
(10) Reduces the maximum civil penalty for a violation of this bill from $15,000 to $7,500 and removes the list of criteria for assessing and calculating a penalty;
(11) Removes the requirement that a controller's privacy program must disclose the commercial purposes for which the controller collects, controls, or processes personal information;
(12) Preempts conflicting local regulation;
(13) Specifies that the Tennessee Information Protection Act does not apply to personal information maintained or used for purposes of compliance with the regulation of listed chemicals under the federal Controlled Substances Act; and
(14) Changes the effective date from July 1, 2024, to July 1, 2025.
