Navigating the Landscape of Employee Data Privacy: Compliance and Best Practices

Reece Nanfito
Data Security

In today’s data-driven world, employee privacy is under threat. Between cyberattacks, technology surveillance, and evolving regulations, managing employee data ethically and legally is more complex than ever. However, prioritizing employee data protection should be a top concern for any organization that values trust, security, and compliance.

While complex, the payoff for getting data privacy right is immense. You’ll manage risks, build workforce trust, align with ethics, attract talent, and future-proof regulations and societal expectations around data rights. By viewing privacy as a human right rather than just a compliance challenge, organizations can become truly people-centric.

The Stakes of Data Privacy in the US

As a business, the steps you take to protect employee data should be rigorous, as proper data privacy is crucial for personal and company protection. Mishandling employee data carries serious consequences for companies in the United States, including:

  • Fines: Noncompliance with regulations can lead to steep fines from entities like the FTC, SEC, and state authorities.
  • Lawsuits: Employees can sue for damages if data is misused or a breach occurs. Class actions can multiply penalties.
  • Cyber threats: Lax security invites data breaches and ransomware attacks that are costly to recover from. Sixty percent of small businesses close post-breach.
  • Reputation damage: Data misuse and breaches harm talent recruitment, consumer trust, and brand reputation. Stock value often declines.
  • Innovation obstacles: Lacking data protections impedes global commerce and partnerships. GDPR restricts EU data flows to compliant entities.

With these risks, US companies must implement robust data privacy programs spanning security, IT systems, policies, governance, and training.

Key US Regulations and Guidance

To provide the best protection possible for your company, it’s important to understand different employee data privacy laws. Here’s a brief look at different laws that shape the American employee data privacy landscape:

Sector-Specific Laws

  • HIPAA: Governs patient and employee health data handling for covered entities in healthcare.
  • GLBA: Mandates employee and customer financial data privacy in the banking/insurance sectors.
  • FERPA: Protects the privacy of student and education employee records.

State Laws

California leads US data privacy efforts with the CPRA. Other states like Virginia, Colorado, and Utah now have similar laws. Requirements include:

  • Transparency about data collection
  • Access rights for consumers/employees
  • Restrictions on selling or sharing data
  • Security requirements

FTC Guidance

The FTC provides general guidance for companies to enhance consumer and employee privacy through security measures, limited data collection, and notice and consent requirements.

Right to Privacy

Some courts have established privacy as a right, enabling lawsuits for violations like unauthorized data sharing.

Operationalizing Data Privacy

To protect your company’s personal data and create a culture of privacy and trust within your organization, you need to turn regulations and data protection principles into action. That means following best practices for data collection, security, and more. Here are some essential practices to remember when implementing robust data protection:

Data Collection

  • Only gather employee data needed for business and compliance needs.
  • Limit collection of sensitive information like health, religion, etc.
  • Anonymize identifying data for analytics/general use.

Data Security

  • Encrypt stored employee data.
  • Restrict access to personnel handling HR/benefits/payroll.
  • Employ data loss prevention and cybersecurity tools.
  • Inform employees of data gathering and usage.
  • Obtain opt-in consent where required by laws or for sensitive data.
  • Allow employees access to view/update their records.

Data Retention and Disposal

  • Follow data retention schedules based on legal needs.
  • Permanently delete data after the expiration of the retention period.
  • Safely dispose of physical records like shredding.

Governance

  • Appoint internal data privacy leader and team.
  • Create and update comprehensive data privacy policies.
  • Continuously audit and improve data practices.

Data Privacy with Employment and Income Verification

One of the key processes businesses must protect for their employees is employment and income verification. These essential processes require companies to share personal information about employees, so you must ensure that this data is kept secure and not stored. Here’s why privacy in these processes is so important:

  • Protecting Personal Information: Employee details like SSNs, bank accounts, tax docs, and more should only be collected and shared as needed. Companies verifying employment should have restricted data access and usage policies, encrypt stored data, train employees on handling sensitive information, and conduct audits to ensure compliance.
  • Avoiding Discrimination: Bias and discrimination during the lending process based on non-job-related personal details is, unfortunately, still a risk. Ensuring this data stays private prevents misuse during verification.
  • Complying with Regulations: Regulations like GDPR, CPRA, and HIPAA have specific rules around collecting and processing personal data, consent requirements, data rights like access and deletion, and breach notification. Companies must follow these to verify income and employment while protecting privacy legally.
  • Building Trust: Transparency around data practices, offering options like consent and access, implementing security protections, and communicating responsibilities build trust and confidence in your company. This trust is vital for an ethical verification process.
  • Limiting Exposure: Only essential income/employment details should be collected. Additional data like credit history, performance reviews, reasons for leaving, demographics, and more unnecessarily expose applicants.

The main idea is that income and employment verification must balance an applicant’s right to privacy with a company’s need to confirm applicant details. Following privacy best practices and regulations and focusing only on essential data helps achieve this balance.

Conclusion

With increasingly prevalent data risks and regulations, US companies must prioritize employee data privacy through robust security, IT systems, policies, and training. Privacy should be embedded across the organization and never be a side consideration. Beyond legal compliance, high data privacy standards demonstrate an ethical commitment to honoring employees’ personal information and the human right to privacy. Companies wishing to attract top talent, avoid data disasters, and build long-term success must view employee data privacy as a core component of 21st-century business.

Employee Data Privacy with Vault Verify 

When lenders need to verify an employee’s income, Vault Verify plays an important role in maintaining data privacy. Vault Verify enables income verification while upholding core privacy principles:

  • Consent & Transparency – Vault Verify obtains clear opt-in consent from employees before verifying income details with employers. This aligns with best practices around affirmative consent.
  • Limited Data Collection – Only the specific income details needed for verification are collected. Vault Verify avoids gathering extraneous employee data.
  • Data Security – As a verification service, Vault Verify utilizes strong security like encryption to protect sensitive financial information.
  • Restricted Access – Employee income data access is limited to essential personnel managing the verification process.
  • Data Retention – Income data is only retained temporarily as legally required, then disposed of safely.
  • Compliance – Vault Verify adheres to regulations like FCRA that govern data handling for verification services.

By following core privacy principles, Vault Verify’s income verification enables lenders to confirm employee income while respecting privacy. We offer no-cost, fully compliant employment and income verification services to the HR departments of employers that reduce data exposure by 99%. But don’t just take it from us. Our 99% client retention rate reflects the fact that we always put our clients first, and when you need help, you’ll always speak to our professional USA-based client support specialists.

Ready to get started? Contact Vault Verify today to request a demo.