Employee Data Privacy: What Employers Must Protect in 2024

The Privacy Landscape for Employee Data

State comprehensive data privacy laws have proliferated rapidly. California, Colorado, Connecticut, Virginia, Utah, Texas, Oregon, Montana, and other states have enacted consumer privacy laws. While many of these laws initially exempted employee data, the exemptions are expiring or narrowing. California's CCPA already applies to employee personal information, and other states are following.

Employers collect and maintain vast amounts of sensitive personal information: Social Security numbers, banking details, health records, background check results, performance evaluations, and more. Protecting this data is both a legal obligation and a business imperative.

What the Laws Require

While specific requirements vary by state, common obligations include:

Notice. Employers must inform employees about what personal information they collect, why they collect it, how it is used, and with whom it is shared. California requires a specific "Notice at Collection" for employees.

Purpose limitation. Personal information should be collected and used only for purposes disclosed to the employee. Collecting data for one purpose and using it for another without notice raises compliance concerns.

Data minimization. Collect only the personal information that is reasonably necessary for the purpose stated. Employers who maintain excessive data face greater risk and liability if a breach occurs.

Security. Implement reasonable security measures to protect personal information from unauthorized access, disclosure, or destruction. What constitutes "reasonable" depends on the sensitivity of the data and the size and resources of the organization.

Access and correction rights. Under some state laws, employees have the right to access the personal information you hold about them and request corrections to inaccurate information.

Deletion rights. Some laws provide a right to request deletion of personal information, subject to exceptions for legal and business retention requirements.

Practical Steps

Conduct a Data Inventory

Map the personal information you collect about employees across the entire employment lifecycle: application, hiring, onboarding, employment, benefits, performance management, and separation. For each data element, document:

• What information is collected
• Why it is collected
• Where it is stored
• Who has access
• How long it is retained
• Whether it is shared with third parties

This inventory is foundational to compliance with any privacy law.

Update Privacy Notices

Provide employees with clear, plain-language notices about your data practices. At minimum, your notice should describe the categories of personal information collected, the purposes for collection and use, the categories of third parties with whom data is shared, and how employees can exercise their rights.

Implement Retention Schedules

Maintain employee records only as long as required by law or necessary for a legitimate business purpose. Common retention requirements include:

• Payroll records: three to four years after creation
• I-9 forms: three years after hire or one year after separation, whichever is later
• Tax records: four years after the tax becomes due or is paid
• Personnel files: varies by state, commonly three to seven years after separation
• Health records: six years under HIPAA, longer for workers' compensation

When the retention period expires, securely destroy the records.

Strengthen Access Controls

Limit access to employee personal information based on job function. Payroll staff needs access to banking information; the marketing team does not. Implement role-based access controls in your HRIS and other systems, and audit access regularly.

Manage Vendor Relationships

Review the data practices of every vendor that receives employee personal information, including payroll processors, benefits administrators, background check providers, and cloud service providers. Include data protection obligations in your vendor contracts and verify compliance.

Train Your Team

Everyone who handles employee data must understand their privacy obligations. Training should cover proper data handling, access controls, breach reporting procedures, and the consequences of unauthorized access or disclosure.

Prepare a Breach Response Plan

Despite best efforts, breaches happen. Have a documented incident response plan that includes identifying and containing the breach, assessing what data was affected, notifying individuals as required by state breach notification laws, and notifying regulators where required.

Employee data privacy is not optional, and the regulatory requirements will only increase. Building strong data protection practices now positions your organization for compliance as new laws take effect.