Data Processing Agreements (DPAs) are crucial contracts that outline the management of personal data between data controllers and data processors. These agreements are mandated by numerous global data protection regulations to ensure the safeguarding of users’ personal information.
Organizations frequently depend on third-party service providers to handle data processing tasks for numerous purposes, such as managing customer relationships, processing payroll, executing marketing campaigns, or analysing website performance. Although outsourcing these functions can enhance operational efficiency, it also introduces potential risks related to data privacy and security, including the possibility of data breaches or unauthorized access.
A Data Processing Agreement (DPA) helps reduce these risks by defining the specific responsibilities of both the entity that gathers the data and the third-party service provider processing it. This agreement ensures that personal data is managed securely and aids organizations in adhering to data privacy laws, such as DPDPA.
We look at what a data processing agreement is, when you actually need one, and the key details it needs to include to meet regulatory standards.
What is a DPA?
A Data Processing Agreement is a legal document between a company that owns data (data controller) and a company that processes the data on its behalf (data processor). It sets the rules for how the data is to be managed and protected.
A data processing agreement is also known as a data privacy agreement, data protection agreement, or data privacy addendum. Some laws simply refer to it as a contract between the controller and processor.
What is the purpose of a data processing agreement?
A Data Processing Agreement (DPA) is important for ensuring personal data is used safely when shared between two companies. It sets rules to protect the data and ensures both companies comply with the law.
Assists in meeting legal requirements
Some of the regulations that mandate a DPA include:
– India Digital Personal Data Protection Act (DPDP Act)
– European Union General Data Protection Regulation (GDPR)
– California Consumer Privacy Act (CCPA)/California Privacy Rights Act (CPRA)
– United Kingdom General Data Protection Regulation (UK-GDPR)
– South Africa Protection of Personal Information Act (POPIA)
– Thailand Personal Data Protection Act
– China Personal Information Protection Law
– Virginia Consumer Data Protection Act (VCDPA)
– Colorado Privacy Act (CPA)
Clarifies responsibilities of the parties
The DPA outlines the duties of the data controller and processor, specifying how personal data should be handled, stored, and protected. It ensures the processor follows the controller’s instructions, preventing misunderstandings and ensuring both meet their data-handling responsibilities.
Helps protect data subjects
A Data Processing Agreement (DPA) is a document that outlines how two parties should handle personal data safely. It includes guidelines that the data processor needs to follow, such as:
– Encrypting data to keep it secure.
– Using access controls to ensure only authorized people can see the data.
– Performing regular security checks to prevent unauthorized access or data breaches.
These measures are put in place to protect personal information from being accessed or leaked without permission.
Establishes protocols
A Data Processing Agreement (DPA) sets clear guidelines for managing personal data and using sub-processors. It specifies security measures, breach notification processes, and responsibilities in case of a data incident. This ensures both parties are prepared and reduces the chance of delays or confusion during a security issue.
Facilitates international data transfers
When personal data crosses borders, the agreement outlines the safeguards required to ensure that the data receives the same level of protection it would under domestic laws. This might include the use of standard contractual clauses (SCCs) when transferring data to countries that don’t have robust privacy laws.
When is a data processing agreement required?
A data processing agreement (DPA) is necessary when an entity, functioning as a data controller, shares personal data with a third-party service provider for processing. It is essential that this agreement is signed before any data processing activities commence.
Small businesses, sole proprietors, nonprofits, government organizations, and others must enter into DPAs if the following conditions apply:
– they are required to comply under a regulation that mandates a DPA, based on the location of the data subject and specific compliance thresholds related to the type of entity, annual revenue, or other relevant criteria
– they are considered a data controller, meaning they are responsible for determining the purpose and means of processing
– they share data with third-party processors for processing purposes
What needs to be included in a data protection agreement?
Some regulations simply state that a contract is necessary, without detailing the DPA requirements.
Regardless of the specific law, a well-structured DPA should generally include the following elements:
– purpose and scope of processing
– types and categories of personal data to be processed
– how long the data will be retained for
– obligations of the controller and processor
– technical and organizational measures to be implemented for data security
– provisions regarding engagement and use of sub-processors
– provisions regarding data return or deletion
– how the processor will assist the controller in fulfilling its obligations related to data subjects’ rights
– procedures for data breach notifications, including timelines and responsibilities
Signing the DPA as a controller
When you sign a DPA as a controller, you’re the one who decides why and how personal data will be processed. It’s important to make sure the agreement clearly defines how the processor is allowed to use the data and to check that they’ve agreed to follow all relevant data privacy laws. The processor should only handle the data according to your specific instructions.
You are ultimately responsible for the data processing activities, which means you must consider the implications of any international data transfers and ensure that the processor complies with all relevant regulations.
By carefully reviewing and signing the DPA, you confirm that the processor is legally obligated to protect the personal data in line with your regulatory responsibilities. This helps you stay compliant with data privacy laws.
Signing the DPA as a processor
When you sign a DPA as a processor, you’re the one handling personal data on behalf of the controller. You’re also responsible for complying with the obligations specifically laid on you under the different data privacy laws.
You’ll need to process the data strictly according to the controller’s written instructions and ensure that all personnel authorized to process the personal data are bound by confidentiality obligations, either through employment contracts or other legal agreements.
Additionally, you should make sure the DPA covers all relevant data privacy laws and be ready to provide any information the controller needs to show compliance with these obligations.
If you need to bring in any sub-processors to help, it’s on you to make sure they also follow the DPA terms, and you must get the controller’s consent before involving them.
How to create a data processing agreement
There’s no specific way you have to create a DPA under any of the regulations that require it. Businesses have the flexibility to draft a DPA themselves, use a template or guide, or hire a qualified legal expert to draft it for them.
It is advisable to consult a qualified legal professional or privacy expert, such as a Data Protection Officer (DPO), to draft or review your DPA. Since a DPA is a binding legal agreement, professional guidance helps to confirm that it complies with all the requirements of the relevant privacy laws, enhancing your DPA compliance.
A legal expert can assist in customizing the agreement to suit your specific data processing activities and help identify any potential legal issues.