Data Processing Agreements: Overview & Free Template

Understanding Data Processing Agreements (DPAs)

A Data Processing Agreement (DPA) regulates how companies use consumer data, especially personally identifiable data (PII). It ensures that data processors follow the agreement’s terms, providing a framework to manage and protect sensitive information. DPAs set clear guidelines for data handling practices, helping companies comply with legal regulations and protect consumer privacy.

Types of Websites Requiring DPAs

Various types of websites necessitate Data Processing Agreements to regulate the handling of consumer data. These include:

• Online retailers
• Internet marketers
• Affiliates
• Online service providers
• Professional services firms
• B2B companies
• Financial institutions
• Technology firms
• Medical providers

Large companies handling significant data may need to appoint a Data Protection Officer (DPO) to ensure compliance and enforce data privacy policies.

Essential Steps

Crafting an effective DPA involves a methodical approach, considering local, state, federal, country, and industry requirements.

1. 1. Determine Essential Customer Data: Identify the types of data crucial for your business.
   2. Set Data Storage/Processing Duration: Decide the duration for which data needs to be stored/processed.
   3. Define Data Usage: Clearly articulate how data will be used in your own words.
   4. Stakeholder Finalization: Obtain final approval from key company stakeholders.
   5. Consult with a Privacy Lawyer: Schedule an intake with a privacy lawyer to ensure legal compliance.
   6. Collaborate on Policy Finalization: Work closely with the hired lawyer to finalize the policy.

Utilizing technology lawyers in this process ensures legal experience and digital knowledge, enabling precise and compliant agreements.

Advantages of Engaging a Lawyer

Engaging a lawyer for Data Processing Agreements offers numerous benefits, including:

1. 1. Ensures Legal Compliance: Lawyers navigate complex data protection regulations, mitigating legal repercussions and financial penalties.
   2. Customized Agreements: Lawyers tailor DPAs to meet specific business needs, ensuring the agreement considers unique requirements and risk considerations.
   3. Risk Mitigation: Legal professionals identify potential liabilities, reducing risks related to data processing agreements and shielding companies from legal actions.
   4. Data Security Assurance: Attorneys help set clear data security procedures within the DPA, defining organizational and technical measures for personal data protection.
   5. Data Breach Response Management: In the event of a data breach, lawyers offer guidance on proper procedures, including notifying necessary parties and managing legal obligations.
   6. Stay Updated: Lawyers keep businesses informed about changes in data protection laws, ensuring continuous compliance.
   7. Legal Documentation Expertise: Lawyers create precise, legally binding agreements, avoiding ambiguity and potential conflicts.

Key Terms & Definitions

DPAs, like all contracts, contain key terms and provisions crucial for understanding rights and responsibilities:

• • Subject Matter: This refers to the primary focus or subject of the agreement, which in the context of a DPA, is the processing of personal data. It outlines what data will be processed and for what purpose.
  • Duration: This term specifies the period for which the agreement is valid or in effect. It indicates the start and end date of the agreement or may specify conditions under which the agreement can be terminated.
  • Purpose: The purpose of the agreement delineates the reasons for which personal data is being processed. It clarifies the intended use of the data and ensures that it aligns with legal and ethical standards.
  • Data Used: This term defines the types of data that will be processed under the agreement. It includes categories of personal data as well as any special categories of data, such as health or financial information.
  • Data Categorizations: This refers to the classification or categorization of data based on its sensitivity, value, or other criteria. It helps in establishing different levels of protection and handling procedures for various types of data.
  • Rights and Obligations: These are the privileges and duties assigned to each party involved in the agreement. It outlines what the data controller and data processor are responsible for, including compliance with data protection laws and regulations.

These terms may vary based on state, industry, country, and company type, emphasizing the need for consultation with privacy lawyers to ensure objectivity, compliance, and enforceability.

Why Your Company Needs a DPA

Ensuring compliance with jurisdiction-specific laws is imperative. Failure to have DPAs in place may lead to significant penalties. Notable regulations include:

1. DPAs and the GDPR: The General Data Protection Regulation (GDPR) outlines data processing regulations, applicable to EU countries. DPAs must address rights like the right to opt-out, be informed, disclosure, deletion, and equal services and prices.
2. DPAs and the CCPA: The California Consumer Privacy Act (CCPA) dictates how companies use consumer data, applicable to both first and third-party service providers and retailers.

Benefits of DPAs

Understanding the advantages of a Data Processing Agreement is essential, as it offers various benefits, including:

• • Ensures Legal Compliance: DPAs observe data protection laws, minimizing the chance of legal repercussions, financial penalties, and regulatory measures.
  • Maintains Clarity and Accountability: Offers precise instructions on handling, managing, and protecting personal data, fostering accountability.
  • Mitigates Risk: Reduces the risk of data breaches, unauthorized access, or mishandling of personal data by establishing clear terms and protection measures.
  • Includes Data Subject Rights: Guarantees adherence to data subject rights, such as access, update, or deletion requests.
  • Guarantees Data Security: Contains provisions requiring data processors to implement suitable security measures, to safeguard personal data.
  • Addresses Cross-border Data Transfers: Contains provisions for transmitting personal data outside specified regions, complying with data transfer limits.
  • Resolves Disputes: Specifies dispute resolution procedures, enabling conflict resolution without costly legal action.
  • Outlines Termination and Transition Clauses: Defines steps for ending the contract and transitioning data processing responsibilities.
  • Promotes Trust: Builds trust between data controllers and processors, showcasing a commitment to data security and ethical data management.

DPAs and Small Businesses

Small businesses, often operating with limited resources, may find themselves subject to the same Data Processing Agreement (DPA) requirements as larger enterprises. While the scale of operations may differ, the importance of safeguarding customer data remains consistent. Here’s a closer look at the intersection of DPAs and small businesses:

1. 1. Budgetary Constraints: Small businesses, cognizant of budget constraints, might be tempted to bypass the DPA process. However, non-compliance can lead to substantial fines and legal consequences. Prioritizing legal compliance, even with limited resources, is crucial.
   2. Tailoring Agreements to Scale: Smaller operations can benefit from tailoring DPAs to their scale. Rather than adopting a one-size-fits-all approach, customization ensures that the agreement aligns with the specific data processing activities of the business, avoiding unnecessary complexity.
   3. Consulting Local Internet Lawyers: Navigating geographical variations in data protection laws can be challenging for small businesses. Local internet lawyers possess the expertise to interpret and apply regional regulations, providing tailored advice on compliance measures. This can be a cost-effective strategy to address specific legal requirements.
   4. Educating Small Business Owners: Given that small business owners may not have an extensive legal background, educational initiatives are vital. Providing resources or workshops on data protection laws and DPAs can empower entrepreneurs to make informed decisions and foster a culture of data responsibility.
   5. Risk Mitigation Strategies: While resources may be limited, small businesses can employ risk mitigation strategies. This includes investing in basic cybersecurity measures, employee training on data protection practices, and seeking cost-effective legal counsel to navigate compliance challenges.

Why You Should Get Started Early

Anticipating evolving legislation and proactively implementing Data Processing Agreements (DPAs) is a strategic move for businesses of all sizes. Here’s why getting started early is crucial:

• • Adaptation to Changing Regulations: Data protection laws are dynamic and subject to frequent changes. Initiating the DPA process early allows businesses to adapt swiftly to new regulations, reducing the risk of non-compliance.
  • Demonstration of Ethical Commitment: Early adoption of DPAs showcases a commitment to ethical data processing practices. This proactive approach enhances a company’s reputation, especially among tech-savvy consumers who prioritize data privacy.
  • Avoidance of Legal Rush: Waiting until the last minute to implement DPAs can lead to a rushed and potentially incomplete process. Starting early provides sufficient time for thorough legal consultation, ensuring that agreements are comprehensive and tailored to the business’s needs.
  • Building Customer Trust: Tech-savvy customers are increasingly aware of data privacy issues. By visibly engaging in responsible data processing practices, businesses can build trust with their customer base, fostering long-term relationships.
  • Prevention of Costly Legal Consequences: Early adoption acts as a preventative measure against costly legal consequences. Non-compliance with data protection laws can result in fines and damage to a company’s financial health and reputation.

DPAs vs. Privacy Policy

Understanding the distinction between Data Processing Agreements (DPAs) and privacy policies is essential for comprehensive data governance. Each serves a distinct purpose in managing customer data:

• • DPAs: DPAs primarily focus on the contractual relationship between a data controller and a data processor. These agreements outline the specific terms and conditions for how personal data will be processed, the responsibilities of each party, and mechanisms for compliance.
  • Privacy Policies: Privacy policies, on the other hand, are public-facing documents that inform users about how their data is handled by a company. They detail the general practices related to data collection, storage, and usage. Privacy policies are typically designed to be easily understandable by the general public.

Example of DPAs vs. Privacy Policy: In a DPA, a company may include specific clauses related to the engagement of third-party subprocessors, outlining the roles and responsibilities of each entity involved in data processing. This detailed contractual information ensures legal compliance and accountability.

In contrast, a privacy policy would communicate to users, in a more user-friendly language, the general practices of data collection, usage, and protection employed by the company. While it may mention the use of third-party processors, the level of detail provided would not match the specificity found in a DPA.

Wrapping Up

Data Processing Agreements (DPAs) serve as essential instruments for businesses, establishing guidelines for data handling, ensuring legal compliance, and fostering consumer trust. By delineating responsibilities, addressing risks, and outlining data usage, DPAs play a crucial role in safeguarding sensitive information. 

For businesses of all sizes, prioritizing DPAs is essential for legal compliance and risk management. Early adoption showcases commitment to ethical data practices, enhances reputation, and mitigates the risk of legal consequences. Understanding the distinction between DPAs and privacy policies is crucial, allowing businesses to confidently navigate data governance. By embracing DPAs, businesses can create a secure and trustworthy data environment, balancing innovation with privacy protection. 

Free Data Processing Agreement Template

*Quick note: Our “Free Data Processing Agreement Template” covers key requirements and legal considerations. However, it is important to customize this template to align with your business-specific practices and legal requirements. It’s advisable to consult with legal counsel to ensure full compliance with privacy laws.

If you would like a Free Data Processing Agreement Template tailored to your business needs, we can help. Create an account and get started in 5 minutes.

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Data Processing Agreement

 

This Data Processing Agreement (“Agreement”) forms part of the Contract for Services (“Principal Agreement”) between:

 

(Your Company)

and

(Processor Company)

 

WHEREAS

 

(A) The Company acts as a Data Controller.

(B) The Company wishes to subcontract certain Services, which imply the processing of personal data, to the Data Processor.

(C) The Parties seek to implement a data processing agreement that complies with the requirements of the current legal framework for data processing and with Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons about the processing of personal data and the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation).

(D) The Parties wish to lay down their rights and obligations.

IT IS AGREED AS FOLLOWS:

1. Definitions and Interpretation

• • 1.1. Unless otherwise defined herein, capitalized terms and expressions used in this Agreement shall have the following meaning:
    • • 1.1.1. “Agreement” means this Data Processing Agreement and all Schedules;
      • 1.1.2. “Company Personal Data” means any Personal Data Processed by a Contracted Processor on behalf of the Company under or in connection with the Principal Agreement;
      • 1.1.3. “Contracted Processor” means a Subprocessor;
      • 1.1.4. “Data Protection Laws” means EU Data Protection Laws and, to the extent applicable, the data protection or privacy laws of any other country;
      • 1.1.5. “EEA” means the European Economic Area;
      • 1.1.6. “EU Data Protection Laws” means EU Directive 95/46/EC, as transposed into domestic legislation of each Member State and as amended, replaced, or superseded from time to time, including by the GDPR and laws implementing or supplementing the GDPR;
      • 1.1.7. “GDPR” means EU General Data Protection Regulation 2016/679;
      • 1.1.8. “Data Transfer” means:
        • • 1.1.8.1. a transfer of Company Personal Data from the Company to a Contracted Processor; or
          • 1.1.8.2. an onward transfer of Company Personal Data from a Contracted Processor to a Subcontracted Processor, or between two establishments of a Contracted Processor, in each case, where such transfer would be prohibited by Data Protection Laws (or by the terms of data transfer agreements put in place to address the data transfer restrictions of Data Protection Laws);
      • 1.1.9. “Services” means the __________________ services the Company provides.
      • 1.1.10. “Subprocessor” means any person appointed by or on behalf of Processor to process Personal Data on behalf of the Company in connection with the Agreement.

• • 1.2 The terms, “Commission”, “Controller”, “Data Subject”, “Member State”, “Personal Data”, “Personal Data Breach”, “Processing” and “Supervisory Authority” shall have the same meaning as in the GDPR, and their cognate terms shall be construed accordingly.

2. Processing of Company Personal Data

• • 2.1. Processor shall:
    • • 2.1.1. comply with all applicable Data Protection Laws in the Processing of Company Personal Data; and;
      • 2.1.2. not Process Company Personal Data other than on the relevant Company’s documented instructions.

• • 2.2. The Company instructs Processor to process Company Personal Data.

3. Processor Personnel

• • 3.1. Processor shall take reasonable steps to ensure the reliability of any employee, agent, or contractor of any Contracted Processor who may have access to the Company’s Personal Data, ensuring in each case that access is strictly limited to those individuals who need to know/access the relevant Company Personal Data, as strictly necessary for the Principal Agreement, and to comply with Applicable Laws in the context of that individual’s duties to the Contracted Processor, ensuring that all such individuals are subject to confidentiality undertakings or professional or statutory obligations of confidentiality.

4. Security

• • 4.1. Taking into account the state of the art, the costs of implementation, and the nature, scope, context, and purposes of Processing as well as the risk of varying likelihood and severity for the rights and freedoms of natural persons, Processor shall in relation to the Company Personal Data implement appropriate technical and organizational measures to ensure a level of security appropriate to that risk, including, as appropriate, the measures referred to in Article 32(1) of the GDPR.
  • 4.2. In assessing the appropriate level of security, the Processor shall take into account in particular of the risks that are presented by Processing, in particular from a Personal Data Breach.

5. Subprocessing

• • 5.1. Processor shall not appoint (or disclose any Company Personal Data to) any Subprocessor unless required or authorized by the Company.

6. Data Subject Rights

• • 6.1. Taking into account the nature of the Processing, the Processor shall assist the Company by implementing appropriate technical and organizational measures, insofar as possible, for the fulfillment of the Company obligations, as reasonably understood by the Company, to respond to requests to exercise Data Subject rights under the Data Protection Laws.

• • 6.2. Processor shall:

• • • • 6.2.1. promptly notify the Company if it receives a request from a Data Subject under any Data Protection Law in respect of Company Personal Data; and
      • 6.2.2. ensure that it does not respond to that request except on the documented instructions of the Company or as required by Applicable Laws to which the Processor is subject, in which case the Processor shall to the extent permitted by Applicable Laws inform the Company of that legal requirement before the Contracted Processor responds to the request.

7. Personal Data Breach

• • 7.1. Processor shall notify Company without undue delay upon Processor becoming aware of a Personal Data Breach affecting Company Personal Data, providing Company with sufficient information to allow the Company to meet