Overview of Data Privacy Laws for SaaS Startups

Most, if not all, SaaS providers will collect personal data through their SaaS platform. Personal data includes obvious things like names, addresses, and social security numbers, but it also encompasses information such as geolocation, biometric markers, and IP addresses. The scope of personal data tends to be broader than people realize. In general, any information that can be associated with an individual may be considered personal data under applicable laws.

In a previous article on data/IP in SaaS agreements, we discussed how privacy laws require SaaS providers to have a privacy policy and, potentially, a data processing agreement. These documents explain to users how the provider collects and handles personal data and set parameters for what the provider can do with the personal data. In this article, we dive deeper into those privacy laws and explain the steps SaaS providers can take to build a compliance strategy that works for their circumstances.

Data Privacy Law Landscape in the U.S.

In the U.S., data privacy laws exist at both federal and state levels. The federal laws are generally “sector” specific. For example, HIPAA covers the handling of health information by entities in the medical industry, while GLBA covers personal data handled by financial institutions.

As of May 2024, there is no comprehensive federal data privacy law regulating the handling of personal data across all industries, although Congress is currently considering such a law. The closest thing we have to a comprehensive federal law is the Federal Trade Commission’s power to combat “unfair and deceptive” business practices. The FTC has used this power for many years to target companies that mislead consumers about how their personal data is being used or fail to properly explain data usage.

In the absence of a federal comprehensive data privacy law, many states, led by California, have passed their own comprehensive data privacy laws. These laws apply to any entity doing business in those states, provided certain size or activity thresholds are met. Among other requirements, they require transparent privacy policies, sufficient technical protections, proper contracts with data vendors, and recourse mechanisms for consumers wishing to access their personal data.

Certain states also have unique data privacy laws addressing specific concerns. For example, Illinois has a biometric privacy law that imposes rules on companies collecting biometric markers (e.g., fingerprints, iris scans). As another example, Washington recently passed its own health privacy law, which, unlike HIPAA, applies to any entity handling health information operating in Washington. Each state also has laws governing how to notify consumers if the provider has experienced a data breach.

Strategies for Compliance

If your first reaction to the U.S. data privacy landscape is that it’s overwhelming, you’re not wrong. However, there are steps you can take to figure out a compliance plan that is right for your business. Read on to learn more about the steps that SPZ can lead you through.

Initial Steps

Data Mapping Exercise:

We work with clients to conduct a data mapping exercise. This involves asking questions like:

• Who do you collect personal data from?
• What personal data is collected, and for what purpose?
• Who has access to that personal data?
• Where is the personal data stored?
• What security measures have you or your vendors put in place for that personal data?

Once we have completed the data mapping exercise, we determine which data privacy laws apply.

Review Data Management Practices:

After identifying the applicable laws, we review your data management practices to determine what changes may be necessary for full compliance with applicable laws.

Risk/Cost Analysis:

We believe this step is the most important. We work with you to conduct a risk/cost analysis and determine which changes are top priorities, taking financial and operational resources into account.

Implementation:

Finally, we implement changes that align with your top priorities.

Interim Steps

If a full compliance analysis isn’t in your immediate future, here are some helpful steps you can take in the interim:

• Draft a Privacy Policy: Accurately explain your data management practices, including what personal data you collect, how you use that personal data, how you may disclose that personal data, and how users can access their personal data.
• Review Vendor Agreements: Examine your agreements with each vendor processing personal data on your behalf (e.g., a server host) to ensure those agreements include sufficient protections for that personal data.
• Appoint a Privacy Lead: Assign someone at your company to take the lead with privacy matters.
• Implement a Consumer Contact System: Set up a system for your consumers to contact you with privacy questions and concerns.

Data privacy compliance is a daunting task for SaaS providers. But if the provider tackles the task with intentionality and takes a step-by-step approach, compliance is more within reach than the provider may realize. 

How SPZ Legal Can Help

Navigating the complexities of data privacy laws can be challenging for any SaaS startup. At SPZ Legal, we specialize in guiding SaaS companies through the maze of data privacy compliance. 

Our team offers expertise in understanding and complying with data privacy laws, drafting clear and compliant privacy policies and data protection agreements, and conducting comprehensive data mapping exercises . Whether you are a new startup or an established SaaS company looking to update your compliance strategies, SPZ Legal is here to help. 

Contact us today to learn more about how we can support your business in achieving its goals while staying compliant with data privacy laws.