Building a strong employee privacy strategy: policies, compliance & risks

What is employee privacy in HR?

Employee privacy refers to the protections employers must provide when collecting, storing and using an employee’s personal information. This includes Social Security numbers, medical data, personnel files, financial records, background checks, disciplinary records and digital activity generated at work.

In today’s modern world there are many ways that employers can and do monitor employee activities such as computer use, phone calls, texts and instant messaging. The primary question employers should answer is whether they should monitor employees. Employers should consider whether and to what extern they have a legitimate business interest in keeping tabs on employees, that outweighs the employee right to privacy and any negative impact on employee morale that may result from monitoring.

In the US, employee privacy is shaped by federal laws such as:

• the Privacy Act of 1974
• the Electronic Communications Privacy Act
• the Stored Communications Act
• the National Labor Relations Act
• the Americans with Disabilities Act (ADA)
• the Health Insurance Portability and Accountability Act (HIPAA).

Employers have certain obligations around employee privacy, including:

• limiting access to sensitive information
• maintaining secure systems of record
• giving proper notice when monitoring may occur
• ensuring data is only used for legitimate business purposes
• having clear policies for data retention, destruction and third-party access
• responding to potential data breaches.

When HR teams collect information without transparency, misuse data or fail to secure it, organizations face serious legal, financial and reputational consequences. 

The importance of employee privacy compliance

Strong employee privacy practices build trust, reduce legal exposure and help create a safe and supportive working environment. Employees expect their personal information to remain confidential, especially data related to health, identity, compensation, family status and performance. 

There are many compelling reasons to monitor employee activities both on and off employer property, for example:

• Maintaining a productive workplace
• Quality control of employee work
• Preventing discrimination and harassment lawsuits
• Protecting relationships with clients and customers
• Maintaining the security of trade secrets and confidential information
• Protecting employer computers, property and equipment
• Protecting employee reputation
• Preventing employee theft and misconduct
• Saving employers money, time and resources.

While there are many reasons to monitor employee behavior, employers must also consider the following potential negative ramifications of monitoring and surveillance:

• Employee privacy expectations. Technology and surveillance have reduced overall privacy expectations, but employees still expect their personal privacy to be respected. Employers who ignore this risk damaging trust and morale.
• Employee right to collective action. Employees have a legal right to advocate for better workplace conditions together or on behalf of others. Discipling staff for protected activities found through monitoring can violate federal law.
• Employee right to safeguard personal information. With identity theft on the rise, employees may be rightfully fearful of personal information falling into the wrong hands.
• Employee right to be free from false publicity or defamatory statements. Employees do not leave the right to be free from defamation or false publicity at the workplace door.
• Employee morale. An employer that records and reviews its employees’ every move or communication does not create a high level of trust and appreciation.
• High costs. Monitoring can be expensive and may not deliver enough benefit to justify the investment. For small businesses, the cost of software, hardware, and skilled staff often outweighs minor efficiency gains.

What’s included in an employee privacy strategy

An employee privacy strategy should include clear policies regarding monitoring and surveillance practices, ensuring that employees are informed and consent to such practices. It is essential to balance the organization’s legitimate business interests with employees’ rights to privacy and potential impact on morale. Compliance with relevant laws is crucial, additionally ensuring that all company data is removed from personal devices during exit processes is vital to protect sensitive information.

Key components of an employee privacy strategy should include: 

• Clear privacy and confidentiality policies
  Explain what information is collected, how it’s used, who has access and how long it’s retained. Policies should also outline employee rights and employer obligations. 
• Secure systems and restricted access
  Physical and digital sensitive files must be stored securely with access granted only to those with a legitimate business need, such as HR or authorized managers. 
• Transparent employee monitoring practices 
  If an organization monitors email, internet use, phone activity, location data or security footage, employees must receive proper notice in accordance with federal and state laws. 
• Data minimization and purpose limitations 
  Collect only what is necessary and use it only for HR-related functions such as payroll, benefits administration, performance management or compliance reporting. 
• Clear procedures for handling personnel files 
  Maintain separate files when required by law (e.g., medical records under ADA/HIPAA) and follow strict guidelines for reviewing, updating or disclosing information. 
• Data breach response protocols
  Have defined steps for reporting, investigating, and mitigating a data breach, including required employee notifications and corrective action.