January is Data Privacy Awareness Month, an appropriate time for employers to assess how they collect, use, store, and protect employee personal information. While much of the public discourse around data privacy focuses on customer or consumer data, employee data is often equally sensitive—and increasingly targeted by cybercriminals. Breaches involving employee information can expose employers to regulatory scrutiny, litigation, and reputational harm. For example, last week, a former Chipotle employee filed a proposed federal class action against the casual Mexican restaurant chain, alleging its reckless data security allowed cybercriminals to view and steal personal employee data.

Employee data typically includes Social Security numbers, bank account information, tax records, health and benefits data, background checks, and login credentials. This information is attractive to cybercriminals because it can be used for identity theft, payroll fraud, and social engineering attacks. Recent incidents demonstrate that employee data breaches often occur through phishing attacks, compromised credentials, third-party vendors, or inadequate internal access controls, rather than sophisticated technical exploits.

From a legal perspective, breaches involving employee data may trigger obligations under state data breach notification laws, federal statutes, and sector-specific regulations. In addition, employers may face claims for negligence, invasion of privacy, or other legal claims if compromised data is misused. Multistate employers must also navigate a patchwork of notification deadlines and content requirements, increasing compliance complexity and risk.

Employers can take several practical steps to reduce both the likelihood of an employee data breach and the resulting liability:

• First, employers should inventory the employee data they collect and retain, and eliminate the retention of information that is no longer necessary for business or legal purposes. Data minimization reduces exposure in the event of an incident.
• Second, access to employee data should be limited to personnel with a legitimate business need, supported by role-based access controls and regular access reviews.
• Third, employee training remains critical. Regular training on phishing, password hygiene, and secure handling of sensitive information can materially reduce human-error-driven incidents.
• Fourth, employers should evaluate their incident response plans to ensure they specifically address employee data breaches, including coordination among HR, IT, legal, and communications teams.
• Finally, vendor management is essential. Employers should assess whether payroll providers, benefits administrators, and other vendors handling employee data maintain appropriate security controls and contractual indemnities.

Data Privacy Awareness Month is an opportunity for employers to proactively address employee data privacy risks. Thoughtful governance, training, and preparedness can significantly reduce exposure when—not if—a data incident occurs.

For additional information, please contact Mike R. Rahmn.