What Is a DPA (Data Processing Agreement) - And Are They Necessary?

What Is a Data Processing Agreement (DPA)?

A Data Processing Agreement (DPA) is a legally binding agreement between a data controller and a data processor. It outlines the terms and conditions for processing personal data and ensures data is processed in accordance with the relevant data protection laws and regulations.

• Data Controller: The entity that determines why and how personal data is processed.
• Data Processor: The third party that processes personal data on behalf of the data controller.

DPAs are sometimes called Data Processing Addendums or Data Protection Agreements but they all serve the same purpose: to regulate how data is collected, stored, accessed, processed, protected and used.

Why Are DPAs Important?

The main purpose of a DPA is to protect the privacy and security of individuals’ personal data. They ensure companies handling sensitive data comply with strict legal requirements so minimising the risk of data breaches and building trust with consumers.
Key reasons DPAs are important:

• Legal Compliance: Compliance with various data protection regulations like GDPR (Europe), CCPA (California), CPRA (California), CDPA (Virginia), CPR (Colorado).
• Data Security: Establishing guidelines for data processing practices so personal data is protected from unauthorized access and breaches.
• Accountability: Defining roles, responsibilities and obligations of both the data controller and the data processor.
• Transparency: Ensuring users’ rights are protected by outlining how their data will be used, stored and processed.
• Avoiding Fines: Non compliance can result in heavy fines, litigation and damage to reputation.

What Should a Data Processing Agreement Include?

To be comprehensive a well structured DPA should include:

General Information

• Company information of the parties (company names, addresses, registration details).
• Definitions of relevant terms (Data Controller, Data Processor, Data Subject etc.).

Scope and Purpose

• Purpose of the data processing activities.
• Types of personal data to be processed.
• Duration and geographical limitations of data processing activities.

Data Security Measures

• Specific measures to protect personal data (encryption, access controls, pseudonymization etc.).
• Breach and incident response obligations.

Individual Rights

• How data subjects can exercise their rights (access, correction, deletion etc.).
• Process for handling data subject requests.

Obligations of Data Controller and Data Processor

• Clearly defined roles for each party.
• Compliance with relevant regulations and standards.
• Documentation of processing activities.

Sub-Processors

• Rules for engaging third party sub-processors.
• Requirements for sub-processors to comply with the DPA.

Data Transfers

• Conditions for transferring personal data to countries outside the original jurisdiction.
• Compliance with data protection laws for international transfers.

Termination and Liabilities

• Conditions to terminate the DPA.
• Liability and indemnification provisions.

Audits and Monitoring

• Process for ongoing compliance.
• Requirements for audits and evidence of compliance.

Common Clauses in Data Processing Agreements

Some of the most common clauses in DPAs are:

• Purpose of data processing.
• Processing instructions from the controller to the processor.
• Security measures.
• Data transfer conditions.
• Rights and obligations of the controller and processor.
• Sub-processor procedures.
• Documentation and audit requirements.

When Is a DPA Mandatory?

A DPA is mandatory when a data controller engages a third party data processor to process personal data on its behalf. This is especially relevant under regulations like GDPR, CCPA, CPRA and CDPA. Companies should always ensure they have the right DPAs in place before engaging external vendors to avoid legal penalties and reputation damage.

How to Draft a Data Processing Agreement

Drafting a Data Processing Agreement requires considering legal requirements, technical safeguards and practical measures for ongoing compliance. The following steps outline how to draft a robust DPA:

Identify the Parties Involved

Start by identifying the data controller and data processor. Include company names, addresses and registration details.

Purpose and Scope of Processing

Clearly state the purpose of personal data collection and processing. Outline the scope of processing:

• Categories of data subjects.
• Types of personal data (e.g. names, email addresses, financial details).
• Duration of processing activities.

Data Security Measures

Describe the technical and organizational measures to protect personal data:

• Data encryption and pseudonymization.
• Regular security assessments and audits.
• Access controls and authentication mechanisms.
• Incident response procedures for breaches.

Data Transfers

Outline the conditions for transferring data to third countries or external processors. Include:

• Standard Contractual Clauses (SCCs).
• Binding Corporate Rules (BCRs).
• Adequacy decisions from relevant authorities.

Data Subject Rights

Provide information on how data subjects can exercise their rights:

• Access their data.
• Request data corrections or deletions.
• Object to processing activities.
• Data portability requests.

Sub-Processor Agreements

Specify requirements for engaging sub-processors:

• Notification and approval process.
• Contractual obligations for sub-processor compliance.
• Periodic assessments and audits of sub-processors.

Termination and Liabilities

Clarify the terms to terminate the DPA and outline the liabilities of each party. Define the circumstances under which liability can be claimed.

Documentation and Audit Rights

Outline the right of the data controller to conduct audits or request documentation of compliance. Specify the frequency and scope of audits.

Review and Update

DPAs should be reviewed and updated regularly to ensure ongoing compliance with changing regulations. Implement a process for monitoring and revising agreements as needed.

When Creating a DPA

Consider the following:

• Legal Obligations: Compliance with GDPR, CCPA, CPRA and other relevant regulations.
• Customization: Tailor the DPA to your business needs and processing activities.
• Data Breach Response: Clearly outline steps to take in case of a data breach, including notification procedures and remediation plans.
• Record-Keeping: Keep records of processing activities as required by data protection laws.
• Dispute Resolution: Define how disputes will be resolved under the DPA.

Common DPA Mistakes

• Vague Clauses: Don’t use vague language that can be interpreted differently. Clearly state responsibilities, obligations and expectations.
• Inadequate Security: Failing to specify security measures can leave data exposed. Make sure your DPA includes detailed technical safeguards.
• Data Subject Rights: Overlooking data subject rights can lead to compliance issues. Ensure your DPA provides mechanisms for individuals to exercise their rights.
• Sub-Processor Agreements: If your processor uses sub-processors, make sure you have proper agreements in place to maintain compliance and accountability.
• Outdated Agreements: Review and update your DPAs regularly to reflect changes in processing activities, legal requirements or technological advancements.

In Conclusion

Data Processing Agreements (DPAs) are a must-have for data protection compliance. By defining roles, responsibilities, security measures and data subject rights, companies can create a solid framework to protect personal data. Whether you are a data controller or data processor, having well drafted DPAs in place is key to compliance and trust with your customers and users.