What is a DPA? Data Processing Agreement for GDPR Explained

Posted by Kevin Yun | August 5, 2023

Introduction

Chances are you're probably reading this as you are exploring what it takes to make your B2B SaaS company compliant with GDPR. You may have had a prospect or customer ask you for a copy of your DPA. Or perhaps you came across a GDPR checklist that mentioned the word "DPA" and you found this article after Googling "What is a DPA?".

The General Data Protection Regulation (GDPR) has significantly impacted how organizations across the European Union collect, process, and protect personal data. As a comprehensive privacy regulation, GDPR imposes strict obligations on companies that handle EU citizens' personal information. One of the key requirements under GDPR is having a Data Processing Agreement (DPA) in place between data controllers and processors. But what exactly is a DPA, and why is it so important for GDPR compliance?

A Data Processing Agreement is a legally binding contract that establishes the data protection responsibilities and liabilities between a data controller and a data processor. In simple terms, the data controller is the organization that determines why and how personal data should be processed. The data processor is a third party that carries out data processing services on behalf of the controller. Under GDPR, both controllers and processors have direct legal obligations to ensure personal data is properly handled and secured. A DPA formally defines those obligations between the two parties.

If you're looking for a DPA template to use for your own startup, we recommend using the example DPA provided by GDPR.eu here.

In this post, we will examine the key elements of a GDPR Data Processing Agreement and why having a comprehensive DPA is critical for organizations that process EU citizen data.

Key Elements of a GDPR Data Processing Agreement

While the specific contents may vary slightly, GDPR DPAs will generally include details of:

  • The nature and purpose of data processing: This outlines the specifics of what data will be collected, from whom, and for what purposes.
  • Type of personal data processed: The different categories of personal data included, such as names, contact information, financial details, IP addresses, location data, online identifiers, etc.
  • Categories of data subjects: The types of people the data pertains to, such as customers, newsletter subscribers, website visitors, event attendees, etc.
  • Processor's security obligations: The technical and organizational security measures the processor must implement when handling the data, including encryption, access controls, testing, audits, etc.
  • Sub-processing rules: Conditions for the processor to engage sub-processors or sub-contractors. Sub-processors would also be bound to the DPA.
  • Data transfer guidelines: Rules for transferring data outside of the EU, such as requiring Privacy Shield certification or Model Contract Clauses.
  • Audit rights: Allowing the controller to audit the processor's data security measures and GDPR compliance.
  • Obligations after contract termination: Such as deleting or returning all personal data after the contract ends.

The DPA provides legally binding instructions regarding how the processor can handle the controller's data. Adhering to the DPA helps minimize compliance risks.

Importance of Having a Data Processing Agreement

While DPAs may seem tedious to put together, they are critically important for several reasons:

  1. Helps ensure GDPR compliance: The DPA formally defines data protection responsibilities between controllers and processors. This helps close potential compliance gaps.
  2. Minimizes liability risks: Following a solid DPA shows regulators and data subjects that both parties are committed to handling personal data properly under GDPR. This reduces the risks of fines, lawsuits and other enforcement actions.
  3. Provides transparency to data subjects: EU citizens have the right to know how their personal information is processed. The DPA offers visibility into data handling practices.
  4. Builds trust between controllers and processors: A well-constructed DPA aligns expectations and responsibilities, leading to smoother business relationships.
  5. Standardizes data protection: Documenting requirements like security controls and audits sets consistent data handling rules for the processor across clients.

Without a DPA, data controllers could still be liable for the processor's mishandling of data. However, the agreement provides a legal commitment from the processor and a means to hold them accountable. Ultimately, having a comprehensive DPA minimizes compliance blind spots and demonstrates diligence to regulators and data subjects.

Consequences of Not Having a Data Processing Agreement

Unfortunately, many organizations undervalue the importance of DPAs in their GDPR compliance programs. Failing to have a solid DPA in place can lead to significant consequences, such as:

  • Regulatory investigations and fines: Supervisory authorities like the ICO can audit businesses to ensure they have appropriate contracts with processors. Not having a DPA would violate GDPR Article 28 and could trigger fines of up to 20 million EUR or 4% of global revenue.
  • Civil lawsuits from data subjects: Individuals who have suffered damages from non-compliant data processing can sue both the controller and processor for compensation. Lacking defined responsibilities in a DPA makes winning these lawsuits more difficult.
  • Reputational damage: Data breaches or compliance violations get widespread media coverage. Companies without proper processor contracts could face public backlash and lose customer trust.
  • Termination of services: Processors handling sensitive data may refuse services to controllers that won't sign a DPA, due to their own GDPR liability. This can disrupt business operations.
  • Weaker security posture: Without a DPA, processors have less incentive to implement strong data security. This indirectly exposes the controller to more cyber risks.

Creating a comprehensive Data Processing Agreement clearly defines responsibilities between controllers and processors. While the process takes time and effort, the long-term benefits are well worth it for smoothly navigating GDPR obligations and protecting personal data. Maintaining GDPR compliance should be an ongoing process, not just a one-time checkbox activity. Investing in a robust DPA is a key step for operationalizing data protection and minimizing compliance risks.

Conclusion

Data Processing Agreements play a critical role in formalizing the data protection responsibilities between controllers and processors under GDPR. A well-constructed DPA establishes legally binding data handling guidelines and security expectations for the processor. Having a DPA in place provides transparency for data subjects, reduces liability risks for both parties, and helps sustain long-term GDPR compliance.

All organizations that are subject to GDPR should take the time to put together a comprehensive data processing contract with any third-party data processors they engage. While the effort to craft a solid DPA is an investment, it pays long-term dividends by upholding data security and privacy protections. With a strong foundation provided by the DPA, organizations can enable more secure and responsible processing of personal data in alignment with GDPR’s goals.

Once you have a DPA for your company, your prospects and customers may request a signed copy of your DPA. This is where ComplyDog comes in. Our GDPR compliance software comes with integrations like DocuSign and Dropbox Sign to automate this process so that you never have to handle DPA signature requests manually. ComplyDog offers a free trial with no credit card required -- sign up here.

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