Sub-processors: Overview, definition, and example
What are sub-processors?
Sub-processors are third-party service providers that process data on behalf of a company’s primary data processor. In business and legal terms, sub-processors are commonly used in data processing agreements, especially when companies outsource tasks like cloud storage, payment processing, or customer support.
For example, if a software company uses a cloud hosting provider to store customer data, that hosting provider is considered a sub-processor because it handles data on behalf of the software company.
Why are sub-processors important?
Sub-processors are important because they play a key role in handling and securing sensitive data. Companies must ensure that sub-processors comply with data protection regulations, such as the General Data Protection Regulation (GDPR) or other privacy laws.
For SMBs, using sub-processors can improve efficiency and scalability, but businesses must carefully manage these relationships to ensure data security and compliance. Many contracts require businesses to disclose sub-processors and obtain approval before engaging them.
Understanding sub-processors through an example
Imagine an e-commerce company that collects customer payment details but does not process payments directly. Instead, it hires a third-party payment processor to handle transactions securely. In this case, the payment processor is a sub-processor because it processes customer data on behalf of the e-commerce company.
In another case, a small marketing agency uses an email automation platform to manage client campaigns. The platform stores and processes customer data, making it a sub-processor under the agency’s data processing agreements with its clients.
An example of a sub-processors clause
Here’s how a sub-processors clause might appear in a contract:
“The Processor may engage Sub-Processors to assist with data processing activities under this Agreement. The Processor shall ensure that all Sub-Processors comply with applicable data protection laws and maintain appropriate security measures. The Controller reserves the right to review and approve the use of any Sub-Processor.”
Conclusion
Sub-processors help businesses manage data processing efficiently, but they also introduce security and compliance responsibilities. For SMBs, properly vetting sub-processors and ensuring compliance with privacy laws is essential to protecting customer data and avoiding legal risks. Clearly defining sub-processor obligations in contracts helps maintain transparency and trust with clients and regulatory authorities.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.