Use of sub-processors: Overview, definition, and example
What is use of sub-processors?
The use of sub-processors refers to the practice where a primary service provider (often called the "data processor") engages a third party (sub-processor) to carry out specific tasks or processes on behalf of their clients, typically in the context of data processing or IT services. Sub-processors are used when the main processor needs additional support for certain activities such as data storage, customer support, or software development. The primary service provider remains responsible for ensuring that the sub-processor complies with relevant regulations and maintains the security and confidentiality of the data.
Why is use of sub-processors important?
The use of sub-processors is important because it allows service providers to delegate specific tasks to specialized third parties, improving efficiency and enabling them to offer more comprehensive services. Sub-processors often have expertise or capabilities that the main processor may not possess. However, it’s critical for businesses to manage and monitor the use of sub-processors to ensure that they follow legal requirements, particularly when handling sensitive data. For example, in the context of data privacy laws such as GDPR, companies must inform clients if their data will be processed by sub-processors and seek consent when required.
Understanding use of sub-processors through an example
Imagine a company that provides cloud storage services. The company may rely on sub-processors to handle certain aspects of its operations, such as managing its data centers or providing customer support. In this case, the cloud storage company would inform its clients about the sub-processors it uses and the specific tasks they perform (such as managing servers or ensuring data redundancy). The company remains responsible for ensuring that these sub-processors follow the same privacy and security standards set by the cloud service provider.
In another example, a company offers payroll processing services to small businesses. The company may hire a sub-processor to manage certain tasks like tax filings or benefits administration. The main provider must disclose this use of sub-processors in the service agreement and ensure that the sub-processor adheres to the necessary confidentiality and regulatory requirements for handling payroll data.
An example of a use of sub-processors clause
Here’s how a clause related to the use of sub-processors might look in a contract:
“The Service Provider may use sub-processors to fulfill certain obligations under this Agreement, provided that the Service Provider ensures that all sub-processors are bound by written agreements that include terms no less protective than those in this Agreement. The Service Provider shall provide the Customer with a list of sub-processors and update this list in the event of any changes.”
Conclusion
The use of sub-processors enables businesses to scale their operations by outsourcing specialized tasks while maintaining responsibility for the overall service. It is essential for businesses to ensure that the use of sub-processors complies with regulatory requirements, particularly in data protection, and that proper agreements are in place to safeguard data security and privacy. Transparency and monitoring of sub-processors help businesses mitigate risks and maintain trust with clients and stakeholders.
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.