Data PrivacyChallenges for Multinational Employers under India’s New Data Privacy Regime

INTRODUCTION

India’s introduction of the Digital Personal Data Protection Act, 2023 (DPDP Act) signifies a landmark development in the country’s legal approach to privacy and data governance. With growing digital integration in business operations, the DPDP Act introduces a structured regime for the lawful processing of personal data, placing obligations on data fiduciaries while safeguarding the rights of data principals.

For multinational employers operating within India’s jurisdiction, this legislation introduces a new layer of regulatory complexity. Balancing compliance with the DPDP Act and existing global data protection frameworks—such as the GDPR or CCPA—poses distinct operational and legal challenges. This article explores the key compliance hurdles that multinational employers may face and outlines practical strategies to navigate this evolving legal landscape.

IMPLICATIONS ON MULTINATIONAL EMPLOYERS

By extending its territorial reach to any entity that processes the personal data of individuals within India—regardless of where that processing occurs—the DPDP Act fundamentally alters how global companies must think about employee data. Routine HR processes such as recruitment, performance management, and payroll administration now fall squarely under the Act’s purview, requiring employers to meticulously map all data flows touching their India-based workforce and assess each interaction against the DPDP Act’s stringent requirements.

One of the Act’s most far‑reaching provisions is its insistence on valid legal grounds for processing personal data. While explicit consent remains the primary basis for handling sensitive personal data, the Act also contemplates alternative grounds such as “employment-related necessity” under certain legitimate uses. Yet, in the absence of detailed regulations, these alternative grounds remain vaguely defined.

As a result, standard “terms and conditions” clauses in offer letters are unlikely to satisfy the DPDP Act’s demand for clear, informed, and specific consent. Multinational employers must therefore overhaul their consent management frameworks: crafting granular consent notices, embedding lawful‑processing justifications in HR policies, and maintaining auditable records of each employee’s choices.

Cross‑border data transfers, long a cornerstone of multinational HR operations, now face heightened scrutiny. Under the DPDP Act, any transfer of personal data outside India must comply with government‑approved mechanisms/restrictions or rely on explicit exemptions granted by the Data Protection Board. With official SCC templates and lists of approved jurisdictions still pending notification, many global employers find themselves in a state of regulatory confusion. Employers that channel India-based employee data to regional hubs or global analytics platforms must institute interim contractual safeguards—such as robust indemnity clauses—and continuously monitor rule‑making so that, to ensure swift compliance.

CHALLENGES FACED BY MULTINATIONAL EMPLOYERS

1. Compliance with Consent and Purpose Limitation

The DPDP Act mandates that personal data be processed only for specific, lawful purposes with the consent of the Data Principal. Employers must obtain clear consent from employees for data processing activities, which may require revising employment contracts and data collection practices. This is particularly challenging when dealing with sensitive personal data, such as health records or financial information, which necessitate explicit consent and justified need for processing.

2. Cross-Border Data Transfers

While the DPDP Act permits cross-border data transfers, it allows the Central Government to restrict transfers to certain countries. Multinational companies must stay informed about such restrictions and ensure that data transfers comply with both Indian regulations and the data protection laws of other jurisdictions. This may involve implementing additional safeguards or revising data transfer agreements.

3. Data Breach Notification Obligations

The DPDP Act requires organisations to promptly inform both the Data Protection Board and the individuals concerned in the event of a data breach. Unlike several global data protection regimes, the Act does not set any minimum risk level for mandatory reporting. Consequently, every breach, regardless of its impact, must be disclosed. This underscores the need for companies to establish efficient breach response mechanisms and transparent communication frameworks to meet their legal obligations effectively.

4. Accountability for Third-Party Processors

Employers often engage third-party vendors for services like payroll processing or background checks. Under the DPDP Act, Data Fiduciaries are accountable for the actions of their Data Processors. This requires thorough due diligence, comprehensive contractual agreements outlining data protection responsibilities, and regular audits to ensure compliance.​

Compliance with the DPDP Act is essential for multinational companies, particularly due to its extraterritorial scope.

AMLEGALS REMARKS

The DPDP Act marks a pivotal shift in India’s approach to data privacy, introducing a regulatory framework that demands accountability, transparency, and robust data governance. For multinational employers, especially those with operations or customers in India, the Act imposes significant compliance obligations, both within and beyond India’s borders. A

s enforcement mechanisms strengthen and penalties for non-compliance remain high, it is crucial for such organisations to adopt a proactive compliance strategy, one that aligns internal policies, employee practices, and cross-border data flows with the requirements of the DPDP Act. In doing so, multinational companies not only mitigate legal risks but also build greater trust with stakeholders in one of the world’s fastest-growing digital economies.

– Team AMLEGALS assisted by Ms. Anushka Mishra (Intern)