HIPAA Breach Caused by Employee PHI Disclosure: Requirements, Notifications, and Sanctions

Definition of HIPAA Breach

A HIPAA breach occurs when Protected Health Information (PHI) is used or disclosed in a manner not permitted by the HIPAA Privacy Rule, and that incident compromises the privacy or security of the PHI. In the context of an employee-caused disclosure—such as emailing a spreadsheet of patient data to the wrong recipient or discussing patient details with an unauthorized person—the event is presumed to be a breach unless a documented Breach Risk Assessment shows a low probability that the PHI has been compromised.

PHI includes any individually identifiable health information in any form or medium. Both covered entities and business associates must apply the HIPAA Security Rule safeguards to electronic PHI and ensure their workforce understands permissible uses and disclosures to avoid impermissible employee actions that could trigger the Breach Notification Rule.

Breach Notification Requirements

Once a breach is discovered, you must notify affected individuals without unreasonable delay and no later than 60 calendar days from discovery. The individual notice must be written in plain language and include: what happened (including dates of breach and discovery), the types of PHI involved, steps individuals should take to protect themselves, what you are doing to investigate and mitigate, and how individuals can contact you for information and assistance.

Substitute notice is required if you lack sufficient contact information: for fewer than 10 individuals, use an alternative written, telephone, or other means; for 10 or more, post on your website for at least 90 days or use major print/broadcast media. Telephone notice may supplement written notice in urgent cases involving possible misuse of PHI.

Business Associate Obligations: a business associate that discovers a breach must notify the covered entity without unreasonable delay (no later than 60 days). The notice should identify each affected individual and include available details so the covered entity can meet its Breach Notification Rule duties. Contracts should specify timing, content, and cooperation requirements.

Exceptions to Breach Definition

Not every employee slip rises to the level of a breach that requires notification. Three narrow exceptions apply when the information is not further used or disclosed in a manner not permitted by the Privacy Rule:

• Unintentional acquisition, access, or use by a workforce member acting in good faith and within the scope of authority (for example, a nurse opens the wrong chart, realizes the error immediately, and closes it without further use).
• Inadvertent disclosure from one authorized person to another authorized person within the same covered entity or business associate (for example, sending PHI to the wrong internal clinician who is also authorized to access it).
• A disclosure where you have a good-faith belief the unauthorized recipient could not reasonably have retained the information (for example, a mailed letter returned unopened or an email that bounces back undelivered).

If none of these exceptions fits, you must perform and document a Breach Risk Assessment to decide whether notification is required.

Conducting Risk Assessments

Your Breach Risk Assessment should be systematic, prompt, and well documented. Evaluate and record, at minimum, the four factors recognized under the Breach Notification Rule to determine whether there is a low probability that PHI was compromised:

• Nature and extent of PHI involved, including the sensitivity of data elements (diagnoses, SSNs, financial data) and the likelihood of reidentification.
• The unauthorized person who used the PHI or to whom the disclosure was made, including whether that recipient is subject to confidentiality obligations or capable of using the PHI for harm.
• Whether the PHI was actually acquired or viewed (for example, logs indicating no download or view versus confirmed access).
• The extent to which the risk has been mitigated (for example, obtaining a satisfactory confidentiality assurance, remote wiping a device, or confirming destruction/return of data).

Good practice includes preserving logs and screenshots, interviewing involved employees, locking down further disclosures, and aligning corrective actions with the HIPAA Security Rule. Document your rationale, evidence, and decision. If the outcome does not clearly support a low probability of compromise, treat the incident as a breach and proceed with notifications.

Applying Sanctions for Non-Compliance

The HIPAA Privacy Rule requires covered entities and business associates to apply appropriate Workforce Sanctions when employees fail to comply with HIPAA policies or the Rules. Your sanctions policy should be written, communicated to staff, and enforced consistently to deter future violations and demonstrate accountability.

Use a tiered approach that matches intent and impact:

• Inadvertent, low-risk errors: coaching, retraining, and a written warning with monitoring.
• Negligent or repeated violations: final written warning, suspension, performance plan, and heightened auditing.
• Willful neglect, snooping, or disclosure for personal gain: termination, access removal, and, where applicable, referral to licensing boards or law enforcement.

For contractor personnel and business associates, apply contract remedies—up to termination—and require corrective action plans. Always document the violation, investigation, sanction decision, and remedial training to support compliance with the Breach Notification Rule and the HIPAA Security Rule.

Encryption as Safe Harbor

Encryption provides a powerful safe harbor: if PHI is “secured” through strong encryption consistent with HHS guidance, the loss or theft of that data is generally not a reportable breach. Effective controls include modern, industry-standard algorithms, proper key management, full-disk and file-level encryption for data at rest, and TLS for data in transit.

Safe harbor depends on implementation quality. If encryption is disabled, keys are stored on the same device and compromised, or a user exports unencrypted files, you may lose the protection. Destruction of media (for example, shredding or secure wiping) also qualifies as a method of securing PHI. Pair encryption with access controls, endpoint management, and workforce training to reduce employee-caused PHI disclosures.

Notification Procedures for Media and HHS

If a breach affects more than 500 residents of a single state or jurisdiction, you must notify prominent media outlets serving that area without unreasonable delay and within 60 calendar days of discovery. The media notice should summarize the same elements provided to individuals and direct readers to your designated contact resources.

Reporting to HHS is always required. For breaches affecting 500 or more individuals, report to HHS contemporaneously with individual notice (no later than 60 days from discovery). For breaches affecting fewer than 500 individuals, log them and submit to HHS within 60 days after the end of the calendar year in which they were discovered.

Before issuing notices, verify counts by state/jurisdiction, finalize your call center and web content, and coordinate public messaging. Document the timeline, recipients, and content of every notification. Summary: if an employee causes a PHI disclosure, act fast—assess, mitigate, notify as required, and apply sanctions—so you meet the HIPAA Privacy Rule, Security Rule, and Breach Notification Rule obligations.

FAQs

What constitutes an employee-caused PHI disclosure breach?

An employee-caused breach arises when a workforce member uses or discloses Protected Health Information in a way the HIPAA Privacy Rule does not permit—such as sending PHI to the wrong recipient, accessing records without a job-related need, or discussing patient details with unauthorized parties—and a Breach Risk Assessment does not show a low probability that the PHI was compromised.

When must a breach be reported to HHS and affected individuals?

Notify affected individuals without unreasonable delay and no later than 60 calendar days after discovery. Report to HHS within 60 days for breaches affecting 500 or more individuals; for fewer than 500, submit your annual log to HHS within 60 days after the end of the calendar year. If more than 500 residents of a state or jurisdiction are affected, notify prominent media outlets within the same 60-day window.

What sanctions apply to employees responsible for PHI breaches?

Sanctions should align with intent and impact: from retraining and written warnings for inadvertent, low-risk errors to suspension or termination for reckless, repeated, or willful violations. Document the conduct, investigation, decision, and corrective actions, and apply enforcement consistently across your workforce.

How does encryption affect breach notification requirements?

If PHI is properly encrypted in accordance with HHS guidance, a loss or theft of that data is generally not a reportable breach under the Breach Notification Rule. However, if encryption was not active, keys were compromised, or the PHI was exported unencrypted, safe harbor may not apply and notification may be required.