Three-step test under GDPR: Evaluating legitimate interest in data processing
The three-step test is a GDPR assessment that helps data controllers determine whether they can lawfully process personal data under the legitimate interest legal basis. It ensures that a controller’s interests do not override the fundamental rights and freedoms of data subjects.
If the three-step test is passed, the controller can proceed with processing under the legitimate interest legal ground.
What are the three steps of the test?
The three-step test consists of:
1. Purpose test – Is there a legitimate purpose for processing?
- The controller must define a specific, lawful, and clearly justified purpose for processing the data.
- The purpose must align with the organization’s objectives and not be misleading or unlawful.
2. Necessity test – Is processing necessary to achieve the purpose?
- The controller must determine if the data processing is essential for achieving its goal.
- If a less intrusive method can achieve the same result, the processing may not be justified.
3. Balancing test – Do data subject rights outweigh the controller’s interest?
- The controller must assess whether the processing impacts the data subject’s rights, privacy, or freedoms.
- If the individual’s rights outweigh the controller’s interests, processing cannot continue without a different legal basis.
If all three tests are passed, processing under legitimate interest is considered GDPR-compliant.
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How to apply the three-step test in GDPR compliance
1. Clearly define the purpose of processing
- Identify why the data is being processed and whether it serves a legitimate business interest.
- Ensure the purpose is specific, explicit, and lawful.
2. Assess the necessity of data processing
- Determine whether the data processing is essential or if there’s a less intrusive alternative.
- Minimize data collection to only what is strictly necessary.
3. Evaluate the impact on data subjects
- Weigh the controller’s interest against the individual’s privacy rights.
- If processing poses a high risk, consider obtaining consent or using another legal basis.
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Why the three-step test is essential for GDPR compliance
Applying the three-step test helps organizations:
- Ensure lawful data processing under the legitimate interest legal basis.
- Reduce legal risks by evaluating potential privacy concerns.
- Improve transparency by documenting processing justifications.
- Strengthen accountability by aligning with GDPR’s fairness principle.
By conducting a thorough three-step test, businesses can ensure compliance, protect data subject rights, and justify legitimate interest processing.
