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Biometric Data Collection and Storage: 5 Legal Myths That Put SMBs at Risk

The fingerprint scanner at your office door, the facial recognition system clocking employees in, the voice authentication protecting your customer accounts — biometric technology feels futuristic and secure. But the legal landscape surrounding biometric data collection and storage is riddled with dangerous misconceptions that expose small and mid-sized businesses to catastrophic liability every single day.

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Here are five pervasive myths that could cost your business millions.

Myth #1: "If There's No Federal Biometric Law, We Don't Need to Worry"

Why People Believe This

Business owners often assume that legal compliance flows top-down — that without a sweeping federal biometric privacy statute, they operate in a regulatory vacuum. Since Congress has not passed a comprehensive federal biometric privacy law, many SMBs conclude that biometric data collection exists in a legal gray area where enforcement is minimal.

The Reality

The absence of a single federal law does not mean the absence of regulation. Illinois' Biometric Information Privacy Act (BIPA), enacted in 2008, remains the most aggressive biometric privacy statute in the United States and has generated billions of dollars in settlements and judgments. Texas has its Capture or Use of Biometric Identifier Act (CUBI). Washington state has its own biometric privacy provisions. Colorado, Virginia, and Connecticut have incorporated biometric data protections into broader consumer privacy laws enacted between 2021 and 2023.

In January 2023, the Illinois Supreme Court ruled in Cothron v. White Castle System, Inc. that a separate BIPA violation accrues each time a company scans a fingerprint or face without proper consent — not just the first time. White Castle faced potential damages exceeding $17 billion. According to a 2023 report from Seyfarth Shaw LLP, over 2,000 BIPA lawsuits were filed in Illinois between 2020 and 2023 alone.

The Consequence of Believing This Myth

Businesses operating across state lines or employing remote workers in states with biometric protections can face class-action lawsuits without ever realizing they were subject to those laws. Ignorance of state-level regulation is not a defense.

Myth #2: "Biometric Data Is Just Like Any Other Personal Data"

Why People Believe This

Many companies lump biometric identifiers — fingerprints, retinal scans, voiceprints, facial geometry — into the same category as email addresses, phone numbers, or Social Security numbers. After all, they're all "personal information," right?

The Reality

Biometric data is fundamentally different because it is immutable. If a password is compromised, you change it. If a credit card number leaks, you cancel the card. If your fingerprint data is stolen, you cannot grow new fingers. This permanence is precisely why legislators treat biometric data with heightened legal scrutiny.

The European Union's General Data Protection Regulation (GDPR) classifies biometric data as a "special category" under Article 9, requiring explicit consent and imposing stricter processing conditions than standard personal data. Similarly, BIPA mandates specific written consent, a publicly available retention policy, and a defined destruction timeline — requirements that go far beyond what is demanded for ordinary personal information.

A 2022 report from the Identity Theft Resource Center found that breaches involving biometric data increased by 65% compared to the previous year, underscoring the growing threat landscape.

The Consequence of Believing This Myth

Companies that apply generic data protection policies to biometric information inevitably fail to meet the elevated legal standards. This gap creates direct liability exposure and regulatory scrutiny.

Myth #3: "Employee Consent Is Implied When They Use Our Biometric Systems"

Why People Believe This

The reasoning seems logical: if an employee places their finger on a scanner every morning without objecting, they have implicitly agreed. Many employers assume that continued use equals consent.

The Reality

Under BIPA and similar statutes, consent must be informed, written, and obtained before collection. The law requires that companies provide a clear disclosure explaining what biometric data is being collected, the purpose of collection, and the duration of storage. The individual must then sign a written release.

In Rogers v. BNSF Railway Co. (2022), a federal jury found BNSF liable for $228 million in BIPA damages because a third-party vendor collected fingerprints from truck drivers without proper written consent — even though the drivers voluntarily used the scanners. The court was unambiguous: voluntary participation does not constitute legally valid consent.

The Consequence of Believing This Myth

Relying on implied consent exposes businesses to per-violation statutory damages that accumulate rapidly across every employee and every scan.

Myth #4: "We Can Store Biometric Data Indefinitely as Long as It's Encrypted"

Why People Believe This

Strong encryption feels like an impenetrable shield. If the data is secure, why would retention timelines matter?

The Reality

Encryption addresses security, not legality. BIPA Section 15(a) explicitly requires organizations to establish a written policy detailing a retention schedule and destruction guidelines. Data must be destroyed when the initial purpose is fulfilled or within three years of the individual's last interaction with the company — whichever comes first. GDPR's data minimization principle under Article 5(1)(e) similarly mandates that data not be kept longer than necessary.

The Federal Trade Commission (FTC) has also signaled increasing enforcement interest. In its 2023 policy statement on biometric information, the FTC warned that deceptive or unfair practices involving biometric data — including indefinite retention — could trigger enforcement actions under Section 5 of the FTC Act.

The Consequence of Believing This Myth

Indefinite storage creates compounding legal risk. Every day data is retained beyond its lawful period represents continued noncompliance.

Myth #5: "Only Big Tech Companies Get Sued Over Biometric Data"

Why People Believe This

Headlines about Facebook's $650 million BIPA settlement and Clearview AI's regulatory battles create the impression that enforcement targets only corporate giants.

The Reality

BIPA lawsuits disproportionately target mid-sized employers — restaurants, warehouses, staffing agencies, and retail chains using biometric time clocks. Seyfarth Shaw's annual BIPA litigation tracker consistently shows that the majority of defendants are not Fortune 500 companies. Plaintiffs' attorneys actively pursue SMBs because statutory damages of $1,000 per negligent violation and $5,000 per intentional violation make class actions lucrative regardless of company size.

The Consequence of Believing This Myth

SMBs that assume they fly under the radar delay compliance until a lawsuit arrives — at which point remediation costs pale in comparison to litigation expenses.

The Bottom Line

Biometric data collection is not an unregulated frontier. It is a heavily scrutinized legal domain where misconceptions translate directly into financial devastation. Consult qualified legal counsel, audit your biometric practices, and implement compliant policies before a plaintiff's attorney does the auditing for you.