Houzz Inc., an online platform for home remodeling and design headquartered in Palo Alto, has settled a lawsuit with the State of California after violating state wiretapping and eavesdropping laws, Attorney General Kamala D. Harris announced.
Houzz's Irvine office secretly recorded calls that were intended for training and quality-assurance purposes, but it did not notify people that it was making the recordings nor obtain their consent, according to an injunction filed by Harris on Oct. 2 in Santa Clara County Superior Court.
Court records show the company settled the lawsuit on the same day it was filed.
The number of recordings the company made are unknown, but the state's injunction asked for $2,500 per violation. Although most of the secretly recorded calls were with home improvement and remodeling professionals, Houzz also recorded customers' and employees' personal calls, according to Harris's office.
The recordings occurred between March and September 2013. After being notified by the California Attorney General's Office in September 2013, Houzz stopped recording calls and voluntarily cooperated with the investigation, Harris' office noted in the settlement.
The agreement requires Houzz to appoint a chief privacy officer within 60 days to oversee the company's compliance with privacy laws. Houzz must also conduct a privacy-risk assessment addressing its efforts to comply with privacy laws governing its U.S. operations within 12 months.
The assessment would evaluate any issues in Houzz's business processes, use of technology, and processes related to business partners with whom Houzz shares personal information, and the company's efforts to correct or avoid any adverse effects on people in the U.S.
The Attorney General's Office agreed to keep the privacy-risk assessment confidential except when enforcing compliance with the judgment or in support of any other legal action by the state office or as required by law.
Houzz also agreed to pay $175,000, including civil penalties and attorney's fees.
"Houzz violated the trust of its professionals, customers, and employees by recording calls without permission. This settlement holds Houzz accountable for violating state privacy laws and ensures that the company will stop recording calls without permission," Harris said in a press release.
"This is a significant step that is aligned with Harris' ongoing efforts to preserve California businesses' ability to innovate while ensuring that consumers' right to privacy is protected."
Houzz said in an email: "We are pleased to have reached a mutually acceptable agreement with the State of California about an isolated incident involving a small number of calls during a short period of time in 2013. Houzz values the privacy of its employees and its community and we have since enhanced our compliance efforts to meet all applicable legal requirements."
The company claimed it never shared the recordings with third parties and only a small number of employees had access. The employees reviewed only a few recordings, according to the settlement. The company does not admit wrongdoing nor liability as a result of the settlement.
Houzz may retain any copies of the recordings in a secure location with restricted access in the "due course of business" until the company determines that it is no longer appropriate to retain the recorded calls.
The calls must not be copied nor distributed unless through a court order. The company must notify the California Attorney General's Office in writing when the calls are destroyed.
The settlement applies to all of Houzz's subsidiaries and associated businesses and contractors.