The Information Commissioner's Office (ICO) has fined Cheshire East Council £80,000 after it failed to use a secure email system to pass on sensitive information to voluntary workers.
The breach occurred in May 2011 and involved a member of the council team sending an email to a voluntary worker on her personal email account, rather than using the councils secure system.
The email detailed police concerns with an individual working in the area and was subsequently forwarded on to 180 recipients who should not have been given the information.
The head of enforcement at the ICO, Stephen Eckersley, noted that while the employee at the council may have believed they were acting in good faith, a lack of training and appreciation of data protection regulations forced the data watchdog to issue the fine.
"While we appreciate it is important for concerns about individuals working in the voluntary sector to be circulated to relevant parties, a robust system must be put in place to ensure information is appropriately managed and carefully disclosed," he said.
"Cheshire East Council failed to provide this particular employee with adequate data protection training. The highly sensitive nature of the information and the need to restrict its circulation should have been made clear to all recipients."
He added that the fine should serve as a warning to other councils and local authorities to step up their efforts to protect sensitive data.
"I hope this case - along with the fact that we've handed out over £1m worth of penalties since our powers came into force - acts as a strong incentive for other councils to ensure that they have sufficient measures in place around protecting personal data," he said.
Cheshire East Council said it intends to pay the penalty early so as to reduce it to £64,000 and councillor David Brown said the organisation was taking action to avoid such an issue in the future.
"Data protection is an issue that the council takes very seriously. This incident has prompted us to scrutinise our policies and procedures very carefully to make sure that this never happens again," he said.
"Staff will be receiving extra training and support in this area and all staff are being urged to remain extremely vigilant with the way sensitive information is handled and distributed."
The fine is the latest in a long line of penalties issued in recent weeks by the ICO to councils in the UK, as poor data protection handling appears endemic in the public sector.
This has prompted information commissioned Christopher Graham and the head of the civil service, Bob Kerslake, to write a letter to council chiefs urging them to address this situation.
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