(a) In General.—Each contract entered into by the Department of Defense on or after the date of the enactment of this section shall include a provision prohibiting the contractor and each subcontractor under such contract from selling, licensing, or otherwise transferring covered individually identifiable Department employee data to any individual or entity other than the Federal Government, except to the extent required to perform such contract or a subcontract under such contract. This provision does not apply in circumstances where the transfer of such data would otherwise be authorized by law.

(b) Waiver.—The Secretary of Defense may waive the requirements of subsection (a) with respect to the sale, licensing, or other transfer of covered individually identifiable Department employee data if the Secretary determines that such waiver—

(1) appropriately considers the privacy risks to the employee of the Department of Defense to which such data relates; and

(2) is necessary in the interest of national security.

(c) Report.—Not later than January 15, 2026, and annually thereafter for four years, the Under Secretary of Defense for Acquisition and Sustainment, shall submit to the congressional defense committees a report on the use of the waiver authority under subsection (b) for the fiscal year preceding the date of submission of the report. The report shall include, for each use of the waiver—

(1) the specific justification for providing the waiver;

(2) an identification of the contractor or subcontractor that is the subject of the waiver request; and

(3) an identification of the purpose of the sale, licensing, or transfer of covered individually identifiable Department employee data that is the subject of the waiver request.

(d) Definitions.—In this section:

(1) The term "covered individually identifiable Department employee data" means individually identifiable Department employee data obtained by a contractor or subcontractor described in subsection (a).

(2) The term "individually identifiable Department employee data" means information related to an employee of the Department of Defense, including a member of the Armed Forces, that—

(A) identifies such employee; or

(B) which may be used to infer, by either direct or indirect means, the identity of such an employee to whom the information applies.