How to Create and Protect Privilege in Internal HR Investigations
The attorney-client privilege has long been held to apply in the corporate context. See Upjohn Co. v. United States, 449 U.S. 383 (1981). Determining the contours of this protection, however, is not simple. Whether the attorney-client privilege protects an in-house counsel’s communications is determined on a case-by-case basis, depending on the subject matter of each individual communication. Communications to or from an in-house counsel are not protected by the privilege simply because the in-house counsel is an attorney. In order for the attorney-client privilege to protect an in-house counsel’s communication, the corporate client has the burden of showing that the in-house counsel’s communication (1) was made for the purpose of providing legal advice, and (2) that the communication was intended to be, and was in fact, kept confidential.
In-house counsel frequently perform both a business and a legal function for their employers. Many times in-house counsel effectively wear two hats as they are identified with two corporate titles and often more than one function (e.g., assistant general counsel and vice president or general counsel and secretary). The key to the interpretation is that only an in-house counsel’s communications in their legal role are subject to the protection of the attorney-client privilege. The communications of an in-house counsel relating to his/her business functions are not protected by the attorney-client privilege merely because the in-house counsel is an attorney. As long as the communication is predominately of a legal character or nature, the privilege is not lost because the communication is also one in which non-legal matters are addressed.
Perhaps the most important area in which in-house counsel may become engaged which also triggers concerns as to privilege is when they are pulled in to handle or supervise internal investigations into serious human resources matters, ranging from allegations of sexual harassment to employee drug abuse. Such matters can expose an employer to substantial liability, yet the company’s investigation may be required by law – making it potentially discoverable. This article focuses on how the employer can minimize the potential that its investigations will be used against it in subsequent litigation, whether with or without the involvement of in-house counsel.
The legal lay of the land
In order to better understand the issues and concerns impacting privilege, it is important to have an understanding of the law governing this area.
Privilege in the in-house context. From a baseline standpoint, the attorney-client privilege protects from disclosure certain communications between in-house counsel and a corporate client/employer. Case law has narrowed this privilege, however, based on a concern that companies might try to cloak regular, routine business matters with the privilege simply by including in-house counsel in such communications.
A communication generally will be protected by privilege provided that it was confidential, made primarily for legal advice, made to appropriate corporate personnel, and made by in-house counsel acting within the capacity of a legal advisor, and not merely in a business capacity. Under the Supreme Court’s Upjohn Co. decision, the privilege generally applies only to communications between counsel and those employees who communicate with counsel at the direction of superiors in order to secure legal advice. State law on the issue is not as clear and varies from state to state.
Attorney-work product immunity. This form of immunity from disclosure is narrower than the attorney-client privilege, and protects materials prepared in anticipation of litigation. Work product immunity gives absolute protection to documents containing an attorney’s mental impressions, conclusions, opinions and legal theories, and provides for a more limited “qualified” privilege for other materials prepared in anticipation of litigation. However, documents prepared in anticipation of litigation (but which do not reflect an attorney’s mental impressions/advice, etc.) must be disclosed to a requesting party if he/she can show: (a) a substantial need for the documents; and (b) an inability to obtain the substantial equivalent by other means. Since this form of privilege is narrower in scope, companies would be wise to not assume that privilege will apply merely because in-house counsel crafted or had a hand in the drafting or authoring of written material tied to the investigation.
The structure of the investigation
The primary goal of an investigation into employee relations matters is to end any unlawful or inappropriate conduct (such as harassment, discrimination, hostile work environment or employee misconduct). At the same time and with an eye to possible future litigation, in-house counsel is also focused on protecting the client/employer from liability and/or embarrassing subsequent disclosures. The question then becomes what should be the key considerations in structuring the investigation
Who should conduct the investigation? Ironically and though it is likely antithetical to most assumptions, the use of counsel, including in-house counsel, as an investigator may possibly hinder the employer’s ability to protect the investigation results from discovery because: (a) privilege does not apply when an attorney acts as an investigator in an investigation required by law; and/or (b) an implied waiver of available protections may sometimes result from such involvement. In addition, when an attorney conducts such an investigation (whether in-house or outside counsel), that attorney is likely to be disqualified from representing the employer in subsequent litigation. Consequently, it is often advisable to consider whether to have competent human resource professionals conduct such investigations.
Does one size fit all? The rookie mistake of characterizing all investigations as privileged and in anticipation of litigation, can have unwelcome consequences as an employer may risk losing protection of its investigations due to its “generic” treatment of such matters. Applying an auto-pilot approach and claiming privilege or work product immunity to every investigation may dilute the effectiveness of such claims because a court may conclude that the employer does so solely to prevent discovery. In order to avoid this, employers should analyze each investigation carefully before seeking to protect the investigation with privilege or work product immunity.
The best defense is a good offense. In certain situations, such as sexual harassment cases, whether or not the employer took effective remedial action can be a significant part of the employer’s defense or even preclude liability. Consequently, a key issue in such cases is whether the employer conducted a full and impartial investigation. If the employer asserts that it implemented appropriate corrective action, then it may find it quite difficult to protect from discovery materials generated by the investigation. Most courts consider precluding disclosure of the substance of the investigation on the basis of privilege or work product immunity to unfairly deprive the plaintiff employee of the ability to challenge the effectiveness of the investigation. Employers should be wary of how such matters are addressed, at the onset, internally.
Liability of supervisors. In many states, especially those with more protective state laws on workplace issues, employers are deemed strictly liable for a supervisor’s sexual harassment of subordinates. Consequently, when a complaint regarding a supervisor’s conduct is made, although an employer is still obligated to investigate the claim of harassment, the employer must immediately plan how to conduct the investigation with the understanding that whatever investigation it conducts could be used against it by the employee’s counsel to establish liability.
Impact of waiver. An employer may seek to waive privilege or work product immunity, but the decision to do so should be done very carefully and with an eye towards the overall short and long term impact of that decision. Generally, if a party waives the privilege protecting communications in a specific litigation proceeding, the privilege is waived as to those communications in all other contexts. There are a line of state and federal cases which support the notion of a “selective waiver” being applicable only to the party to whom the information is disclosed when such otherwise privileged information is produced under a confidentiality agreement. That said, employers should be extremely careful in waiving privilege and protecting, or at least trying to protect, from disclosure is often well worth the battle.
Tips for employers
Whether or not an internal HR investigation can (or should) be protected from discovery depends on the facts. In order to increase the probability of protecting an investigation from discovery, an employer should consider the following:
Get in-house counsel in the loop and involved as soon as the complaint is received. By doing so, the employer and counsel can determine what steps, if any, will be taken to protect the investigation from discovery.
Do not automatically seek to protect all investigations.
Be careful and thoughtful in picking the investigator. If counsel is used, then it is likely that privilege and work product immunity may be deemed inapplicable or waived, and counsel will be disqualified from representing the employer in subsequent litigation.
Consider carefully whether the investigation’s findings should be reported orally or in writing. Employers may prefer to keep the report in oral form, especially if the employer believes the report is likely to be disclosed.
If the employer wishes to assert privilege or work product protection of its investigation, it should take appropriate steps, such as marking documents as attorney-client privileged and work product produced in anticipation of litigation, specifically noting that in-house counsel is involved for the purpose of seeking advice, and maintaining the investigation as confidential.
If the employer determines that it wants to waive the privilege, it should seek to do so under a confidentiality agreement that limits the waiver to certain areas and only to the parties to that specific litigation.
Make it a practice that all reports and conclusions are drafted with the understanding that these materials may be subject to discovery and public scrutiny.
