In-house counsel are often called upon 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. Can the employer minimize the potential that its investigation will be used against it in subsequent litigation?
The legal landscape
To help understand the issues, it is important to have an understanding of the law governing this area.
Privilege in the in-house context. In general, the attorney-client privilege protects from disclosure certain communications between in-house counsel and a corporate client. Case law has narrowed this privilege, however, based on a concern that companies might try to cloak regular business matters with the privilege simply by including in-house counsel in such communications.
A communication generally will be protected by privilege provided it was confidential, made primarily for legal advice, made to appropriate corporate personnel, and made by in-house counsel acting as a legal advisor and not in a business capacity.
Under the Supreme Court’s Upjohn Co. v. United States 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. For example, Massachusetts appears to have adopted a variant of the control group test, limiting the privilege to employees: (a) with managerial responsibility over the matter; (b) alleged to have committed the wrongful acts at issue; or (c) who have authority to make decisions about the course of the litigation.
Attorney-work product immunity. This immunity 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 a more limited “qualified” privilege for other materials prepared in anticipation of litigation.
However, documents prepared in anticipation of litigation (but not reflecting an attorney’s mental impressions/advice, etc.) must be disclosed to a requesting party if he or she can show: (a) a substantial need for the documents; and (b) an inability to obtain the substantial equivalent by other means.
Structuring the investigation
The primary goal of an investigation into employee relations matters is to end any unlawful or inappropriate conduct (such as discrimination, harassment or employee misconduct). Of course, in-house counsel is also concerned about protecting the client from liability and/or embarrassing disclosures. This section will discuss considerations in structuring the investigation with an eye towards furthering these goals.
Who should conduct the investigation? The use of counsel, including in-house counsel, as an investigator may well 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; or (b) an implied waiver of available protections may result.
Moreover, 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 have competent human resource professionals conduct investigations.
One size does not fit all. By routinely characterizing all investigations as privileged and in anticipation of litigation, an employer may risk losing protection of its investigations generally. Mechanically claiming privilege or work product immunity may dilute the effectiveness of such claims because a court may conclude that the employer does so to prevent discovery. To avoid this, employers should analyze each investigation carefully before seeking to protect the investigation with privilege or work product immunity.
Effective investigation as a defense. In certain situations, such as sexual harassment cases, whether the employer took effective remedial action can be a significant part of the employer’s defense or even preclude liability. As such, 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 difficult to protect from discovery materials generated by the investigation. Most courts consider that precluding disclosure of the substance of the investigation on the basis of privilege or work product immunity would unfairly deprive the plaintiff of the ability to challenge the effectiveness of the investigation.
Supervisor liability. In Massachusetts, 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 a claim of harassment, the employer must plan how it conducts the investigation with the understanding that whatever investigation it conducts could be used against it to establish liability.
Waiver. An employer may seek to waive privilege or work product immunity, but the decision to do so should be done carefully. Generally, if a party waives the privilege protecting communications in a specific litigation, the privilege is waived as to those communications in all other contexts.
Some cases support the notion of a “selective waiver” applicable only to the party to whom the information is disclosed when such otherwise privileged information is produced under a confidentiality agreement.
Whether an internal HR investigation can (or should) be protected from discovery depends on the facts. To increase the probability of protecting an investigation from discovery, an employer should consider the following.
Mark H. Burak is a shareholder at Morse, Barnes-Brown & Pendleton (www.mbbp.com). He counsels employers in all areas of employment and labor law, and represents clients in employment litigation before federal and state courts and agencies, and also provides counseling and training for employers in employment law issues such as sexual harassment, EEO awareness and termination matters. He can be reached at (781) 622-5930 or email@example.com.