Seyfarth Synopsis: Given recent headlines, a storm could be brewing over the boundaries of the attorney-client privilege in some parts of the country. California employers can avoid this vortex, at least when dealing with their current and former employees. Both can be part of the “corporate client” for purposes of attorney-client privilege, so long as communications with counsel meet a few requirements.
To provide sound legal advice, in-house counsel often communicate with current and even former employees from all levels of their corporations. Particularly with the storm over the scope of the attorney-client privilege currently raging in Washington, it never hurts to review when employees are “corporate clients” whose communications are privileged and sheltered from disclosure. The last place an employer wants to find itself is in the rain, without an umbrella, when the government or a bombastic plaintiff’s attorney starts poking around for in-house counsel’s communications.
Which Employees Are “Clients?”
California and federal privilege rules treat company employees similarly, but there are some differences. Federal courts, while applying federal-question jurisdiction, apply the well-known Upjohn standard. The Ninth Circuit describes this standard as protecting communications by any corporate employee, regardless of position, when
- the communications concern matters within the scope of the employee’s corporate duties, and
- the employee is aware that the information is being furnished to enable the attorney to provide legal advice to the corporation.
California courts apply a different set of factors. In the leading case, D. I. Chadbourne, Inc. v. Superior Court, the California Supreme Court listed eleven “basic principles” to determine when the attorney-client privilege exists in a corporate setting. Chadbourne’s principles overlap somewhat with federal law: (1) the communications must emanate from the employees’ job responsibilities and (2) the employee must understand that the communications are confidential. But Chadbourne adds some additional wrinkles, breaking privileged communications into three categories:
- If the employee is a defendant or may be charged with liability because of being employed, statements to in-house counsel relating to the potential dispute are privileged.
- In the ordinary course of business, employee communications with counsel are privileged if they “emanate” from the corporation, and the employee is the person who would ordinarily communicate the information to counsel.
- If the employee has witnessed an event requiring legal advice, communications with counsel are privileged when the employee is required to report the matter, and the “dominant purpose” for requiring the employee to talk with a lawyer is to provide the lawyer information from the company.
Multi-factor legal tests are not known for the clarity they provide. Chadbourne’s is no different. For instance, what happens if an employee walks into counsel’s office, undirected by a manager, to raise concerns about the job? Is that conversation privileged? The federal standard would suggest that privilege applies, so long as the conversation is confidential and the employee is seeking legal counsel about employment. But the California standard clouds up the legal skyscape. A strict reading of Chadbourne could suggest that privilege attaches only if the employer requires the employee to report conduct, a requirement arguably not met in our hypothetical.
Are Former Employees Ever “Clients?”
California courts have extended attorney-client privilege to some situations involving communication with former employees. Courts recognize the privilege where the corporate lawyer communicates with former employees when (1) matters fall in the former employees’ prior scope of employment, and (2) the lawyer needs to provide legal advice to the company. But corporate counsel again must proceed with caution.
As an initial matter, the privilege as to former employees is narrower than it is as to current employees. For instance, one federal judge interpreting California law refused to extend the privilege to counsel’s fact gathering interviews and deposition preparation with a former employee, as nothing required the former employee to communicate with counsel. The employee did not have a cooperation agreement with his former employer, and the former employee was not the only source of the information the company sought. Many employers could avoid this predicament with a joint-defense agreement with the former employee. But these agreements could come with their own risks, particularly where a potential conflict looms with the employee.
Further, even if the former employee’s communications with corporate counsel are privileged, opposing counsel could contact the employee directly. The opposing side cannot inquire into privileged communications, but there is little in practice that corporate counsel can do to ensure that the former employee does not unknowingly disclose privileged information.
So How Do Employers Avoid Privilege Storms With Their Employees?
Contrary to some high-level publicity on the subject, the attorney-client privilege is not dead. Indeed, it thrives, at least as it exists between California employers and their employees. But to ensure clear sailing, employers communicating with current and former employees should keep some tips in mind, lest they destroy the privilege in a storm of their own making:
- Always be clear with current and former employees that you do not represent them personally, and that the communications are confidential. Often called “Upjohn Warnings,” the strongest notices to employees (1) make clear that the corporate lawyer does not represent the individual employee, (2) that anything the employee says to the lawyers will be protected by the company’s attorney-client privilege, (3) the employer retains the right to waive the privilege, and, depending on the type of situation, (4) individuals may wish to consult their own independent counsel if they have any concern about potential legal exposure. These warnings often are given in writing.
- Document that the communication is related to providing legal advice to the company. That the conversation concerned legal issues relating to the company is a requirement for the attorney-client privilege to attach. Proper documentation could help establish the privilege in the event a court ever should question the purpose of the conversation.
- Limit discussions with current and former employees to matters within the scope of their job duties. Again, this is a requirement for the privilege to attach, and thus, important to document, where feasible.
- Do not discuss litigation strategy or share work product with the employees. This is a good strategy for all employees, but especially important for former employees because the opposing party in litigation can contact them directly, without going through the company’s counsel.
- Ensure company policies include provisions reminding employees not to disclose the contents of communications with counsel. This is another opportunity for employers to impress upon employees that communications with counsel are confidential, which is key for the communications to be privileged.
- Consider having departing employees sign cooperation agreements. Particularly for employees involved in active litigation, or where litigation is possible, having a cooperation agreement in place with former employees will help remove doubt whether they are “required” to provide information to employers, even after their employment ends.
Workplace Solutions: As one can see, navigating the stormy waters of corporate attorney-client privilege can be difficult. If you have further questions about this article, please feel free to contact the author or your favorite Seyfarth attorney.