OFCCP audits are probing increasingly more complex discrimination law issues, and probing them more deeply than ever before. As a result, federal contractors preparing Affirmative Action Plans, compensation analyses, statistical Disparity Analyses, self-audits and undertaking preventative maintenance discrimination analyses need to be more careful than ever before.
At the same time, however, defense lawyers like myself are unfortunately routinely discussing with each other our deep, profound and continuing concerns that so many of our federal contractor clients trying to do “the right thing” are inadvertently exposing themselves to potentially great legal risk by failing to invoke, or failing to properly invoke, or failing to properly maintain attorney-client privilege cloaking from OFCCP view many sensitive discrimination law analyses.
So, Candee Chambers persuaded me this month to write a blog post discussing the practical “Do’s and Don’ts” of properly invoking and maintaining the attorney client privilege. But, let me first start with four basic rules to help frame your understanding before turning to some specific practical “Do’s” and “Don’ts” punctuated with occasional representative case law decision references so you know my partner Jay Wang and I are not just making this up..
RULE 1: Only the client may invoke the attorney-client privilege; not the lawyer.
RULE 2: Only the client, not the lawyer, may waive the client’s privilege. The client may choose to allow the lawyer to “waive privilege” and reveal the client’s attorney-client privileged confidences and confidential legal strategies and analyses.
RULE 3: Companies may properly invoke the attorney-client privilege as to
- a communication;
- made between privileged persons;
- in confidence; and
- for the purpose of the client seeking to obtain or provide legal advice.
RULE 4: Under federal law, we apply what is known as the “Subject Matter/Upjohn Test.” This test comes from the now famous U.S. Supreme Court decision in Upjohn Co. v. United States, 449 U.S. 383 (1981). Upjohn held communications between a corporate client and its counsel are privileged even as to lower management employees where:
- the communication is made to counsel at the direction of corporate superiors;
- the communications concerned matters with the scope of the employees’ delegated work duties;
- the information was not available from upper-level management; and
- the employees were aware that they were being questioned for the corporation to receive legal advice.
SUMMARY: Said another way, a party may successfully demonstrate applicability of the privilege to written communications between corporate management employees by establishing that the communication was made in confidence for the primary purpose of obtaining legal advice for the company.
DO #1: Do invoke the attorney client privilege at the first moment you are interested to cloak from possible public view a matter involving legal risk to the company. Usually, this is done via an e-mail (a written memorandum in more formal companies) setting forth the legal issue of concern and the legal advice needed and being asked of legal counsel.
You should exercise GREAT care when formulating this request for legal assistance since this request document is discoverable. Your request for legal assistance should record the date and time of the invocation of the attorney client privilege (i.e. the date/time the privilege began). If you request legal assistance by e-mail, the e-mail will reord the date and time, of course. Equally of importance, the initial request for legal assistance frames the scope of the legal inquiry and thus the scope of the attorney-client privileged documents and information. Narrow scope of requested assistance= narrow scope of privilege.
Documents/information developed BEFORE you properly invoke the privilege are NOT subject to the privilege. There is no such thing as a retroactive application of the privilege. Try to avoid a conversation with your legal counsel like this:
HR: “Oh, so you mean I probably should have called the Legal Department last year when we were starting to review compensation in the Sales Division to help us understand why female “salesmen” were not paid as much as male outside sales guys, instead of waiting until today to deliver the final report to you.”
LEGAL: “Yes. That would have been the right way to proceed. How did the compensation study come out, by the way?”
HR: “Not so good. That’s why I am here and personally in your office. Some on my staff say it is a “disaster.” My more level-headed and restrained Affirmative Action Manager called the results of the study “catastrophic” for the company. Personally, the results look to me like a ‘train wreck.’“
LEGAL: Well, the good news is that I can keep your “train wreck” statement out of evidence and not allow OFCCP to hear that now that you have requested my legal assistance and you have now properly brought down the “Cone of Silence:”.
The “Cone of Silence” from Get Smart. (Ok, for those of you under 45 and who did not have a chance to see the Get Smart TV series live: https://en.wikipedia.org/wiki/Cone_of_Silence)
DO #2: During meetings or telephone calls with counsel and employees in which legal advice is sought, document the date and time of each meeting/conversation, including the subject matter of the meeting and legal issue(s) of concern and documents/information to be protected.
DO #3: Best practice: Do have counsel (can be in-house or outside) directly retain any consultants or experts to coordinate the work to make much stronger the conclusion that the at-issue consultants’ (if any) documents/analyses are the subject of “legal” advice.
- In determining that statistical disparity analyses prepared during a company reorganization and reduction in force were protected under the attorney-client privilege, the court found that the statistical analysis data were gathered at the direction of counsel and the expert’s communications occurred for the purpose of obtaining legal advice. See, Williams v. Sprint/United Management Co., 464 F. Supp.2d 1100 (D. Kan. 2006).
DO #4: Do properly mark and identify privileged documents, and keep them confidential to adequately preserve the privilege.
- Audit information an EEO Manager collected to determine compliance with minority hiring goals was NOT protected from disclosure where no one marked the documents “confidential” or “privileged” and also intermingled the documents with many other non-confidential personnel documents. See, Hardy v. New York News Inc., 114 F.R.D. 633, 644 (S.D.N.Y. 1987)
DO #5: In seeking legal counsel to respond to government audits or investigations, specifically state the reasons for commencing any investigation by counsel by describing the potential legal problems or concerns to be addressed.
- The Attorney Work Product Doctrine is not intended to protect documents or materials prepared in the ordinary course of business. Since the HR Manager prepared computer printouts containing statistical analyses concerning proposed workforce reductions at the direction of counsel in anticipation of litigation, the printouts were protected from disclosure. See, Maloney v. Sisters of Charity Hospital, 165 F.R.D. 26 (W.D.N.Y. 1995)
DO #6: Do deliver so-called Upjohn warnings to witnesses the company is privately interviewing about a matter of concern directing the witnesses to keep the matter confidential and to not discuss the matter further without authorization, except as otherwise permitted by law (pay transparency, for example, or any other concerted protected activity).
And now for the DON’Ts (i.e. the naughty list):
DON’T #1: Don’t confuse the attorney work product “doctrine” with the attorney-client privilege. The work product doctrine is distinct from the attorney-client privilege. The doctrine protects from disclosure documents an attorney prepares in anticipation of litigation or for trial and recording the lawyer’s mental impressions, conclusions, opinions, or legal theories concerning the litigation or the potential litigation.
DON’T #2: Do not merely copy counsel on communications (i.e. CC on an e-mail) because that is insufficient BY ITSELF to invoke the attorney-client privilege.
- Routine, non-privileged communications between corporate officers transacting the general business of the company do not attain privileged status solely because counsel is copied on the correspondence; the communication must seek the procurement of legal advice from counsel. See, SmithKline Beecham Corp. v. Teva Pharmaceutical USA, Inc., 232 F.R.D. 467 (E.D. Pa. 2005)
DON’T #3: Don’t disseminate legal advice from counsel to corporate employees who have no substantive need for it.
- Rationale for circulating legal advice to corporate employees unrelated to privileged issue constitutes a business purpose rather than the pursuit of legal advice. See, United Investors Life Ins. Co. v. Nationwide Life Ins. Co., 233 F.R.D. 483, 489 (N.D. Miss. 2006); See also, Kintera v. Convio, Inc., 219 F.R.D. 503, 514-515 (S.D. Cal. 2003)].
DON’T #4: Don’t seek attorney review of business decisions to provide business advice.
- Where communication with counsel related to business, not legal matters, and documents were created for ordinary business purposes, the attorney-client and work product privileges do not apply. See, Michigan First Credit Union v. Cumis Ins. Society, Inc., 2006 U.S. Dist. LEXIS 45202 (E.D. Mich. 2006]
-By the way, trying to sort through in-house legal counsel documents (typically e-mails) to determine whether a lawyer was acting in her/his legal capacity or policy-making capacity when writing the e-mail/memo is an expensive nightmare requiring one to parse e-mails line-by-line and word-by-word to redact privileged portions while allowing not privileged portions to be read by investigators/jurors. NOTE: We are seeing more and more companies using their in-house lawyers to participate in and formulate business policies and practices: i.e. acting as business operations personnel and not as lawyers).
DON’T #5: Don’t screw up! Accidental or unintended waivers of the privilege (i.e. inadvertent disclosures to persons not intended to receive confidential attorney-client privilege documents could let the horse out of the barn—WHOOPS! You forwarded an e-mail to OFCCP explaining there was no statistically meaningful disparity in the rejection of Black Applicants for employment compared with the percentage rejection of White Applicants before reading down the chain of e-mails to discover lurking at the bottom of the e-mail chain your lawyer’s damning conclusion about the high legal risk and large potential financial damages suggested by the company’s Disparity Analyses for Hires. Courts allow discovery of attorney-client communications IF the company which inadvertently published the attorney-client privileged document is unable to show it took reasonable precautions to prevent inadvertent disclosures AND failed to act promptly to cure any accidental dissemination. See, IMC Chems., Inc. v. Niro, Inc., 2000 U.S. Dist. LEXIS 22850 (D. Kan. 2000).
Questions:
-What reasonable efforts did company undertake to prevent disclosure?
-What steps did company undertake to fix the problem once identified?
(Now you understand the utility of that legal gobbelty-goop language at the bottom of your corporate e-mail which says something like this:
“This electronic mail (including any attachments) may contain information that is privileged, confidential, and/or otherwise protected from disclosure to anyone other than its intended recipient(s). Any dissemination or use of this electronic email or its contents (including any attachments) by persons other than the intended recipient(s) is strictly prohibited. If you have received this message in error, please notify us immediately by reply email so that we may correct our internal records. Please then delete the original message (including any attachments) in its entirety. Thank you.”)
DON’T #6: (OK, get ready: this is a high-level point). Production of a privileged document to a government investigatory agency can waive the attorney-client privilege and the work product doctrine. So, don’t produce an attorney-client privileged document to OFCCP thinking the agency will retain the document’s confidential and privileged nature just because you have selectively waived privilege (only as to OFCCP) and upon OFCCP’s express written assurance that the agency will keep your document confidential because it wants it only for its personal use to resolve an audit issue. Even if the document would get you out of a pickle with OFCCP, if the document could get you in hot water with other parties, those other parties can almost always get your (formerly) confidential and privileged document.
For example, perhaps you explain wage disparities away to OFCCP by proving that the at-issue disparities are not due to violations of Executive Order 11246 but are rather due to violations of the Equal Pay Act (outside of OFCCP’s jurisdiction). However, your confession of Equal Pay violations could be of interest to the EEOC or private plaintiff lawyers to prosecute. Unfortunately for you, most courts would say those other parties now have a right to your privileged documents since you “waived” your company’s privilege, even if only selectively (in this case to OFCCP).
This issue is known as the “selective waiver” issue and refers to the assertion by a party that has previously produced materials to a federal investigatory agency that the privileged documents the company disclosed are not waived through the voluntary surrender of information to the government. However, most courts do not support and in fact reject the “selective waiver” concept:
- The Tenth Circuit Court of Appeals (in Denver) surveyed almost 10 years ago “selective waiver” case decisions in the various federal circuits, and found that the D.C., First, Second, Third, Fourth, Sixth, and Federal Circuits had all rejected “selective waiver.” The 10th Circuit then joined those courts to hold that Quest Communications had waived its privilege as to documents Quest produced to the U.S. Department of Justice and the Securities and Exchange Commission. See, In re Qwest Communications Int’l. Inc., 450 F.3d 1179 (10th Cir. 2006).
- Proper preservation of the privilege in the OFCCP context would require your company to undertake a 3-part approach: (1) resist to impasse OFCCP’s demand you produce the privileged document, (2) let OFCCP sue your company, and (3) then produce the requested document to OFCCP only after the U.S. Department of Labor Administrative Law Judge had ordered your company to provide OFCCP access. See, In re Initial Public Offering Securities Litigation, 249 F.R.D. 457, 466 (S.D.N.Y. 2008) [voluntary disclosure of attorney work product, regardless of the existence of a confidentiality agreement, will waive work product privilege absent special circumstance].
DON’T #7: Don’t assume you can get away with a “partial waiver.” Partial waivers—in which you try to waive some part of the document (i.e. pages 8-10, but not other pages or attachments)–are VERY legally tricky. You have to research the law very carefully and apply it to your specific facts. No general rule here other than to be VERY careful since so many courts believe that once you have opened the kimono part of the way, you have opened it all of the way.
http://www.urbandictionary.com/define.php?term=open+the+kimono
- Privileged documents and information relied upon to form a company’s “good faith” defense to liability or damages may be waived not only to the report, but also as to all underlying documents. See, Chevron Corp. v. Pennzoil Co., 974 F.2d 1156 (9th Cir. 1992); EEOC v. Rekrem, Inc., 2002 U.S. Dist. LEXIS 252 (S.D.N.Y. 2002) [attorney-client privilege waived where employer asserted advice of its counsel as it defense to an EEOC Charge].
DON’T #8: Don’t forget that the privilege does not extend to (a) routine business documents not the subject of review for legal risk to the company or (b) underlying facts found in the privileged document.
- The privilege does not protect communications that are strictly business related. See, Resnick v. American Dental Assoc., 95 F.R.D. 372, 375 (N.D. Ill. 1982) [study of personnel practices by outside third-party consulting group not protected as attorney work product since Association initiated study for overall business reasons and study addressed personnel matters of all sorts rather than just those in litigation].
- A client cannot protect facts from disclosure simply by communicating them to a lawyer. The underlying factual information in a document itself is not privileged, unless revelation of the precise and unique array of facts might reveal the lawyer’s strategies or conclusions. In other words, the privilege extends only to the legal advice or counsel provided.
- The attorney-client privilege protects only the disclosure of communications from client to attorney, not the disclosure of the underlying facts by those persons who communicated with the attorney. See, Upjohn, supra, 449 U.S. at 395-396.
- Employee’s notes given to the company attorney during an investigation into an age discrimination claim were protected by the attorney-client privilege, but the facts recorded in the notes were discoverable. See, Clark v. Buffalo Wire Works Co., 190 F.R.D. 93 (W.D.N.Y. 1999)
DON’T #9: The attorney-client privilege does not extend to statutory or regulatory obligations. We leave one of the most import Don’ts to last!
- Internal investigations undertaken pursuant to regulatory requirements and/or corporate policy rather than for the purpose of obtaining legal advice are subject to disclosure and not protected as privileged communications. See, United States ex rel. Barko v. Halliburton Co., 37 F. Supp.3d 1 (D.D.C. 2014) [subsequently vacated by In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014), in which the D.C. Circuit Court of Appeals held the internal investigation was in fact for the purpose of obtaining or providing legal advice].
- Attorney-client privilege did not apply to an attorney-directed internal investigation into sexual abuse at a school because the school’s statutory obligation under the Massachusetts state statutes required disclosure of the at-issue information to government investigators. See, In the Matter of a Grand Jury Investigation, 437 Mass. 340, 351-356 (2002).
So, statistical Disparity Analyses (which OFCCP regulations at 41 CFR Section 60-2.17(b) require) and internal self-audits and reports (which OFCCP regulations at 41 CFR Section 60-2.17(d) require) to name but two sensitive analyses which OFCCP regulations require, CANNOT be the subject of attorney-client privilege. NOTE: The drafts leading up to the final document(s) could be attorney-client privileged…if the client were diligent enough to involve legal counsel sufficiently early in the development of these analyses and reports. See “Do #1,” above.
Be Careful Out There!
Thanks, John
N.B. My thanks go out to my partner Jay J. Wang who also contributed to this Blog and found all those great employment investigation-related case decisions.
THIS COLUMN IS MEANT TO ASSIST IN A GENERAL UNDERSTANDING OF THE CURRENT LAW AND PRACTICE RELATING TO OFCCP. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. COMPANIES OR INDIVIDUALS WITH PARTICULAR QUESTIONS SHOULD SEEK ADVICE OF COUNSEL.
Reminder: If you have specific OFCCP compliance questions and/or concerns or wish to offer suggestions about future topics for the OFCCP Fox Report, please contact your membership representative at 866-268-6206 (for DE members), or send an email to Candee Chambers at candee@directemployers.org with your ideas.
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