Protecting Attorney-Client Privilege with Former Employees
A critical skill for any corporate counsel is the ability to assess which internal conversations are protected by attorney-client privilege and take steps to ensure that privilege remains unbroken. For decades, courts have used various common law tests to determine whether attorney-client privilege applies to conversations between corporate counsel and a company’s former employees, such as the multi-factor analysis established by the Upjohn decision in 1981. But a ruling from Washington state last fall turned the long-accepted doctrine on its head. The Washington Supreme Court decision in Newman v. Highland School District adopts a blanket rule that privilege does not extend to communications with employees who have left the company. In light of this and the risk of similar privilege-limiting decisions from other jurisdictions, any privileged communication with the employee should occur before the employee departs, if possible, and any communications with a former employee should be handled as if it is not privileged.
Although in-house lawyers are increasingly involved in a company’s business operations, attorney-client privilege only applies to legal advice. Corporate counsel’s participation in business operations creates the opportunity for opposing parties to challenge this privilege in corporate communications. To make this determination, courts evaluate whether the primary purpose of the communication was for legal advice. The burden of establishing the primary purpose lies with the party asserting the privilege—the corporation. Privilege may only be invoked properly if the in-house lawyer was wearing an attorney hat when the communications were made.
If a corporate counsel recognizes the need for a communication to remain confidential, steps must be taken to ensure that the primary purpose of the communication is squarely related to legal advice. Isolating legal communications from business discussions is key. Corporate counsel should only send legal advice to those to whom this guidance applies. Counsel should also create a record by noting that the communication is privileged legal advice, such as marking emails or memoranda giving legal advice as “attorney-client privileged.” Although there is no golden rule, adopting these practices may help protect such communications from discovery.
Employee’s Status: Knowing the Test
Although the corporation is technically a corporate counsel’s client, a corporation exists only as a legal concept. Corporate counsel must communicate with the corporation’s employees to serve the company. The tests and analyses for evaluating whether a certain employee constitutes “the client” for purposes of confidential communications vary across jurisdictions. Some jurisdictions use the corporate control test that limits confidentiality to employees with a critical role in decision-making, such as executives.
However, the majority of jurisdictions use either the subject matter test or the Upjohn test. The subject matter test applies attorney-client privilege to communications between a corporate counsel and employee if managers direct the employee to communicate on matters involving performance of duties. The Upjohn test is a variation of the subject matter test that provides six factors for evaluating whether employee communications are privileged: (i) the employee’s supervisor directed him to communicate with corporate counsel, (ii) upper management lacked the information corporate counsel needed to give legal advice, (iii) the information communicated relates to the employee’s job duties, (iv) the employee understood the purpose of the communication was to enable corporate counsel to give legal advice to the corporation, (v) the communications were confidential, and (vi) the opposing party could obtain the underlying facts without accessing these communications.
Although the multi-factor Upjohn test allows greater flexibility by enabling corporate counsel to communicate with employees at any level, it creates uncertainty as to whether a court will uphold the asserted privilege. Nonetheless, it is crucial for corporate counsel to know which test applies in their jurisdiction so that they can ensure that communications intended to be privileged remain privileged. The state of Washington formerly applied the Upjohn test to evaluate post-employment communications with former employees, but now applies a blanket prohibition of privilege on such communications. In light of this ruling, at least in Washington state, it is crucial to have potentially privileged communications with an individual before that person’s employment ends.
Corporate Counsel’s Role
Because communications with former employees may no longer be privileged, corporations may want to conduct exit interviews strategically with a mind toward any potential litigation that might occur. If the company decides to conduct such exit interviews, corporate counsel must play a pivotal role. Foremost, corporate counsel are uniquely situated to assess future litigation risks involving certain employees. With this insight, in-house counsel can provide guidance for which employees are more likely to have information that may be relevant to a future lawsuit and ensure that such information is gathered in an exit interview.
Because exit interviews must be confidential for privilege to apply, corporate counsel must be involved. Of course, it is likely impractical for company lawyers to participate in every exit interview, and a court could determine that privilege does not apply if counsel discuss business matters in the same interview. With those considerations in mind, corporate counsel should create guidelines for exit interviews that may uncover any potential for litigation and separately conduct the portion of the interview where the primary intent is to gather facts that may be useful for legal guidance to the corporation.
The state of Washington limited the application of attorney-client privilege to exclude former employees. Other states may follow Washington’s lead. A corporation can get ahead of this trend by involving corporate counsel with the exit interview process. Regardless of whether a corporation’s jurisdiction similarly limits attorney-client privilege, corporate counsel can best serve clients by crafting policies and procedures that ensure attorney-client privilege endures in the event of future litigation.
Bio: William R. Jenkins Jr. and Lindsey Lee Robin are commercial litigators in the Fort Worth, Texas, office of Jackson Walker LLP. Jenkins serves as managing partner of the Fort Worth office.
Reprinted with permission from the July 20, 2017, edition of Corporate Counsel. ©2017 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.