Businesses beware: the attorney-client privilege does not shield interviews with former employees, at least according to one state supreme court. The privilege does not apply even if the interview relates to the scope of former employment or if the former employee had previously served in management. Once the employment relationship has ended, all future communications with corporate counsel are immediately discoverable, according to the decision.
This new bright-line test, adopted by the Washington Supreme Court in Newman v. Highland School Dist. No. 203, replaces the more flexible approach that other courts have used for decades. The previous rule, fashioned by the U.S. Supreme Court in Upjohn Co. v. United States, drew no distinction between current or former employees, instead balancing a host of factors including whether the communications: (1) were at the behest of management; (2) revealed factual information necessary to supply a basis for legal advice; and (3) concerned matters within the scope of employment.
Now, under Newman, the only question in Washington courtrooms will be whether there was an ongoing employment relationship at the moment of the communication. If not, then the attorney-client privilege will not apply, regardless of any other circumstances in play.
The plaintiff in Newman sued his former school district for permanent brain injuries suffered while playing high school football. With the passage of time between injury and suit, however, several members of the coaching staff had moved on and were no longer district employees. Nevertheless, the district's attorney represented these former coaches at their depositions, revealing that he had also interviewed them beforehand as well. After the plaintiff sought to disqualify the district's counsel for an alleged conflict of interest, the superior court ruled that the district's counsel "may not represent non-employee witnesses in the future."
Newman then sought to discover all pre-deposition communications between the counsel and the former coaches. The superior court ordered the discovery, paving the way for the Washington Supreme Court to ultimately weigh in with its new standard.
In so doing, the Washington Supreme Court's five justice majority acknowledged Upjohn's flexible approach but disclaimed that it would apply post-employment. As the court reasoned, "[e]verything changes when employment ends. When the employer-employee relationship terminates, this generally terminates the agency relationship. As a result, the former employee can no longer bind the corporation and no longer owes duties of loyalty, obedience, and confidentiality to the corporation." By this view "a former employee is no different from other third-party fact witnesses to a lawsuit who may be freely interviewed by either party."
In dissent, the remaining four justices observed that "the majority's focus on the formalities of the relationship . . . missed the point of Upjohn's functional framework." As a practical matter "relevant knowledge obtained by an employee during his or her period of employment does not lose relevance simply because employment has ended. When former employees have relevant knowledge about incidents that occurred while they were employed, the extension of the attorney-client privilege to cover postemployment communications may further support the privilege's fact-finding purpose."
"The dissent, in my opinion, better represented how the privilege should be applied," says T. Lowndes Pope, Columbia, SC, cochair of the Legal Ethics Subcommittee of the ABA Section of Litigation's Corporate Counsel Committee. "You don't want to mute the flow of relevant and necessary information between a corporation and its employees. Just because the employee may have recently left employment should not end the corporation's ability to have those protected discussions," advises Pope.
Anthony J. Carriuolo, Fort Lauderdale, FL, cochair of the Litigation Management Subcommittee of the Section of Litigation's Corporate Counsel Committee agrees. "There is a whole slew of factors that I think the Upjohn test appropriately recognized and analyzed in a current employment context which ought not to be thrown out the window simply because an employee is no longer associated with the entity," says Carriuolo. Indeed, "sometimes your best 30(b)(6) corporate representative may be a former employee who is nonetheless loyal to the company and willing to work with counsel," adds Carriuolo.
The net effect of the decision may be that counsel is more cautious in tapping that historical knowledge, warns William E. Weinberger, Los Angeles, CA, cochair of the Litigation Management Subcommittee of the Section's Corporate Counsel Committee. "If the knowledge that the institution had is with former employees, and the investigation itself is discoverable, the question may become whether the attorney can risk becoming fully informed," Weinberger notes.
Michael A. Brockland, St. Louis, MO, cochair of the Privilege Subcommittee of the Section's Commercial & Business Litigation Committee, also worries about the practical effects of the ruling. "I think it will have a chilling effect on how that former employee is approached, and the scope of topics discussed, because all of that now is discoverable," he adds.
Brockland anticipates that this decision will add increased importance to pre-separation exit interviews as the last opportunity for privileged communications. "While they are still under your wing, you'll want to go ahead and get as thorough an understanding as you can," says Brockland. Weinberger agrees, but sees an even starker alternative. "It seems that the Newman decision creates an incentive to keep people on payroll that the company would otherwise let go, just for the purpose of being able to gather the facts necessary to deal with a possible future claim," he warns.
Either way, this bright-line rule may have unintended consequences. "Lawyers are smart, they'll figure it out, right?," Brockland laughed.
