Litigation Alert: Court Explains the Circumstances in Which an Employer May Invoke the Attorney-Client Privilege When Communications are Neither Authored By Nor Addressed To Counsel

Date: Jun 18, 2010

In Lewis v. Wells Fargo & Co., Case No. C-08-02670 CW (N.D. Cal. Mar. 12, 2010), the U.S. District Court for the Northern District of California clarified the application of the attorney client privilege to documents that were neither authored by nor addressed to counsel. Confidential documents created by company employees to assist company counsel are protected by the attorney-client privilege even if the document is not addressed to counsel as long as the employee understands the intended use of the document.

Wells Fargo reclassified many of its employees as "non-exempt" under the Fair Labor Standards Act ("FLSA"), which means they must be paid overtime. After the reclassification, several employees filed a class-action lawsuit seeking back pay they claimed Wells Fargo owed them for work done before the reclassification.

During discovery, Wells Fargo refused to produce documents from internal audits conducted to determine the proper classification of certain positions. Plaintiffs argued that the audit documents were not protected merely because counsel was copied on the communications or because counsel requested the audits to be conducted.

To determine whether certain audit documents were protected by the attorney-client privilege, the court stated that the appropriate inquiry is whether: (1) the communication was within the scope of the employee's corporate duties; (2) the employee was made aware that the information provided was intended to enable counsel to provide legal advice; and (3) the communication was confidential.

Using this standard, the court held that communications among Wells Fargo's compensation group and human resources department regarding the FLSA audits and documents created by the compensation group summarizing the findings of the FLSA investigation were protected by the attorney-client privilege. However, questionnaires providing information about job duties were not protected by the attorney-client privilege because employees completing the questionnaires were not notified that the surveys would be used to obtain legal advice regarding FLSA compliance.

The court determined that the difference between protected and non-protected documents turned on whether the author of the documents knew that the information requested from the audits would be used to obtain legal advice.

For more information on Fair Labor Internal Audits please see: Client Alert: WHD Tells Stakeholders: "We Can Help." Better Watch Out If You're an Employer, However.

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