A Practical Guide for Protecting Privilege, Maintaining Confidential Information, and Properly Preserving Communications in the Workplace
Understanding the intricacies of legal protections for business communication is challenging even for the most experienced business professional. In today’s legal minefield, the last thing any professional wants to do is compromise privileged business information, jeopardize confidentiality, or create a legal challenge based on poor business communication management skills. Legal counsel and Human Resource experts often see ill-informed professionals attempting to protect business documents from disclosure that are outside of the purview of the legal privilege or inadvertently disclosing confidential and privileged materials thereby relinquishing the ability to keep the material between the lawyer and the client. This behavior, while well-intentioned, is detrimental to the legal affairs of the business. Let’s begin with a scenario to see how quickly professionals can muddy the water:
Joe Smith, Chief Ethics Officer, is sitting in his corner office on Friday afternoon ruminating about his weekend plans. His secretary beeps to say that a registered letter has arrived. Curious, Joe rips open the sealed envelope to discover a demand letter from an attorney threatening to sue the Company for breach of contract, age discrimination, sexual harassment, and retaliation on behalf of Bill E. Nuff, a former Sales and Marketing executive who left to “join the circus” after receiving counseling for poor performance over the past year.
Not too surprised, Joe contacts Sally Jones, VP Sales and Marketing and informs Sally of the lawsuit threat. Sally is furious, she took extreme measures to work with Human Resources to draft a Non-Compete letter that was “full-proof” and to document all the information pertaining to Bill’s departure. She thought the harsh “cease and desist” letter from corporate counsel would be enough to keep him from heading directly to the competition. But then when the Company had to file for injunctive relief to keep Bill from working for their top competitor, she really believed that the Court would easily see the damage that Bill could do to her company. What’s more frustrating, despite her best efforts to monitor his activities, she is convinced that Bill took proprietary information when he left, including client lists, financial information, and a company directory.
To make matters worse, Sally and Bill used to have a close, friendly, joking relationship. Having started at the company ten years ago, they were peers and together went through both the glory days and economically-challenging times. They were the most senior people on the team and would joke about their age and the “young recruits” they now had to contend with. They also loved to share jokes (sometimes raunchy) which made the day a bit more fun. Because of their travel schedules, much of their communication and “catching up” occurred on-line, through e-mail and their company-issued Blackberry.
Now befuddled, Sally agrees to meet with Joe Monday morning to prepare for the lawsuit. Neither is an attorney, but they know that they need to start collecting “evidence” for their in-house Counsel. Sally spends the weekend going through her previous communications with Bill. By now, most have been deleted and she decides to delete the few remaining ones that people “would not understand” because of their joking relationship. A few others that related to business, she saves and labels as “Confidential: Attorney Work-Product.”
Joe goes to Human Resources to have Bill’s personnel file pulled. He puts it in an envelope labeled “Attorney-Client Privilege.” He also sends a letter to the in-house counsel outlining the timeline of events that occurred leading to Bill’s departure and what he recollects about the situation. He includes a copy of the “cease and desist” letter and labels it “Attorney-Client Privilege.”
Monday morning Joe and Sally meet. While discussing the complaint, Joe calls Lee Galeese, in-house counsel and asks her to join them. He also asks his secretary and the Human Resource Director to join to discuss “legal strategy.”
- Has Joe properly protected the documents he has retrieved or prepared in preparation for litigation?
- Has Sally acted appropriately in collecting “evidence” and preparing for litigation?
- Is any attorney-client privilege waived as a result of the meeting with the five attendees on Monday morning?
While most know that this scenario raises significant red flags, a solid understanding of privileged communications and document protection is essential for best communication practices. This article provides an overview of the key legal evidentiary rules impacting workplace communications and discusses when and how these rules impact various types of business communication.
Section I: Protecting Privileged and Confidential Information
Test your knowledge and awareness of the attorney-client and attorney work-product privilege rules…
Are these communications “privileged” (meaning that they would not have to be disclosed in the event of litigation and are considered private)?
* Answers provided at the end of the article…
|1. Investigation report prepared by outside third-party investigator regarding allegations of company theft.||True||False|
|2. Notes made by supervisor documenting progressive discipline and decision to terminate employee.||True||False|
|3. Notes made by in-house counsel in responding to litigation surrounding termination of employee.||True||False|
|4. E-mail to my direct supervisor expressing concerns about building safety.||True||False|
|5. All-employee meeting with legal counsel present discussing management’s position on union avoidance.||True||False|
|6. Complete list of clients placed on the Company intranet.||True||False|
Certain business and personal communications are afforded legal protection from disclosure based on the sensitive nature of the relationship (attorney-client) or the sensitive nature of the compelling the writing (attorney work product). These protections are enacted to protect the sanctity of the legal process and legal relationship. Business communications are often confused for privileged communications because the drafter or receiver believes the content to be sensitive but the protection only exists in limited circumstances and can be purposefully or inadvertently waived if the parties fail to protect the privilege. This Section informs on the various business communication protections and how to maintain the privilege.
What is Attorney-Client Privilege?
An attorney-client privilege exists when legal advice, legal services, or opinion of law is sought by a someone who is or seeks to become a client from a member of the bar of a court who is acting as a lawyer, and the communications relating to that purpose is made in confidence by the client. The communications are permanently protected from disclosure by himself or by the legal advisor, unless the protection is waived.1
Why does the privilege exist?
The privilege exists because confidentiality of communications between attorney and client is fundamental to our legal system.
The privilege encourages clients to make full disclosure to their attorneys without fear of revelation to others and protects a person's right to freely and fully confer with, and confide in, an attorney.2
Whose is it?
In an attorney-client communication privilege, the client owns the privilege, and therefore is the only party that can waive the privilege. The attorney cannot divulge the privileged communication without the consent of the client. An attorney must tell the client that such a privilege even exists. If not waived, the duration of the attorney-client privilege is indefinite. The protection survives termination of litigation or threat of liability, termination of attorney-client relationship, the client's death, and the transfer of control of entity client.
While this seems straightforward, in a business legal matter, the question comes up as to who is the “client.” Does the client include all representatives of the business or only those involved in the legal matter? What if separate legal counsel is retained for different people in the same business, can they all be present in a discussion and retain the privilege? Typically, the privilege extends to any employee communicating on matters within the scope of his or her employment, during the time of his or her employment. Further, the privilege extends to other employees of the attorney or holders of confidential communication who are included in communication in furtherance of legal advice. Nonetheless, be very careful about who is present during confidential conversations intended only between “attorney” and “client.” Certain parties that are integral to the legal matter, such as outside investigators or expert witnesses or consultant, are not covered by the privilege, despite the fact that they are integrally involved in the legal matter. Do not allow outside parties, such as expert witnesses, friends and family, outside investigators, to overhear conversations or view written communications intended for the attorney because they are not bound by the same privileges and may have to testify as to what they saw and heard. If the communication is not kept privileged, it is considered “waived” and then is open for discovery.
What communications are included?
In general, the attorney-client communication privilege extends to information communicated from the client to the attorney. The communication can take any form; written, verbal, electronic; however, there must be a reasonable expectation of privacy in the communication. For example, an e-mail sent to a broad distribution list and copied to the attorney is not considered confidential and does not become “cloaked” with the attorney-client privilege. In addition, information simply transferred to the attorney from the client, does not fall under the privilege, so documents used in the normal course of business that are later shared with the attorney are NOT covered under the attorney-client privilege.3
Communications from the attorney to the client are also protected, so long as the communication is based, at least in part, upon a confidential communication from the client to the attorney.
Types of protected communication include:
- written or oral information provided for the purpose of eliciting legal advice or obtaining legal assistance;
- investigation undertaken by an attorney as an important part of an attorney's legal services to a client; or
- the initial consultation a client seeks from a potential attorney.
What communications are not protected?
It is important to delineate the communications that would never be included in an attorney-client privilege. For example, the attorney-client privilege does not extend to communications “in furtherance of intended or present continuing illegality.”4 This is considered the crime-fraud exception. Further, physical evidence of a client's crime would also not be covered under the privilege since the attorney would be required ethically to turn such evidence over to prosecutors.5
Moreover, the privilege attaches only to confidential communications for the purpose of legal representation, consultation or advice. Therefore, communications by or with in-house counsel acting in a nonlegal capacity or company executives that are lawyers but not acting in a legal role (i.e., HR Manager) are not protected by the privilege. For example, in-house counsel’s involvement as a member of the Personnel Action Review Committee and participation in its meetings did not render documents generated in connection with those meetings privileged. The Committee's primary function was to make business decisions, not to obtain legal advice. However, in that same situation, Committee documents relating to in-house counsel's legal advice are privileged.6
How can the privilege be waived?
A client wishing to preserve the privilege must take affirmative action to guard confidentiality. A client disclosing to third party (e.g., cc on email) who isn’t involved in the furtherance of legal advice waives the privilege by failing to meet the confidentiality element. A client leaving confidential communications in a place where they can be found or throwing privileged documents in a trash dumpster loses their privileged status of the communications when found by the opposing party. In a business setting, the “client” is the business entity, but that is a legal fiction since the business acts through its agents and employees. Typically, only executives can expressly waive attorney-client privilege and no employee has the right to use or waive the business privilege on his or her own behalf.
Referring to our opening scenario, communications prepared in the normal course of business, such as personnel files or strategy memos to a department, cannot be protected as attorney-client communications. The timeline Joe prepared may be as he has only shared it with the attorney, but the underlying supporting documents are not protected, despite labeling them as such.
Attorney Work Product Doctrine
What is Attorney Work Product Doctrine?
Work product protection extends only to “derivative” materials: i.e., those created by or derived from an attorney's work on behalf of a client that reflects the attorney's evaluation or interpretation of the law or the facts involved. The protection afforded by the privilege is not limited to writings created by a lawyer in anticipation of a lawsuit but may apply to writings prepared by an attorney while acting in a nonlitigation capacity. For example, memos prepared by lawyers negotiating business deals reflecting their opinions of the deal.7
The purposes of the protection are to: (1) preserve the rights of attorneys to prepare cases for trial with that degree of privacy necessary to encourage them to prepare their cases thoroughly and to investigate not only the favorable but the unfavorable aspects of such cases; and (2) to prevent attorneys from taking undue advantage of their adversary's industry and efforts.8
Whose is it?
In this case, the attorney, rather than the client, is the holder of work product protection. The doctrine protects the work product of the attorneys, attorneys’ agents (investigators, researchers, etc.) and consultants. Further, the work product of experts consulted by the attorney and who will not testify at trial are deemed privileged.
On the other hand, where a party consults with an expert before hiring counsel, those consultations are notafforded protection as “attorney work product.” Further, the work of an attorney hired for nonlegal work, such as the work of an attorney solely to investigate or adjust a claim, or to negotiate a contract, rather than to provide legal advice, is not protected.
What is protected?
Any writing that reflects an attorney's impressions, conclusions, opinions or legal research or theories. This applies as well to writings prepared by an attorney while acting in a nonlitigation capacity. Attorney opinions, often referred to as attorney’s “brain work,” are absolutely protected and qualified protections exist for other work product.
Examples of protected attorney work product include:
- Report generated by outside consultant to help evaluate the risks of litigation
- Memos prepared by lawyers negotiating business deals reflecting their opinions, research, etc.
- Notes or recorded statements taken by counsel (because they would reveal counsel’s impressions, conclusions, etc.)
- Audit reports or compilations of entries in documents and records
Discovery and Waiver
Unlike privileged information, which generally receives absolute protection, many types of work product receive only qualified protection from discovery and a court may order disclosure of work product under certain circumstances.
To preserve the Attorney Client Privilege and Work Product Doctrine distribute communications only to those who “need to know.” If access to information and materials otherwise protected from disclosure is provided to individuals other than those who “need to know,” a corporate client may inadvertently waive the protections offered by the attorney-client privilege and work-product doctrine.
Confidential Information and Trade Secrets
Trade Secrets, by definition, broadly entails information, including a formula, pattern, program, customer list, device, technique or process that: 1) derives independent economic value, actual or potential, from not being generally known to the public or to persons who can obtain economic value from its disclosure or use; and 2) is the subject of reasonable efforts under the circumstances to maintain its secrecy. Examples of Trade Secrets include:
- Customer lists compiled with a significant investment of time/money
- Compensation and other financial data;
- Marketing strategies;
- Secret recipes;
- Internal succession planning/ HR planning strategies.
However, not all business information is a trade secret. A showing of value, by itself, is not sufficient to satisfy the statutory definition of trade secret. Other businesses must be unaware of the information and be able to put that information, if it were known to them, to beneficial use.9
The key to protecting Trade Secrets is for the owner to proactively maintain secrecy. Employees need to be aware of, and agree on, what exactly is "secret" information within the company, to decrease the possibility that there may be an inadvertent leak of valuable information. According to Joseph A Greco of Townsend and Townsend and Crew LLP in his article, Protecting Trade Secrets is Important to Your Business: How to Implement a Trade Secrets Program, published on www.Findlaw.com, there are three major barriers that a company can erect to protect their trade secrets:
- Physical Barriers: Confidential information should be handled differently than everyday information and kept segregated, under lock and key, and/or physically designated as "confidential." Electronic information is especially susceptible to inadvertent disclosure or misappropriation. Special tactics such as read-only files, passwords, and firewall protection, limited internet accessibility, retrieval and multi-level security access, may prevent the loss of confidential information.
- Disclosure Barriers: Create a "need to know" policy that limits the scope of the group of people that have access to the entire trade secret. For example, a company can significantly reduce the risk of misappropriation if an employee that changes jobs had access to only one aspect of the critical data. Other methods of protecting valuable data include check-in and check-out procedures, document destruction policies, and a review of all publications and presentations to avoid inadvertent dissemination of confidential information.
- Contractual Barriers: Contractual barriers include nondisclosure agreements, agreements (NDAs) that prohibit employees from sharing proprietary information with other individuals outside the company and forcing the employee to acknowledge that he or she has not brought any trade secrets or proprietary information from a previous employer. This second part is critical, according to Kelly Griffin in her article,Protecting Your Company’s Assets, published on www.HR.BLR.com, because the 1996 Economic Espionage Act provides for criminal penalties for the sharing of information that will “benefit a foreign government, foreign instrumentality, or foreign agent” as well as for “theft of trade secrets.” If the business is ever legally challenged for obtaining stolen competitive information or corporate espionage, the Nondisclosure Agreement could become critical evidence in the lawsuit. In addition, in some states where permitted, covenants not to compete can be utilized to prevent the proprietary information from walking away with a former employee. Consultants and other third parties should explicitly be included in the procedures a business employs to protect its valuable intellectual property. Exit interviews with outgoing employees might also be used to reinforce your company's trade secret policies.
Access to, and dissemination of, confidential and proprietary information and trade secrets must be controlled carefully by an organization.10
Section II: Maintaining Communication Security: Document Retention and Recordkeeping
For the myriad of business communications that do not fall under a privacy privilege, it is imperative that organizations maintain proper document retention practices in the event that the documentation is needed for business, legal or planning purposes. In many cases, governmental regulations require documents to be saved and secured.11 Documents must also be saved to justify or defend business-related decisions or for audit, research, and planning purposes.
Practical Rules for Preparing and Safeguarding Business Communication
Regarding security of “hard copy” information, some ideas seem rudimentary but a necessary reminder:
- Erase whiteboards or take flip-chart notes that contain valuable data after meetings and before workday’s end. In one example, an executive team spent an afternoon conducting succession planning and inadvertently left the information on the white board concerning promotions, position changes, and performance matters for others to view.
- Shred documents that are no longer needed (but within the record retention guidelines!)
- Documents containing confidential information should be conspicuously stamped as “Confidential” and kept in secure places.
In today’s business arena, maintaining computer security is paramount. Employees should be advised to regularly sign on and off computers, even when stepping away for a brief respite, meeting or lunch. Secure laptops with login codes, locks, and constant vigilance. Richard Bernes, founder of the Bernes Group, a security consulting and investigations firm, notes that over one half million laptop computers are stolen a year in the U.S. and Canada.12 Consider assigning “traveling” laptops that are stripped with proprietary information and only include the necessary business documents and tools for the trip. Also ensure that messages sent via computer are labeled as “confidential” and intended only for recipient.
Retention practices are useful for both keeping and eliminating business communications. For example, in order to avoid inordinate space being consumed on the business’s computer system, the company implements a mandatory e-mail deletion policy after 30 days. Or, departments are expected to purge employment applications after they have been on file for one year.
Destruction of documents, however, including electronic documents such as emails, can be illegal. Federal and state statutes mandate retention periods for business documents related to various employment and business laws and require continued preservation of document related to pending litigation. Further, Leonard Deutchman and Brian Wolfinger tell us in their article, Revised Rules on ESI Should Prompt Routine Imaging, that case law firmly establishes that the “duty to preserve is triggered not only by the commencement of litigation, or even when you receive a ‘preservation letter’ from opposing counsel stating that litigation is contemplated and requesting that all possibly relevant materials be preserved. The duty to preserve arises simply when an event occurs that would give a party reasonable notice that litigation will commence.”13
An employer’s duty of preservation is highlighted in the case of Zubulake v. UBS Warburg LLC,14 which involved a Title VII claim of wrongful termination. In Zubulake, the court found that the duty to preserve arose before the filing of the complaint, and even before the August 2001 filing of the Title VII claim with the Equal Employment Opportunity Commission (EEOC). The court found that the duty to preserve arose as far back as the time of Zubulake’s termination, when the words exchanged made employees at UBS Warburg aware of her intent to sue for wrongful termination. Zubulake is most well-known for the court’s imposition of severe sanctions against the employer for failing to preserve evidence, referred to as “spoliation.”15 The lesson to businesses, and particularly HR business partners, is that any time management has reason to suspect litigation, assume an immediate duty to preserve documents that could be relevant to the litigation matter.
Further, electronically stored information (ESI) is critical to employers and businesses and should be routinely preserved to protect an organization’s intellectual property or otherwise enforce its rights, under contract or statute, against challengers. Amendments to the Federal Rules of Civil Procedure regarding the preservation, storage, search and production of ESI took effect on Dec. 1, 2006. For HR professionals and employers, the most important change is the requirement that parties who know or have reason to believe that litigation will commence must preserve all information, including ESI, of possible relevance to that litigation.16 Possible sources of electronically stored information include: employees’ computers; file and mail servers; computer compact disks (CD), USB memory sticks or “thumb” drives, external hard drives, and PDAs (such as Blackberry or Palm equipment).
In cases of record retention and preservation, discuss with counsel and seek legal advice before hitting the shredder or spoiling the electronic evidence.
In summary, studies show that what employees do not know or understand regarding privileged and confidential business information can destroy privilege and reap havoc in a litigation matter. Protecting the company’s assets is a key component to business success. Understanding the scope and purpose of the communication, recognizing and adhering to privileges associated with certain communications, maintaining the secrecy in business proprietary and confidential information and properly retaining and preserving communications enable you to become an expert communicator.
**For additional information on the topic of Business Communications, please refer to the complementary article in this series: Business Communications: A Practical Guide for Drafting Effective and Unchallengeable Communications by Denise M. Kay, Esq., SPHR.
Answers to introductory case study exercise:
Has Joe properly protected the documents he has retrieved or prepared in preparation for litigation?
- Personnel file cannot be privilege
- Letter with timeline and his recollection can be privilege (must be protected)
Has Sally acted appropriately in collecting “evidence” and preparing for litigation?
- Sally has acted negligently and potentially criminally be deleting/destroying evidence that could be relevant to the matter. She does not have a right at this point to destroy evidence.
- E-mails she saves are not “Attorney work product.” Cannot protect, must disclose.
Is any attorney-client privilege waived as a result of the meeting with the five attendees on Monday morning?
- Depends on “need to know.” Likely that because all these people are agents of company that they are bound by A/C privilege and it is not waived.
Answers to Business Communication Quiz:
|1. Investigation report prepared by outside third-party investigator regarding allegations of company theft. NO PRIVILEGE||True||False
|2. Notes made by supervisor documenting progressive discipline and decision to terminate employee. UNLESS PREPARED FOR ATTY, THEN NO PRIVILEGE AND NO WORK-PRODUCT||True||False
|3. Notes made by in-house counsel in responding to litigation surrounding termination of employee. WORK PRODUCT||True
|4. E-mail to my direct supervisor expressing concerns about building safety. NO PRIVILEGE||True||False
|5. All-employee meeting with legal counsel present discussing management’s position on union avoidance. NO ATTY-CLIENT PRIVILEGE BECAUSE ALL IN ATTENDANCE ARE NOT “CLIENTS”||True||False
|6. Complete list of clients placed on the Company intranet. PRESUME INTRANET IS FOR INTERNAL USE ONLY, CLIENT LIST IS TRADE SECRET IF ATTEMPTS ARE MADE TO KEEP IT SECRET||True