Employers typically waive the attorneyâclient privilege when they assert the advice-of-counsel defense to show their good-faith attempt at FLSA compliance. Â But what is the scope of that waiver?
The SDNY recently provided its answer by limiting the scope of waiver to lawyersâ communications to employees relevant to the FLSA advice. The court found no privilege waiver for attorney-to-attorney communications not shared with employees Foster v. City of New York, 2016 WL 524639 (SDNY Feb. 5, 2016). You may read the decision here.
Advice-of-Counsel Defense
Where an employer has violated the FLSA, the statute provides for a liquidated-damages award doubling the unpaid overtime compensation unless the employer shows that it acted in good faith. Employers often show their good faith by claiming they sought and followed the advice of counsel. In Foster, the defendant City did just that, arguing that it implemented policies âto ensure compliance with the FLSA after consultation with counsel.â
Implied Waiver
The Foster court correctly recognized that parties implicitly waive the attorneyâclient privilege when they assert a claim âthat in fairness requires examination of protected communications,â and that the Cityâs good-faith defense âeffected an implied waiver here.â But waiver is not automatic for every privileged communication that âmay merely be relevantâ to the defense; âthe paramount consideration is whether fairness requires disclosure.â
Limited Scope of Waiver
The plaintiff sought two categories of attorney communications: (1) communications between the Cityâs attorneys and City employees (regardless of level); and (2) internal, attorney-to-attorney communications not revealed to City employeesâin other words, âall relevant communications related to FLSA compliance.â
The SDNY found a limited waiver, ruling that the City âwaived protection over communications related to legal advice about this compliance shared between attorneys and non-attorney employees, whether those employees are âdecision-makersâ or âlower level employeesâ who might provide input into the process.â
But using comments that employers will find useful, the court did not expand the waiver. Stating that implied waivers are not âblunt instrumentsâ and âmust be formulated with caution,â the court refused to expand the waiver to âexclusively internal privileged communications.â
The plaintiffs questioned how they could test the reasonableness of the Cityâs reliance on its attorneys’ FLSA analysis without knowing that advice. The court answered that they could not obtain internal privileged communications âunless they could show that the City knew (or should have known) that the analysis was deficient.â Â With no such showing here, the court found no waiver of attorney-to-attorney communications.