Employers typically waive the attorney–client privilege when they assert the advice-of-counsel defense to show their good-faith attempt at FLSA compliance. But what is the scope of that waiver?
The SDNY recently provided its answer by limiting the scope of waiver to lawyers’ 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.
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 “to ensure compliance with the FLSA after consultation with counsel.”
The Foster court correctly recognized that parties implicitly waive the attorney–client privilege when they assert a claim “that in fairness requires examination of protected communications,” and that the City’s good-faith defense “effected an implied waiver here.” But waiver is not automatic for every privileged communication that “may merely be relevant” to the defense; “the paramount consideration is whether fairness requires disclosure.”
Limited Scope of Waiver
The plaintiff sought two categories of attorney communications: (1) communications between the City’s attorneys and City employees (regardless of level); and (2) internal, attorney-to-attorney communications not revealed to City employees—in other words, “all relevant communications related to FLSA compliance.”
The SDNY found a limited waiver, ruling that the City “waived protection over communications related to legal advice about this compliance shared between attorneys and non-attorney employees, whether those employees are ‘decision-makers’ or ‘lower level employees’ who might provide input into the process.”
But using comments that employers will find useful, the court did not expand the waiver. Stating that implied waivers are not “blunt instruments” and “must be formulated with caution,” the court refused to expand the waiver to “exclusively internal privileged communications.”
While the plaintiffs questioned how they could test the reasonableness of the City’s reliance on its attorneys’ FLSA analysis without knowing that advice, the court answered that they could not obtain internal privileged communications “unless they could show that the City knew (or should have known) that the analysis was deficient.” With no such showing here, the court found no waiver of attorney-to-attorney communications.