In the recent case of Paknad v. Superior Court, the California Supreme Court affirmed and expanded on previous rulings that attorney-client communications and the attorney work product privileges may be waived where the employer places the adequacy of an attorney-conducted investigation at issue.

When an employee makes a complaint of harassment, discrimination, or retaliation to his or her employer, employers often consider hiring an attorney to conduct the investigation. If the complaint eventually results in a lawsuit, the employer will often assert the “avoidable consequences” doctrine under California law. Under this doctrine, an employer may limit certain damages where the employer implemented policies to prevent and correct workplace harassment and the employee unreasonably failed to utilize those preventive or corrective measures. Employers will use the investigation to show that the company took prompt action to address the complaint.

Ordinarily, communications between an attorney and client, as well as the attorney’s work product – such as an attorney’s thoughts or mental impressions – are protected from disclosure. However, courts have found that an employer may waive those privileges where it relies on the adequacy, thoroughness, and independence of an attorney-conducted investigation to support its defenses.

Prior to Paknad, the case of Wellpoint Health Networks, Inc. v. Superior Court held that an employer could not invoke the avoidable consequences doctrine based on an adequate investigation while asserting privileges to shield the investigation from disclosure. But the question remained as to what extent the attorney work product privilege was waived.

In Paknad, the employee made a complaint of harassment, discrimination, and retaliation to her employer. The employer hired an outside attorney investigator to investigate those claims. Paknad was later terminated and filed a lawsuit against her former employer. At issue was the extent to which her employer could assert the attorney-client communications and attorney work product privileges as to that report, the factual findings in the report, and the underlying information and materials. The court in Paknad held that “despite a relationship giving rise to the attorney client privilege and work product protections, {the employer} waived the privilege by placing the scope and adequacy of the investigations at issue, such that disclosure of the material is essential for a fair adjudication of the action,” and confirmed that “even core work product is subject to waiver when the beneficiary of that protection puts it at issue.”

Employers must therefore be aware that an investigation performed by an outside attorney investigator may result in a waiver of the normal attorney-client and work product privileges if the “avoidable consequences” defense is likely to be raised and the attorneys’ investigation report put at issue.

Stokes Wagner will continue to monitor updates and will provide additional updates as they become available. If you have any questions, do not hesitate to contact a Stokes Wagner attorney.

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THIS DOCUMENT PROVIDES A GENERAL SUMMARY AND IS FOR INFORMATIONAL/EDUCATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO BE COMPREHENSIVE, NOR DOES IT CONSTITUTE LEGAL ADVICE. PLEASE CONSULT WITH COUNSEL BEFORE TAKING OR REFRAINING FROM TAKING ANY ACTION.