New Jersey Employment Law Decision Examines Scope of Attorney-Client Privilege in Workplace Investigations of Sexual Harassment

A key New Jersey employment law issue was recently examined by an appeals Court in the case of C.S. vs Brick Recycling Company.  The Appellate Division of the New Jersey Superior Court examined when communications with attorneys are privileged when those attorneys are examining claims of sexual harassment or discrimination.

 

C.S.’s Claims

C.S. worked for Brick Recycling Company as a truck driver.  He made an internal complaint to Peter Decenzo, the company’s owner and president, that the corporate financial controller, M.R., made unwanted sexual advances toward him, improperly accessed his bank records, and improperly disclosed the information in those records to others..  While M.R. was  a company supervisor, she was not C.S.’s supervisor.  The following day, DeCenzo told C.S. and M.R. to have no have no further contact with each other.  M.R. left an angry note on C.S.’s car, for which DeCenzo admonished her.

DeCenzo hired a law firm to investigate C.S.’s claims.  While the investigation was pending, C.S. resigned.  The investigation substantiated C.S.’s claims, finding that “it is more likely than not that [M.R.] engaged in behavior in violation of Brick Recycling’s Policy Against Harassment.”

 

The Lawsuit

C.S. filed suit in the Law Division of the New Jersey Superior Court for sexual harassment and constructive discharge in violation of New Jersey’s Law Against Discrimination and intentional infliction of emotional distress.  The defendants filed answers to the complaint, and asserted an affirmative defense that they “acted in good faith, without malice, and with the reasonable belief that their actions were reasonable under the existing facts and circumstances.”  In discovery they turned over the report produced after the investigation, but withheld other related documents related to the investigation based on the attorney-client privilege and work-product doctrine.  C.S.’s attorneys issued a subpoena to the law firm which conducted the investigation for all records related to it.  The defendants filed a motion to quash the subpoena.  The court reviewed the withheld documents in camera and ruled that none of them were privileged, and that all of them should be produced in discovery.  The defendants appealed to the Appellate Division of the Super Court.

 

The Appellate Division’s Opinion

The Appellate Division examined the seminal case of Payton v. New Jersey Turnpike. Authority.  In Payton, the New Jersey Supreme Court examined the interplay between the attorney-client privilege, work-product doctrine and employer-initiated investigations of allegations of violations of the Law Against Discrimination.  The Appellate Division explained that under the Payton case analysis:

there is ‘a fine line ‘between an attorney who provides legal services to an organization and one who is providing essentially non-legal duties. Thus, an internal investigation of a sexual harassment claim made by an employer’s attorney may be discoverable “when an attorney conducts an investigation not for the purpose of preparing for litigation or providing legal advice, but rather for some other purpose.’  In that event, the attorney-client privilege is inapplicable, ‘even where litigation may eventually arise from the subject of the attorney’s activities.’ The [Supreme] Court added:

The key issue regarding the applicability of the privilege in this case is the purpose of the various components of the investigation that defendant initiated into plaintiff’s allegations of sexual harassment. If the purpose was to provide legal advice or to prepare for litigation, then the privilege applies. However, if the purpose was simply to enforce defendant’s anti-harassment policy or to comply with its legal duty to investigate and to remedy the allegations, then the privilege does not apply.

In Payton, the Supreme Court held that the privilege probably did not apply, but that an in camera review of the purportedly privileged documents needed to be conducted by the trial court judge.

The Supreme Court also ruled Payton that the employer can waive the privilege by relying on the results of the investigation.  However, the trial court was required to determine “whether those documents are so tenuously related to the affirmative defense that waiver is overcome despite the assertion of that defense.”  In the subsequent case of Aguas v. State, the New Jersey Supreme Court explained that “the employer in a hostile work environment sexual harassment case may assert as an affirmative defense that (1) it exercised reasonable care to promptly prevent and correct any sexually harassing behavior of which (2) the plaintiff employee unreasonably failed to take advantage [of the employer’s anti-harassment reporting procedures].”

Based on these principles, the Appellate Division reversed the trial judge’s decision.  However, it did not rule that the documents did not have to be produced.  Rather, it required that the trial judge review the documents in camera and conduct a page-by-page analysis.  Moreover, it disagreed with the trial judge’s reasoning that the defendants could not claim the privilege because the investigation was conducted several weeks before litigation was initiated.  The Appellate Division explained that since it was after C.S.’s claims, it is possible that the defendants anticipated upcoming litigation and commissioned the investigation to assist in their defense rather than correcting the behavior.  Moreover, even if they were using the investigation report as an affirmative defense, it is possible that some documents might still be privileged and thus a waiver analysis needed to be conducted.  Communications which contain legal advice should not be produced.

 

The Takeaway

Employers can assert the attorney-client privilege and work product doctrine to prevent communications with their attorneys from being produced in discovery during employment litigation, including when that communication happened in the course of an investigation to help the employer defend itself in litigation.  However, when the employer uses the results of an investigation or its subsequent remedial efforts to remedy harassment or discrimination, that employer has waived the privilege.

 

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