10 November 2016 - Post by:David Merlin-Jones
In this blog, the second in a series regarding regulatory investigations and employment challenges, we discuss legal privilege (as a reminder, this protects all communications between a legal adviser and their client, and prevents their disclosure without the client’s permission). In particular, we focus on the importance of maintaining legal privilege over documents, how to share information without waiving privilege and when it makes sense simply to waive it…
Attracting, maintaining and losing privilege is such a wide topic that it deserves its own series of blog posts. Within the context of this series though, the key issue is how to balance the creation of privileged documents during a regulatory investigation, with the need to show during employment litigation that a fair disciplinary process has been undertaken. This concern is real – failure to disclose evidence demonstrating the extent and content of investigations that have taken place can mean the difference between winning and losing employment tribunal claims.
There may be things arising out of an investigation that a company does not want made public. Our starting point is therefore to assume that, to the extent possible, you want all documentation produced during a regulatory investigation to be created in a way that attracts legal advice privilege. To maximise the chance of effectively asserting privilege, the number and types of documents created should be limited and external lawyers should attend interviews, draft non-verbatim notes (which also contain legal advice/opinions) and keep them as part of their working papers. It is also helpful to label documents “Strictly confidential and legally privileged”. The circulation of documents should also be kept as limited as possible – the wider the audience, the weaker the claim of privilege and the higher the risk that someone will inadvertently disclose them.
That said, it will sometimes be in your interest to proactively disclose documents to a regulator (for example, to show that proper investigation of a given matter has taken place or to demonstrate cooperation with the regulator in general), but this will usually constitute a waiver of privilege and risk a loss of control over the documents. While you might be content for the FCA or PRA to inspect a particular document, would you also be happy if this was disclosed in a public forum such as an employment tribunal or to an interested third party via a Freedom of Information request? While it is possible to argue that privilege is not waived in the case of limited disclosure, it is often wise to assume that this will not be the case and to make sure that you only disclose documents over which you are content to lose privilege. In a multi-jurisdictional matter, consideration must also be given to the knock-on effects of a waiver in one country to the proceedings in other jurisdictions where the rules may be different.
Within employment proceedings, the ability to demonstrate that a fair process has taken place is vital to an employer, especially if the dispute has arisen out of a privileged internal investigation. Judges usually give short shrift to arguments that a privileged investigation into an employee’s misconduct took place prior to a disciplinary process and while the disciplinary decision-maker was informed of this fact and its conclusion, they were not given access to the relevant documentation. This is especially problematic if the decision-maker has failed to undertake their own investigations to counter the lack of evidence forthcoming from the privileged investigation. However, there is a solution that goes a long way towards overcoming this problem – the creation of new, open, documentation based on the underlying privileged material and which contains minimal sensitive information. These open documents, over which legal privilege is never asserted, can then be disclosed to a decision-maker and used in any subsequent tribunal proceedings. These will help to show that a fair process has been undertaken and will justify the need not to conduct any more privileged investigations. While there is the alternative of waiving privilege over a select number of documents, and of only doing this during employment proceedings, this can often lead to claimants sensing blood and demanding disclosure of any other related privileged documents.
Disclosure of privileged documents in any scenario should not be undertaken lightly and needs to be tightly controlled. It is best to formulate your strategy with regards to privilege at the outset of any investigation, especially if it is likely to result in disciplinaries. If privilege is only considered at the point at which it becomes an issue, there are likely to be too many groups involved by then (e.g. HR, Compliance, Legal) to implement a coherent approach. All teams dealing with investigations and disciplinaries need to understand upfront exactly what privilege is and how it can be maintained and lost. Remember ‒ inadvertent disclosure of potentially harmful and sensitive documents could damage your firm, both reputationally and financially, whether or not a matter proceeds to an employment tribunal.