The New "Miranda" Warnings for Employees: Surviving the Legal and Ethical Minefield
When an employer utilizes counsel to conduct an internal investigation, the employer needs to give careful thought to the standard disclosures that its attorneys provide at the outset of the interviews. Nothing less than the attorneys’ ethical obligations to the interviewees – and the employer’s right to control the attorney-client privilege – are at stake.
A recent series of cases in the criminal context, involving government investigations of corporate wrongdoing, provides some guidance and suggests that best practices in this area will need to change if employers want to minimize the risks of finding that (a) their attorneys have an ethical obligation to the interviewees and/or (b) the interviewees are effectively co-owners of the attorney-client privilege attached to their respective interviews.
For example, in In Re Grand Jury Subpoena: Under Seal, 415 F.3d 333 (4th Cir. 2005), during an internal investigation of corporate activity prior to an imminent government investigation, a company’s investigating counsel (both inside and outside) provided each of the company’s employees with the following disclosure, commonly referred to as the “Upjohn warning”:
We represent the company. These conversations are private, but the privilege belongs to the company and the company decides whether to waive it. If there is a conflict, the attorney-client privilege belongs to the company.
Subsequently, a grand jury subpoenaed written memoranda and other writings concerning the employee interviews. The employees moved to quash the subpoena and prevent the company from waiving the attorney-client privilege related to the interview memoranda prepared during the internal investigation. The employees argued that they were represented at the time of the interviews by the company’s general counsel and external law firm, and that they (the employees) owned and had not waived the attorney-client privilege.
Ultimately, the Court concluded that the employees’ belief that they were represented by the investigating attorneys was not reasonable. For example, the Court found that the employees were not told that they were to be represented by the investigating attorneys, nor did the employees request the investigating attorneys’ representation. No personal legal advice was sought or rendered. Moreover, the employees were told that the information they were providing could be disclosed at the company’s discretion.
Therefore, the Court held that the attorney-client privilege was the company’s alone. Accordingly, and because the company had expressly waived this privilege, the Court could not preserve the privilege for the individual employees.
While the company ultimately won the right to waive its attorney-client privilege, this case and others like it suggest that there are a number of issues that should be addressed by both inside and outside counsel involved in internal investigations that include employee interviews:
If company counsel are not careful, they can create an attorney-client privilege that belongs to both the company and the employees being interviewed.
Generally, an attorney-client relationship can be created between the company’s attorney (whether internal or outside) and the employee in a situation where the employee reasonably believes that the attorney represents him or her. It is exclusively the attorney’s responsibility to clarify the ethical obligation, if any, that the company attorney has to the employee. In order to avoid an employee’s misperception that the company’s attorney represents the employee, it is critical that the attorney provide clear disclosures to employees, or new “Miranda warnings,” as set forth in greater detail below.
However, when providing the detailed disclaimer in this Miranda warning, the attorney will be faced with the significant practical challenge of obtaining the employee’s cooperation in the face of off-putting legal disclaimers.
It may make a difference whether an inside or outside counsel is conducting the investigation.
The company’s decision whether to use inside or outside counsel for an internal investigation is an important one. Where the inside corporate counsel conducts the investigation, an employee may consider inside counsel to be a co-worker, regardless of the employee’s rank in the company. Therefore, it is even more important for inside counsel conducting an internal investigation to be absolutely clear with the employee that the attorney represents only the company and not the employee, and to ensure that the employee has an understanding of all of the ramifications of the interview, as set forth in the suggested warnings below.
What are the advantages and disadvantages of maintaining the Company’s exclusive attorney-client privilege?
The advantages of maintaining the attorney-client privilege (even when the company’s attorney interviews third-party employees) as purely the company’s privilege are significant. If the company informs the employee, either expressly or impliedly, that the company’s attorney represents both the company’s and the employee’s interests, then the company can lose its exclusive right over the confidentiality of such communications. Should the employee’s relationship with the company later become adverse, then the employee can block disclosures adverse to him or her because the privilege is held jointly by the company and the employee. This could prove to be important if the company wishes to present beneficial evidence discovered during its own internal investigation.
Alternatively, the primary disadvantage of preserving the company’s exclusive attorney-client privilege is that the employee will feel threatened and will not cooperate with the investigating attorney. Ultimately then, the company should carefully consider reserving its exclusive attorney-client privilege by providing a standard set of disclosures to employees at the commencement of every employee interview.
Does the company risk waiving, or losing exclusive control of, its privilege if the investigation report is shared widely with management?
The answer is likely “yes,” because the privilege belongs to the company and not to one individual. Thus, the company should be careful before sharing any investigation report, even within management. Without receipt of the employee “Miranda warning” as set forth below, a manager could argue that he or she enjoys joint representation, based solely on receipt of the investigation report, and therefore might block any disclosure by the company that is adverse to his own interest.
New “Best Practices” – The New “Miranda” Disclosures
The traditional Upjohn warning appears to be insufficient given recent Court decisions. This minimal disclosure, that the interviewing attorney represents the company and not the employee, may not be enough to protect the attorney-client privilege as belonging exclusively to the company. Thus, companies should carefully craft a set of disclosures, or new employee Miranda warnings, prior to initiating an internal investigation. These disclosures should address at least the following:
- Identify the attorney and explain that he or she represents the company.
- Explain that the attorney, whether internal or external, does not represent the employee.
- Explain that the attorney-client privilege belongs to the company and not to the employee.
- Explain that the company will decide whether it will assert or waive the attorney-client privilege.
- Explain that the employee may hire his or her own attorney.
- Explain that the employee’s failure or refusal to cooperate may result in discipline, up to and including termination of employment.
- Ask whether the employee understands these conditions.
As the Fourth Circuit case above illustrates, there is no “one size fits all” approach to handling privilege issues associated with internal investigations. Therefore, human resources directors and in-house counsel should work collaboratively, and with outside counsel, to perform an assessment of potential employee representation challenges on a case-by-case basis.