Federal Court Rules That HR Consultant's Report is Not Privileged

April 14, 2015

On March 27, 2015, the U.S. District Court for the Southern District of New York granted the plaintiffs’ motion to compel disclosure of a report prepared by a Human Resources (“HR”) consultant in class action litigation under the Fair Labor Standards Act (“FLSA”) and state wage and hour laws. In Scott v. Chipotle Mexican Grill, Inc., Chipotle claimed that a number of documents sought by the plaintiffs during discovery were privileged communications that were protected from disclosure.  One such document was a report from an HR consultant examining the activities of four employees holding Chipotle’s apprentice position.  Chipotle claimed that the report was subject to the attorney-client privilege because one of its attorneys retained the HR consultant to help him assess whether the apprentice position should be classified as an exempt or non-exempt position.  The Court disagreed with Chipotle and ordered that the report be turned over to the plaintiffs. In general, the attorney-client privilege -- upon which Chipotle was relying -- applies to communications between an attorney and his/her client that were intended to be, and were in fact, kept confidential, and were made for the purpose of obtaining or providing legal advice.  In certain limited situations, however, communications can fall within this privilege even if not made between an attorney and a client.  The so-called “agent of attorney” doctrine acts to extend the attorney-client privilege to shield communications that are not between an attorney and client when the purpose of the communication is to assist the attorney in rendering legal advice to the client.  Such communication must be “necessary” or “highly useful” for effective consultation between the client and attorney.  This exception has been applied sparingly, in very limited circumstances. Here, the Court held that Chipotle failed to establish that the HR consultant did anything more than factual research to assist Chipotle in making a business decision, rather than to assist an attorney in rendering legal advice to Chipotle.  The Court explained that the report did not provide any specialized knowledge that the attorneys could not have acquired or understood on their own or directly through Chipotle (their client).  There was also no indication that the consultant was taking information that was incomprehensible to Chipotle’s attorneys and putting it into a “usable form,” rather than merely consolidating employee interviews and delivering a factual analysis.  The Court rejected Chipotle’s argument that the report should be considered privileged because the consultant was hired by a law firm and the report was specifically drafted for an attorney, because the agent-of-attorney doctrine does not consider form over substance.  The final nail in Chipotle’s coffin was the fact that no legal advice was actually provided by its attorneys following receipt of the HR consultant’s report, which indicated that the report was not created for the purpose of assisting the attorneys in providing legal advice. The Chipotle decision emphasizes the need for employers to exercise the utmost care when deciding whether to utilize the services of an HR consultant.  Although the Court ruled upon a situation where an attorney was involved, at least tangentially, with the HR consultant, employers must recognize that when an HR consultant is simply providing advice to an employer and there is no attorney involvement at all, such communications or resulting reports would undoubtedly not be privileged.  Even if an attorney is involved, however, the privilege still will not apply if the consultant’s investigation is merely factual, does not assist the employer’s attorney in rendering legal advice, and does not provide information outside of the attorney’s general expertise that is essential to effective consultation between the attorney and client.  In such situations, there is a risk that the employer will be required to disclose any communications and reports from the consultant during future litigation, which potentially could be devastating depending upon the content of those communications and reports.