The Ethics of Corporate Investigations

I was recently a panelist at the Association of Corporate Counsel's annual conference, and someone in the audience posed an interesting hypothetical. 

Imagine that in-house counsel is conducting an internal investigation and speaks with an employee whose conduct may have been unlawful.  The employee does not have her own counsel, so the in-house lawyer makes clear to the employee that the lawyer represents the company and not the employee herself. So far, so good. 

But now let's imagine that the employee is reluctant to speak with the lawyer.  The lawyer then says to the employee, "You are subject to the company's employment policies, which require you to speak with me about this matter." 

Several audience members were convinced that such a statement was both commonplace and ethically permissible.  It was my position that such a statement, which appears to be giving legal advice to an unrepresented (and potentially adverse) party regarding her obligations under the employment policy, could be unethical under Rule 4.3.    What do you think? 

Comments

[john steele]

I'd recommend, "I represent only the company here, and want to inform you that it's the company's position that you have an employment duty to tell the company, and me, what happened." I agree that it's commonplace, though.

[Andrew Perlman]

John,

Thanks. Of course, there is an ethical distinction between your version and the one in the hypo. Your version seems fine to me. Perhaps that's slicing things a bit thin, but I could see an employee reacting differently to your lawyer than to the one in my hypo, which is why I think the lawyer in my hypo has crossed the line.

[john steele]

Yeah, I should have replied to your version more directly. According to your hypo, the lawyer made it clear that she doesn't rep the employee, so i'd say "no violation." In my version, the lawyer repeats the admonish before discussing legal obligations and hence has reduced risk even more.

[Doug Richmond]

I don't think this is legal advice. Anyone in the company's HR department could and would tell the employee the same thing about her duty to speak to the company's lawyers.

[Jeff Lipshaw]

In any event, a well-prepared lawyer and company would have a policy (in the HR Manual) already written on the duties of an employee with respect to an investigation, and a memorandum ready to whip out and give the employee so there is no confusion.

Our practice was to send the employee a letter notifying him or her about the investigation, and spelling out precisely what everybody's role was. The procedure varied on the actual interview; some lawyers took notes, prepared a summary and then sent it to the perp employee for comments. I once had a very tricky situation in which I suggested to the perp employee that we have a court stenographer take down our conversation so that he could review it afterwards for accuracy, but I also told him explicitly that he had an obligation as an employee to speak to me, that I was not his lawyer, and he had no right to counsel in connection with his duty to the company.

I'm not sure what we would have done if an employee actually showed up with a lawyer. I think I probably would have said something like: "you have no right to be here; you are here at our sufferance; you may listen to the conversation, but you have no right to participate; you are free, if you wish to advise your client not to participate, but we will then decide whether there are separate grounds for discipline for failing to cooperate with an investigation."

[Max Kennerly]

I think it comes down to context. If the context has made it clear to the employee that the employee's interests are, or could be adverse, then there is not much problem in the lawyer advancing the views of the employer, since the concern about "confusion" expressed by the rule is inapplicable.

If, however, the impression created is one of a neutral investigator, then it seems to be legal advice given to an adverse unrepresented party.

The precise wording also creates a problem for the attorney, because they did not merely assert that the employee could be terminated and/or sued for refusing to talk, but instead outright told the employee what their legal obligations were under the employment agreement. That's a big problem.

[Andrew Perlman]

Doug puts his finger on the right question: is it legal advice to say that the employee is obligated to speak because of the company's policies? He says no, because an HR person could say the same thing. I'm not convinced, though, that this resolves the issue.

If a lawyer tells an employee that the employee has a duty to speak, what sort of duty is the lawyer referring to? Certainly not a moral duty. The lawyer is saying it in the context of an employment policy. Isn't the lawyer telling the employee what the lawyer believes the employee's legal responsibilities are as a matter of employment/contract law? Put another way, if the CEO called the in-house counsel into her office and asked, "what are my responsibilities under our internal policies?," wouldn't the counsel's answer be considered to be "legal advice" for purposes of the attorney-client privilege? Why should the answer be different when the lawyer is advising an employee regarding her obligations under the same policy?

[Steven Lubet]

In response to Andrew's questions:

AP: "Isn't the lawyer telling the employee what the lawyer believes the employee's legal responsibilities are as a matter of employment/contract law?

SL: No. The lawyer is informing the employee of the company's policy. Properly stated, it has nothing to do with legal responsibilities.

AP: "Put another way, if the CEO called the in-house counsel into her office and asked, "what are my responsibilities under our internal policies?," wouldn't the counsel's answer be considered to be 'legal advice' for purposes of the attorney-client privilege?

SL: Again, no. The answer would be part of a communication made for the purpose of obtaining legal advice, and thus it would be privileged and confidential, but the specific information would be about company policy rather than the law."

AP: "Why should the answer be different when the lawyer is advising an employee regarding her obligations under the same policy?"

SL: Because the contexts are clearly different and the lawyer has taken reasonable steps to make sure there is no misunderstanding.

[Andrew Perlman]

Steve,

Regarding your first point, you say that the "lawyer is informing the employee of the company's policy."

But in my hypo, the lawyer is going beyond merely informing the employee of the company's policy. The lawyer is saying that, in this particular circumstance, the policy requires that you speak with me. There's a difference between saying "The policy says X" and saying "You have an obligation to do something because the policy says X." The former is stating the policy. The latter is giving advice as to the meaning of the policy in a particular circumstance.

Second, you say that a lawyer's conclusions regarding company policy are not legal advice, but are merely "communications made for the purpose of obtaining legal advice."

But what exactly is the nature of the legal advice that the CEO is seeking in my hypo? It seems to me that the CEO is asking the lawyer for advice regarding whether the CEO must take some action because of the policy. If (as you suggest) guidance about obligations arising under the policy is not legal advice, I don't see how the communication is privileged in this particular hypo. You imply that the CEO is, in fact, seeking legal advice. What exactly is the nature of that legal advice?

I'm not sure that I understand your last point. You say that the CEO and the employee hypos are clearly different and that the lawyer has taken reasonable steps to make sure there is no misunderstanding. I'm happy to concede that there is no misunderstanding in either scenario. But when a lawyer has reason to believe that an employee's interests are adverse to the company's the lawyer cannot give that employee legal advice. And that just takes us back to the central question: is the lawyer giving legal advice?

[Jeff Lipshaw]

Andy, I agree with Steve Lubet. Imagine a merger negotiation. Both sides are sitting at a conference table. There is an issue with a merger notification filing. The question is whether buyer or seller is responsible for the filing. The CEO of buyer leans back and asks her lawyer privately, "who is really responsible?" Lawyer says "it's a close call; there's a good argument they are!" That's legal advice! The CEO of seller looks across the table and says, "c'mon, who's really responsible?" Lawyer for buyer now says, "you are!" That's a negotiating position, not legal advice.

The difference between this hypo and the investigation is that it's an employee and perhaps the playing field isn't level. But the issue, it seems to me, is simply a matter of being clear about roles, not one that fundamentally invokes a lawyer-client relationship and hence is problematic regardless of clarity.

[Andrew Perlman]

Thanks, Jeff. I don't think the issue is one about roles. I think it's quite clear in my hypo that the in-house counsel does not represent the employee. The question, as an ethical matter, is whether the lawyer is offering legal advice to someone who is not represented by counsel and whose interests are adverse to the company.

I think you're saying that the answer is "no," because the lawyer's position is merely part of a negotiation with the employee. I think you'd be right if the lawyer said, "The company believes that this policy applies here." John Steele had a similarly acceptable formulation earlier in this comment thread.

But the lawyer in my hypo goes one step further and tells the employee that he/she has a duty to talk under the policy. The difference my appear slight, but it's the difference (in my view) between explaining the company's position and telling the employee what his/her legal obligations are. The former is permissible; the latter is not.

[Andrew Perlman]

P.S. on Jeff's comment. My concern about framing the conversation in my hypo as a "negotiation" position is that it has the potential to swallow the rule. Just about any conversation with an unrepresented adverse party could be framed in this way? Put another way, can anyone give me a hypo that would clearly violate Rule 4.3's "legal advice" provision and would not be considered a "negotiation" position?

[Max Kennerly]

"SL: Because the contexts are clearly different and the lawyer has taken reasonable steps to make sure there is no misunderstanding."

Except that, in the hypothetical, the corporate lawyer has created a new misunderstanding with the question. The lawyer didn't say: "the company demands you answer my questions, and if you don't, will discipline or terminate you for breaching the internal policies." Rather, the lawyer said: "You are subject to the company's employment policies, which require you to speak with me about this matter."

If you took a poll of non-lawyers as to how many would consider that "legal advice," what percent do you believe would say yes? I'd bet at least a substantial fraction, possibly a majority.

Hence my remark before about context. Based purely on the hypothetical, I think the lawyer has a big problem. If we filled in more facts making the adversarial relationship clearer, then there'd be less of a problem. If we filled it facts making the adversarial relationship more ambiguous, then there's more of a problem.

[Bill Simon]

Great discussion. I agree with Steve Lubet. I think the lawyer should be permitted to STATE HIS CLIENT'S POSITION without running afoul of the rule's prohibition on GIVING ADVICE to the nonclient. As the prior comments show, proper phrasing is tricky, but the key point is that the employee should not be led to believe that the lawyer is acting in his interests. Andy's position seems unfair to the client, since the organization has a right to assert its view of the employee's obligations to the employee.

[Andrew Perlman]

Thanks, Bill. For what it's worth, I think the organization *can* assert its view of the employee's obligations, but the lawyer should present it as such: "It is our view that the company's policies require you to speak with us." My hypothetical had phrasing that was much less a statement about the organization's position, and much more an assertion regarding what the employee is obligated to do. The latter seems like legal advice; the former does not.

Again, this distinction may be awfully thin, but the distinction seems to me to be an important one. Then again, this thread suggests that my view is not widely shared.

[Brian Whisler]

What if any ethical duty arises to advise an employee as to their right to counsel, when, during the midst of an interview in an internal investigation, the employee-witness makes an admission having clear criminal implications? Is the best practice to advise and move on, terminate the interview, or forego the advice altogether (since the exercise is to ferret out wrongdoing)?