Pay Equity and Other Internal Assessments and Information — Don’t Forget the Attorney-Client Privilege!
Corporations and other employers conduct a variety of internal studies, and sometimes investigations, to ascertain whether they are achieving their standards or goals or to assess legal compliance. From incentive compensation risk assessments (required by Item 402(s)) to retirement and 401(k) plan compliance audits, companies nearly always seek to protect these studies from disclosure to plaintiffs’ lawyers with the attorney-client privilege, to avoid creating a roadmap for litigation claims.
I have blogged on this issue before, but a recent decision from a widely publicized gender pay discrimination case considered most of the issues relevant in applying the attorney-client privilege. In Cahill v. Nike, the federal district court in Oregon declined to force the company to turn over its (i) “global pay equity analyses,” which Nike had conducted annually since 2016, (ii) supplemental pay equity analyses, which it had conducted annually since 2018, and (iii) its time-in-job and pace of promotions analyses, which it had conducted annually since 2018.
In November 2015, Nike received an EEOC Charge of Discrimination alleging lower pay based on gender and race. In February 2016, a former Nike executive sent a demand letter to Nike’s legal department threatening to file an age discrimination claim. Nike’s legal department engaged a law firm to provide legal advice to it in connection with: (1) the development of statistical models to analyze compensation; (2) validation of those models and identifying outliers or other variables that might explain differences in pay practices; and (3) to counsel Nike legal on its pay practices and policy enhancements. In April 2016, Nike legal and the law firm assembled a project team, including a human resources consulting firm, to conduct compensation analyses and allow Nike legal to assess potential legal risks associated with its compensation and/or promotion practices. EEOC charges and this lawsuit followed in 2018.
In pre-trial discovery, plaintiffs’ asked for all of the studies and information described above, which Nike asserted to be protected by the attorney-client privilege and the work product doctrine.
Attorney-Client Privilege: The Court found that Nike retained a law firm and experts in human resources to assist it in developing and providing legal advice regarding the development of statistical models to analyze compensation/promotion and the validation of those models to identify outliers that might explain differences in pay. The Court found that Nike made this retention in order to counsel Nike on its pay practices and pay adjustment matters, and to help Nike legal remediate risk arising out of or relating to pay and/or promotion discrepancies for members of protected classes. In particular, the Court found that Nike had instituted privilege protocols and guidelines to maintain attorney-client privilege in the development and distribution of the analyses for the teams and individuals involved, including related documents and correspondence regarding the analyses.
Work Product Doctrine: The Court also found that the requested documents, including those created by the HR consulting firms, also fall within the work product doctrine. To qualify for work product protection documents must have two characteristics: (1) they must be prepared in anticipation of litigation or for trial, and (2) they must be prepared by or for another party or by or for that other party’s representative. The reason Nike sought the law firm’s advice was not to primarily address a business purpose such as pay competitiveness in the industry, but to address potential legal liabilities for pay inequities that may result from its policies and compensation/promotion structure.
Sword and Shield: Finally, the plaintiffs argued that Nike had implicitly waived any privilege by using the analyses as both a sword and shield because Nike had asserted as an affirmative defense that it had a legitimate business purpose for its pay decisions. The Court rejected this argument under the three-pronged test for determining whether there has been an implied waiver of the attorney-client privilege.
-Mike Melbinger, CompensationStandards.com November 6, 2020
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