Corporations Can Risk Privilege Protection by Relying Too Heavily on Legal Advice when Firing Employees

December 23, 2015

Corporations firing employees normally must explain why.  All corporate lawyers recognize that affirmatively pleading “advice of counsel” as an employment case defense normally waives privilege protection, but the risks can be more subtle.

In Piazza v. County of Luzerne, Civ. A. No. 3:13-CV-1755, 2015 U.S. Dist. LEXIS 147283 (M.D. Pa. Oct. 30, 2015), plaintiff claimed that the county unlawfully fired him.  When asked why the county fired plaintiff, the county’s decision-maker (and co-defendant) answered “‘I did so on the advice of counsel.'”  Id. at *2 (internal citation omitted).  When asked if there was “‘[a]nything else?,'” the witness responded, “‘That’s all at this point.'”  Id.  Later in the deposition, the county’s lawyer objected to questions about whether the decision-maker’s “beliefs were based on advice from counsel,” and what “sources of information informed [the decision-maker’s] belief that Plaintiff had exceeded his authority.”  Id. at *4.  Acknowledging that the defendants had not filed a formal “advice of counsel” defense, the court nevertheless found a privilege waiver — pointing to (1) the decision-maker’s testimony “that he initially had nothing to add to his statement that he terminated Plaintiff ‘on the advice of counsel,'” and (2) his later testimony that the firing was based on his belief that the plaintiff acted improperly “and this belief was based on his conversations” with the county’s lawyer.  Id. at *11.  The court held that the waiver extended to all “communication[s] relied on by [the decision-maker] which he testified formed the basis of his termination decision.”  Id.

Corporations (and other institutions) can impliedly waive their privilege protection without affirmatively pleading an “advice of counsel” defense.  In employment cases, decision-makers should rely on underlying facts from sources other than just their lawyers, and should be prepared to testify about the reasons for employment decisions other than those lawyers’ advice.