The Advisors' Blog

After blogging twice last week about conducting thorough pay equity audits, I was pleased to stumble across this Seyfarth memo on maintaining privilege over pay equity audits and investigations. It starts with how and why the discoverability of audits and investigations is a high-stakes dispute:

Employers often learn about their employees’ equal pay complaints well before a lawsuit is filed in court. Employees frequently bring their concerns to company personnel first and only proceed to litigation if they feel those concerns were inadequately addressed. Depending on the circumstances, some employers may choose to investigate such claims or audit their pay practices as a result.

Many times, an employer’s investigation will reveal no evidence of unlawful pay disparities. If the employee rejects that conclusion and takes their claim to court, one issue that frequently arises in subsequent litigation is the discoverability of the employer’s investigation files. … Employers find themselves wanting to use aspects of their internal investigation to defend some aspect of an equal pay claim. Such documents can show, among other things, that the employer was diligent in responding to a plaintiff’s claims of discrimination, or that those claims are simply unfounded. … [But] maintaining privilege over investigation files is often as much a question of how those files will be used in litigation as it is a matter of how the investigation itself was conducted.

In one case, the court held that files were privileged because one primary purpose was to obtain legal advice, even though a non-lawyer conducted the investigation. But the EEOC claimed that the employer’s good faith defense waived privilege since the employer’s intentions were at issue, and the employer was forced to not rely on the files in its defense. In another case, the employer waived privilege by relying on its internal investigation report in its formal response to the EEOC complaint. In another, the court distinguished between denial and an affirmative defense:

An employer’s burden of proof is one of the fundamental differences between an equal pay claim brought under Title VII versus one brought under the Equal Pay Act. According to the court, the employer intended to use the report as evidence of a legitimate, nondiscriminatory reason for plaintiff’s termination under the McDonnell Douglas burden shifting framework applicable to plaintiff’s Title VII claim. Under that framework, “an employer is only required to articulate or produce a legitimate reason for its actions, but the employer does not bear a burden to prove or persuade, only to make a minimal evidentiary showing.”

This is in contrast to an employer’s obligation under the EPA, which many courts have held puts the burden of persuasion on the employer to establish its affirmative defense. Or, to put it in more practical terms, the court held that: “the fact that an attorney investigates a claim and reports to a corporate client does not waive privilege where ‘no actual defense of reliance on the attorney’s recommendations or findings is made as a basis of the defense against the claim.’”

Hmm. It almost goes without saying that you should work closely with your experienced labor counsel on any pay equity audits or investigations! I also found this recommendation from the alert to be a helpful — and understandable! — takeaway:

If [employers] have taken the trouble to ensure privilege over their audits and investigations, they should understand that their intention to use those documents in defense of their claims could cause them to lose the privilege they so rigorously protected. Employers will want to keep these issues in mind as they consider why they are conducting the internal investigation in the first place, or how they might want to use what they find in later litigation.

– Meredith Ervine