Does a Privileged Wage and Hour Audit Always Have to Be Turned Over in FLSA Litigation? The Fifth Circuit Says No, and Offers Employers a Roadmap for Keeping Privileged Analysis Out of Litigation

Does merely defending against a wage and hour lawsuit mean that the company must turn over privileged attorney-client analysis to plaintiffs’ counsel? For several years, employers have struggled with this question in part because several lower-court decisions have been interpreted to hold that asserting that the company made a good-faith, reasonable attempt to comply with the wage-and-hour laws waives the attorney-client privilege over wage and hour audits and other legal analysis that influenced compliance. See, e.g., Edwards v. KB Home, 2015 WL 4430998 (S.D. Tex. July 18, 2015). An  unintended consequence of these cases has been that some employers have refrained from seeking legal advice on wage and hour compliance issues for fear of having to turn that advice over if the company is subsequently sued.

A Fifth Circuit decision allows employers in Texas, Louisiana, and Mississippi to breathe easier on this issue. In In re: Schlumberger Technology Corporation, the court held that merely asserting that the company’s decision was in good faith and reasonable does not itself waive the attorney-client privilege over legal analysis. Instead, waiver occurs if the employer affirmatively invokes and relies on the legal advice as a basis for claiming that it acted in good-faith and reasonably. In reaching this decision, this Fifth Circuit specifically noted that were the result to be otherwise, employers could be discouraged from seeking legal input on wage and hour compliance issues.

The Bottom Line for Employers

The Schlumberger decision is good news for employers in Texas, Louisiana, and Mississippi who wish to conduct privileged wage and hour audits without fear that simply by doing so they are waiving the privilege in subsequent litigation. The issue should be carefully considered at the outset of litigation, and there may be cases, of course, in which the company wants to rely on legal analysis as part of its defense to wage and hour claims. In those cases the company will be deemed to have waived any privilege. But a company that does not wish to do so should take care to make clear in litigation that its good-faith, reasonable belief is not based on privileged analysis. An employer hopefully can eliminate doubt on this question by affirmatively stating in the answer or elsewhere that its defenses are not based on attorney-client communications.