Seyfarth Synopsis: Government agencies and private plaintiffs’ counsel alike send a clear message: employers must take pay equity seriously. One way employers can address this message is by considering periodic audits of their pay practices and/or investigations of any unexplainable pay gaps or irregularities. Employers are often concerned about how those audits and investigations could be used against them if an employee were to bring an equal pay lawsuit in court. Several recent decisions have clarified the extent to which audit and investigation files can be kept privileged, and the uses that can be made of them in litigation by plaintiffs and employers.
***
This is the fourth in a series of posts examining the new and developing trends in equal pay litigation identified in Seyfarth’s yearly publication, Developments in Equal Pay Litigation, 2024 Update. The previous posts can be found here, here, and here.
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 that conducted their investigations under the cover of attorney-client privilege usually withhold some or all of their investigation files from production. But even in those cases, employees will sometimes argue that an employer waived privilege by putting the investigation at issue in litigation. These issues can ripen into contentious and high-stakes discovery disputes.
Recent Cases Addressing Privilege And Waiver Of Privilege Over Equal Pay Audits And Investigations
One lesson of these recent cases is that 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. For example, in EEOC v. George Washington University, 342 F.R.D. 161 (D.D.C. 2022), the EEOC alleged that a woman Executive Assistant to the employer’s former Athletic Director was paid less than a male “Special Assistant” for the same work. She filed an internal grievance with the employer’s EEO office and a charge with the EEOC. The employer initiated an internal investigation to review the matter, which was initially conducted by non-lawyer staff in the EEO office. The investigation was later handed over to a law firm, which then issued a Confidential Informal Grievance Report. In discovery, the employer withheld all documents, except the grievance itself, as protected by attorney-client privilege and the work product doctrine.
The court held that those files were privileged because at least one primary purpose of the employer’s internal investigation was to obtain legal advice. Moreover, although the person initially conducting the investigation was not a lawyer, that person had contacted the employer’s General Counsel’s office for guidance at the outset and throughout the investigation. That was enough to keep those documents privileged.
So far, so good. However, the EEOC also argued that the employer’s assertion of a good faith defense put the employer’s subjective intentions at issue, which waived privilege over the investigation files. To save its privilege claim, the employer disclaimed any intent to rely on the internal investigation to support its defense. The court agreed that this was sufficient to preserve the privilege, holding that “a party that has interposed a good faith defense but disclaimed reliance on privileged or protected materials—such as those created in connection with an internal investigation—does not waive protection over those materials.” Id. at 187.
However, in another case, Goulet v. University of Mississippi, No. 3:22-cv-89-NBB-JMV, 2023 WL 2603939 (N.D. Miss. Mar. 22, 2023), a court ordered that large swaths of an employer’s investigation files should be turned over to the plaintiff. In that case, the employer had relied on its investigation report in its formal response to plaintiff’s charge of discrimination filed with the EEOC. Among other things, the employer had disclosed what it learned from interviewing plaintiff as part of the investigation, as well as other facts learned during the course of the investigation. The court held that such disclosures waived privilege over all but 10 pages of the employer’s 64-page investigative report, “for the reason that the information discussed in that material has already been disclosed by the University and its counsel to third parties—or in light of what has been disclosed, fairness would dictate the balance should be as well.” Id. at *4.
In yet another case, Benson v. City of Lincoln, 343 F.R.D. 595 (D. Neb. 2023), the court drew an even finer distinction. In that case, the employer hired an outside attorney to conduct an investigation of a firefighter’s sex-based discrimination complaints. The attorney investigating the incident interviewed plaintiff, the other firefighter accused of misconduct, and several other firefighters who were at the scene of the incident; her report was marked as attorney-client privileged and attorney work product. Although the employer produced the investigation report itself, it withheld the attorney’s other communications, documents, and recordings in her investigative file as privileged. Plaintiff argued that those privileges had been waived because the employer intended to use the report to refute plaintiff’s case in litigation.
The court held that the privilege had not been waived because the employer sought to use the investigation files only to support a denial; it was not intending to use it to prove an affirmative defense. As close followers of equal pay litigation know, 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, non-discriminatory 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.” Id. at 612. 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.’” Id. at 613 (quoting Stockton v. HouseCalls Home Health Servs., Inc., No. 06-cv-357-GKF-PJC, 2007 WL 9782747, at *4 (N.D. Okla. June 15, 2007)).
Implications For Employers
Employers should be aware that the law of privilege and waiver of privilege is complex and may be different in different federal circuits. The above three cases merely show how individual courts handled the issue in three discrete situations with their own unique set of facts. Although these cases were not overtly hostile to the employer’s position, they should serve as a warning to employers that privilege issues must be considered carefully before undertaking an equal pay audit or investigation.
It is often the case that 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. If they 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. They can then plan their audits or investigations accordingly.
These and other trends impacting equal pay litigation are discussed in much greater detail in Seyfarth Shaw’s yearly report, Developments in Equal Pay Litigation, 2024 Update. We highly recommend that report to any employer facing equal pay litigation, or to those who just want to know more about it so they can avoid such lawsuits in the future or keep abreast of changes in the law. We look forward to continuing to share our analysis of these issues.
