In a blow to in-house lawyers, the Washington Supreme Court has ruled that communications between corporate counsel and former employees are not privileged and are freely discoverable.

The 5-4 decision states that attorney-client privilege doesn’t exist because the former employee no longer has an ongoing principal-agent relationship with the corporation. The case involves a parents’ suit against a school district, claiming that their football-playing son allegedly was sent back into a game after suffering a concussion.

General counsel are clearly bothered by the ruling, according to Amar Sarwal, vice president and chief legal strategist for the Association of Corporate Counsel in Washington, D.C. Sarwal says that they have been emailing him since it came down on Oct. 20, including “four or five within the first 24 hours.”

The main problem, according to Sarwal, is that the ruling is going to interfere with in-house investigations that seek to determine the facts surrounding misconduct.

“Former employees tend to have a stockpile of information,” Sarwal says. “They are a treasure trove of information about what happened, and in-house counsel need to speak with them to find out. But this decision will assure that never happens.”

He calls it a “disruption of privilege expectations” based on past practice and limited precedent.

But Kathleen Barnard, a plaintiffs employment lawyer with Schwerin Campbell Barnard Iglitzin & Lavitt in Seattle, says that she doesn’t think in-house counsel in Washington had that expectation.

A previous state case had ruled that a plaintiffs lawyer could depose a former employee so long as the discussions did not invade attorney-client privilege created during employment. The new ruling builds on the prior one, Barnard says, and was no surprise to her. “I would never have expected the court to hold that there was privilege when there is no existing representation,” she adds.

In a strongly worded dissent, Washington Supreme Court Justice Charles Wiggins disagreed with what he called a “temporal limitation” on attorney-client privilege at the termination of employment.

Wiggins wrote that the decision would exclude from privilege “all postemployment communications with former employees, even when those employees have relevant personal knowledge regarding the subject matter of the legal inquiry, and even though had they remained employed, such communications with counsel would have been privileged.”

Wiggins argued for a more flexible analysis that would find that “postemployment communications consisting of a factual inquiry into the former employee’s conduct and knowledge during his or her employment, made in furtherance of the corporation’s legal services, are privileged.”

(It is an interesting aside that Wiggins, who is up for re-election, is facing an opponent who is heavily funded by Microsoft Corp. current and former executives, including chief legal officer Brad Smith. The judge’s dissent just might spur them to rethink their spending.)

And Wiggins’ dissent may help in-house lawyers fight for the privilege in cases elsewhere.

Sarwal, for one, says that the ACC “will bird-dog the privilege issue in other states to make sure this doesn’t spread.”