Despite numerous travelers traversing the "yellow-brick road" to a more diverse workforce, diversity continues to present challenges. Materials that companies create relating to their diversity initiatives can potentially be deadly flowers in the fields along the yellow-brick road.
To place this adventure into context, in addition to an ever-vigilant plaintiffs bar, in December 2012, the U.S. Equal Employment Opportunity Commission (EEOC) adopted a new strategic enforcement plan (SEP) setting forth its priorities and methods of enforcement for the next four years. The SEP demonstrated the EEOC’s intent to continue to focus on systemic discrimination, which it classified as one of its top priorities. Underscoring this continued emphasis is EEOC guidance that provides that when pursuing litigation, system charges and cases should be given priority over other types of actions.
Given the continued emphasis on systemic discrimination investigations by the EEOC, studying your company’s recruitment and hiring practices is a useful tool if performed correctly. It may minimize risks, and can alert your client or company to issues related to diversity that may attract the attention of the EEOC. For example, an internal audit may reveal that the company has lost a number of older workers, and in turn lead to the production of a report stating that the company needs to examine its policies for those individuals over 40 years old; or, more likely, a report stating sweeping conclusions that the company does not want "older workers" and "prefers a younger workforce."
Here is where the beauty and aroma of the deadly flowers may lure the company from the right path. To some, such statements would likely constitute good corporate governance and demonstrate that the company is serious about diversity and be deemed "motivational findings." However, in the hands of a plaintiffs attorney or the EEOC pursuing a claim for age discrimination, the same document may be plaintiffs Exhibit A in subsequent litigation. It is not difficult to imagine the leverage that these types of "statements," whether well intentioned or not, could have before a jury.
The challenge for companies then is twofold: (1) to promote diversity and enjoy its many benefits and (2) to reduce the company’s potential exposure should litigation occur.
Often, a company tasks its internal diversity committee to conduct a comprehensive internal diversity audit in the area of diversity and to make recommendations on how to enhance diversity efforts. However, absent any potential claim of privilege, the activity and findings of the diversity audit will be discoverable in a subsequent EEOC action or litigation.
The potential risks that these documents pose warrant that any diversity audit be conducted by or under the direction of an attorney. While in-house counsel may be more cost-effective for this task, it will be less clear during litigation whether the in-house counsel acted in a legal or business capacity, and, as a result, it will be less clear whether the attorney-client communication privilege applies.
This legal/business capacity distinction is crucially important, as application of the attorney-client privilege often turns on whether the analysis is performed for business or legal reasons. For the attorney-client privilege to apply, counsel must act as an attorney giving legal advice, as opposed to business or management advice. Further, the communication must be maintained as confidential by both the client and the lawyer, and the privilege must not be waived.
If the diversity audit is prepared in anticipation of litigation, the attorney work-product doctrine may apply. This doctrine protects confidential information that an attorney obtains or prepares in anticipation of litigation. There are two types of work product: opinion work product — an attorney’s mental impressions, conclusions, opinions or legal theories — and fact work product — the factual, non-opinion material gathered in preparation for a lawsuit.
The self-critical analysis privilege is designed to allow employers to scrutinize their business practices and compliance with laws. While facially appealing, this privilege has been recognized in fewer than 10 jurisdictions. Even in those jurisdictions, the privilege’s application has been inconsistent. The self-critical analysis privilege is not the most robust way to protect a diversity audit.
Understanding these privileges and ensuring the implementation of a few procedural safeguards may reduce the risks associated with diversity audits.
Prior to starting a diversity audit, the company should identify the people who will conduct the analysis. Include an attorney in the process. If in-house counsel conducts the audit, pay close attention to the attorney-client privilege by ensuring that the diversity audit is not being conducted for business reasons. Or engage outside counsel. Before any data collection or analysis occurs, regardless of whether in-house or outside counsel leads the effort, communicate in writing that the analysis is being performed for legal purposes and describe the reasons. This could include mitigating liability risks and assessing compliance with federal and state law requirements.
Another common misstep that could waive privilege is permitting too many people to be involved in the analysis process. As the number of individuals involved in the process increases, the likelihood that the analyses will be protected decreases. Similarly, communications between the participants during the audit should be clearly marked as confidential and privileged. Indeed, counsel should confirm that the information in question is confidential. Individuals who participate in the audit in any capacity should be given clear guidance that all communications and analyses regarding the audit are confidential and privileged.
Once the company has a confidential audit report, care must be taken to keep the report confidential. Using confidential audit reports in the regular course of business and/or disseminating them beyond a limited group without taking precautions may waive any applicable privilege. The company’s demographic data is what it is and, for the most part, can be acquired by looking at the headcount. The analysis, however, if any, is what the company must try to protect.
By taking a few steps, companies can understand and assess their potential risks surrounding diversity issues and manage those risks in the face of increased scrutiny by the EEOC and other regulatory agencies, as well as an active plaintiffs bar. Rather than subsequently having good-faith efforts used against your company or client in litigation, ensuring that an attorney conducts the diversity investigation will enhance the company’s ability to enjoy the fruits of diversity without encountering a potentially derailing experience with the witch of litigation. •
Larry L. Turner is a partner in Morgan, Lewis and Bockius’ labor and employment practice and co-chair of the firm’s diversity committee, resident in Philadelphia.
David A. Gomez is an associate in the firm’s labor and employment practice and is resident in Philadelphia.