On December 18. 2014, a Magistrate Judge in the United States District Court for the Southern District of New York ordered that, in the case of Scott v. Chipotle Mexican Grill, Inc., certain documents alleged to be covered by the Defendant’s Attorney-Client Privilege were put in issue by the Defendants, and were therefore not protected by any privilege.
In this class action wage and hour case, Plaintiffs allege that Defendants incorrectly classified the “apprentice” position as non-exempt, resulting in the non-payment of overtime wages to employees entitled to them. Further, under the Fair Labor Standards Act (“FLSA”), Plaintiffs are entitled to liquidated damages, unless Defendants can show that its determination of apprentices as non-exempt was made in good faith. However, Defendant had staved off multiple attempts, through multiple routes, by the Plaintiff to discover documents and information pertaining to Defendant’s decision to consider apprentices exempt through use of the Attorney-Client Privilege.
The attorney-client privilege exists to encourage open communication between clients and their attorneys, and thereby further public interests by promoting the observance of the law. This privilege generally applies to communications between clients and counsel that was intended to be kept confidential and was made for the purpose of obtaining legal advice. However, the attorney-client privilege can be waived, impliedly or explicitly. If the party utilizing the attorney-client privilege puts the protected information at issue, their privilege claim is impliedly waived.
Although Chipotle never specifically alleged a generalized good faith defense to statutory damages under the FLSA, it does set out an affirmative defense in a way as to remove its state of mind from being at issue. The court held that this “artful pleading” cannot negate an element of a statutory defense, and therefore its affirmative defense is analyzed under the FLSA’s good faith standard. Therefore, the court had to address whether information pertaining to Defendant’s affirmative good faith defense is protected by the attorney-client privilege. Courts address at-issue waivers on a case-by-case basis. Defendant already admitted that there were communications with counsel regarding the apprentice position’s exemption. In depositions, Defendant repeatedly objected on attorney-client grounds to any questions related to these conversations. The nature of the good faith defense argued by Defendant in this case required a showing that Defendant had no knowledge of the illegality of its actions. Therefore, the court found that Defendant’s defense could only be scrutinized by examining the communications which it claimed fell under the attorney-client privilege. Specifically, in order to address Defendant’s alleged good faith, Plaintiffs need to know whether Defendant did in fact receive advice from its counsel regarding the classification of apprentices. Subsequently, the court found that Defendant had waived its attorney-client privilege by putting the basis for its understanding of what the law requires in issue. The court held that, in the interest of fairness, the Plaintiffs must be allowed to examine protected communications between Defendant and its lawyers.
Defendant also put forth a policy argument, stating that the Plaintiff’s reading of the FLSA would require that every employer in an FLSA case have to choose between revealing communications or forfeiting statutory defenses, which would impose as a matter of law an expanded limitations period and 100% liquidated damages risk on the employer. However, the court stated that liquidated damages are the norm. They are not penal; rather, they are compensation for the retention of worker’s pay, which often results in obscure, difficult to prove damages. Further, the courts holding should encourage Defendants to seek counsel based on the extent of liability, rather than avoid it due to fear of discoverable communications.
Lastly, Defendants tried to protect information pertaining to their decision to classify California apprentices as non-exempt, while leaving all other state apprentices as exempt. The court disagreed with Defendants argument that this information was non-relevant. The court held that this information was clearly discoverable.
The Employment Lawyers at Fitapelli & Schaffer frequently represent employees who are wrongfully labeled as exempt, and therefore denied proper overtime wages.. Please contact us at (212) 300-0375 to schedule a free consultation to further discuss your rights. For more information, please visit our website at www.fslawfirm.com.