In my March 29th post on the attorney client privilege, I specifically noted that communications between in-house (or outside) counsel and employees or former employees could be privileged if the purpose of the communication was to enable the attorney to provide legal advice. As I just learned the other day, however, under some circumstances, communications between a lawyer and an independant contractor or consultant hired by the true client can be protected by the attorney client privilege.
Starting way back in 1994, the 8th Circuit, in In re Bieter Company, held that the attorney client privilege could apply to communications between counsel and independent contractors of a client if “it [would be] inappropriate to distinguish between those on the client’s payroll and those who are instead, and for whatever reason, employed as independent contractors.”
While the Bieter case did not set forth a specific test to analyze under what circumstances a non-employees’ communications with counsel might remain privileged, a number of cases since have generally agreed that the key issue will be whether the individual is the “functional equivalent” of an employee. So what does it mean to be the functional equivalent of an employee? Like many areas of the law, different jurisdictions apply different, and sometimes conflicting, tests.
One case out of the Southern District of New York only allows the privilege to apply to a non-employee if the non-employee was performing a corporate function that was “necessary in the contest of actual or anticipated litigation .…” Nevertheless, taking such a narrow view of what it means to be the functional equivalent of an employee appears to be very much out of the ordinary, and even was contradicted by another case from the same jurisdiction.
A case out of the Eastern District of Pennsylvania, In re Flonase Antitrust Litigation, has an excellent discussion of the evolution of the privilege with respect to non-employee communications. That case also indicates that the prevailing test to be applied in order to determine if a non-employee is the functional equivalent of an employee hinges on simply analyzing whether that non-employee does “possess a significant relationship to the [client] and the [client]’s involvement in the transaction that is the subject of legal services.” (For those of you who, like me, are in Massachusetts, at least one Magistrate Judge has appeared to follow this broad approach.)
Ultimately, the good news with respect to all of this is that companies normally do not need to formally employ a person in order to ensure that communications between that person and counsel will remain privileged. However, if in-house counsel ever are in the position of trying to protect communications with a non-employee, they should balance the importance of protection against the possible risk that by referring to someone as the “functional equivalent” of an employee, that person might attain employment status for the purposes of a potential, personal claim against your company.