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Subscribe to Our FeedReports and Materials Generated During Voluntary Compliance Audits May Be Discoverable in Litigation
January 31, 2011 | No Comments
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In light of a recent Third Circuit decision, Craig v. Rite Aid Corp., No. 4:08-CV-2317 (M.D.Pa., Dec. 29, 2010), employers conducting voluntary compliance audits should proceed with caution, because any materials or reports generated during the process may be discoverable in subsequent litigation.
Craig v. Rite Aid Corp involved a plaintiff who filed suit against his former employer for unpaid wages. Prior to the suit, defendant Rite Aid had performed a voluntary internal analysis of the company’s compliance with the FLSA. The analysis involved many members of Rite Aid’s human resources, operations and compensation departments, and was under the direction of, but not actually performed by, in-house counsel. The plaintiff in Craig sought the production of all information and documents relating to Rite Aid’s internal audit. Counsel for Rite Aid contended the materials were not discoverable because they were protected by the “self-critical” analysis doctrine. The self-critical analysis doctrine is a very limited privilege which has been applied by some courts for the purpose of encouraging companies to engage in internal evaluations of legal compliance, without fear that these assessments could be discovered by third parties. Counsel for Rite Aid argued the materials generated during the internal FLSA compliance review were exactly the type to be protected by the self-critical analysis privilege. However, the Court disagreed, and held that the documents could not be withheld. The Court suggested it might apply the self-critical analysis, very narrowly, to protect employers from disclosure of documents created at the direction of government, but even that remains uncertain.
In light of the Craig decision, employers must take every precaution in planning their internal compliance audits. Strategic planning with counsel on how to best approach internal reviews, such as conducting the investigation under the attorney-client privilege or in anticipation of litigation provide safeguards, which can help minimize the risk of unwanted disclosure.
