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Ethics in Employment Matters – What are In-House Counsel’s Ethical Obligations When Dealing With Employment Matters
October 11, 2017
Moderator - James Villa, Senior Vice President, General Counsel, Corporate Secretary and
Chief Compliance Officer, Versar
Panelists - Christine B. Lucy, Associate General Counsel, Booz Allen Hamilton
Heidi L. Steiber, Associate General Counsel, PCAOB
Deborah Kelly, Partner, Manatt, Phelps & Phillips, LLP ([email protected])
Nigel Wilkinson, Partner, Manatt, Phelps & Phillips, LLP ([email protected])
Rory Adams, Associate, Manatt, Phelps & Phillips, LLP ([email protected])
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TABLE OF CONTENTS
I. INTERNAL INVESTIGATIONS STEMMING FROM EMPLOYEE
COMPLAINT OF POTENTIALLY WRONGFUL CONDUCT: WHO IS THE
CLIENT AND ARE SUCH INVESTIGATIONS PRIVILEGED?................................... 1
A. Who is the Client? .................................................................................................. 1
B. Upjohn WARNING ............................................................................................... 2
C. Is the Investigation Privileged? .............................................................................. 4
D. Who Should Conduct the Investigation? Internal or Third-party
Investigator? ........................................................................................................... 6
E. Presentation of findings ......................................................................................... 9
II. UNAUTHORIZED PRACTICE OF LAW CONCERNS: CAN YOU HANDLE A
MATTER THAT ARISES AT A COMPANY FACILITY IN A STATE IN
WHICH YOU ARE NOT LICENSED .............................................................................. 9
A. So What is the Practice of Law? .......................................................................... 10
B. To What Extent is the Practice of Law Permitted Without Local Bar
Admission? .......................................................................................................... 13
III. JOINT REPRESENTATIONS ISSUES – WHAT HAPPENS WHEN THE
EMPLOYEE SUES BOTH THE COMPANY AND THE BOSS PERSONALLY ....... 18
IV. ETHICS IN MEDIATION AND OTHER CONCILIATORY EFFORTS
DESIGNED TO RESOLVE EMPLOYEE DISPUTES .................................................. 22
A. Bluffing or puffing about the value of the case ................................................... 22
B. Misrepresentations and Omissions ...................................................................... 23
C. Disclosure of Confidential Information Obtained in Mediation .......................... 24
D. Misuse of the Mediation Process ......................................................................... 26
E. Lawyer’s Obligation to Consult with the Client in Mediation ............................ 28
V. WHAT CAN YOU DO WHEN AN EMPLOYEE TAKES WORK-RELATED
DOCUMENTS TO SUPPORT HIS CASE ..................................................................... 29
A. Virginia Legal Ethics Opinion 1786 (dated Dec. 10, 2004) ................................ 30
B. Measures an employer can take to protect its confidential and proprietary
information ........................................................................................................... 31
C. Real Life Example 1: Brainware, Inc. v. Mahan ................................................ 34
D. Real Life Example 2: Audio-Video Group, LLC v. Green .................................. 35
TABLE OF CONTENTS
(continued)
Page
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VI. USING SOCIAL MEDIA IN THE WORKPLACE ........................................................ 37
A. Statutory Protections Regarding Social Media .................................................... 37
B. Social Media Use in Background Checks ............................................................ 39
C. Best Practices for Using Social Media in the Hiring Process .............................. 40
D. Social Media Policies in the Workplace .............................................................. 41
E. Sample Social Media Policy ................................................................................ 41
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Over the past few years, many in-house legal departments have assumed responsibility
for handling most, if not all, employment-related matters. This includes receiving and
investigating employee complaints, representing the company before the EEOC or comparable
state agency, and even representing the company in litigation or arbitration. Below, we explore
some of the possible ethical issues that can arise when dealing with a various employment legal
matters that can arise in the workplace.
I. INTERNAL INVESTIGATIONS STEMMING FROM EMPLOYEE COMPLAINT
OF POTENTIALLY WRONGFUL CONDUCT: WHO IS THE CLIENT AND
ARE SUCH INVESTIGATIONS PRIVILEGED?
Internal investigations are an important tool for responding to complaints or incidents of
suspected workplace misconduct, and an essential step to enhance the likelihood of successfully
defending against an employment-related claim. They help the employer determine whether
allegations of misconduct have any merit, who was involved in the misconduct, disciplinary or
other measures that should be taken against the alleged perpetrator to prevent recurrence and
limit employer liability, and preventative steps to avoid future similar incidents.
Effectively conducting internal investigations of employee allegations is certainly one
step in the process. But also important is recognizing the significant ethical issues that can arise
for the attorneys participating in those investigations. Companies often ask both in-house and
outside counsel to oversee, respond, or conduct internal investigations of alleged misconduct that
may pose a civil or criminal threat to the organization, its manager, and employees. Counsel
may be retained to represent individuals who are the subject of the investigation, who may have
key documents and information, or who may have witnessed the alleged misconduct. Regardless
of the role assumed by counsel, we discuss below some of the common ethical dilemmas that
may arise during the course of an investigation.
A. Who is the Client?
If you work for or are retained by the company as in-house or outside counsel, then the
organization, not its individual employees or officers, is the client.
Virginia Rule of Professional Conduct 1.13(a) states:
A lawyer employed or retained by an organization represents the
organization acting through its duly authorized constituents.
Rule 1.13(b) directs a lawyer representing an organization to proceed in the “best
interests of the organization” if the lawyer knows that an officer, employee, or other person
associated with the organization is or is about to engage in an act (or refuses to act) in a matter
related to the representation that is a violation of a legal obligation to the organization, or a
violation of law which reasonably might be imputed to the organization, and is likely to result in
substantial injury to the organization.
2
In such a situation, Va. Rule 1.13(d) makes it clear that a lawyer is obligated to identify
who his or her client actually is:
In dealing with an organization's directors, officers, employees, members,
shareholders or other constituents, a lawyer shall explain the identity of
the client when it is apparent that the organization's interests are adverse to
those of the constituents with whom the lawyer is dealing. 1
B. Upjohn WARNING
When conducting an internal investigation, whether or not you, as the lawyer, believe that
a company’s officer’s or employee’s interests are or may become adverse to those of the
company, it is a better practice to provide – and document – an Upjohn warning at the outset of
the investigation.2
The purpose of such a warning is to ensure that communications between the lawyer and
a lower-level employee are protected by privilege, and requires that the lawyer inform the
employee that the lawyer represents the company, and not the employee individually. The key
elements of such a warning are:
• Counsel represents the company and not the employee.
• The purpose of the interview is to learn facts in order to provide legal advice to
the company.
• The interview is confidential and protected by the attorney-client privilege.
• The company is the holder of the privilege, not the employee.
• The company may decide to disclose the information obtained during the
interview to third parties.
A sample script of such a warning from an outside law firm (which could be tailored to
work for an in-house counsel’s office) might look something like this:
• I am a lawyer from [name of law firm] and I represent the Company. My only
client here today is the Company. I want to be clear that neither my firm nor I
represent you personally.
1 The corresponding rules in both the District of Columbia and Maryland are essentially the
same. D.C. R. Prof. Conduct 1.13; Md. R. Prof. Conduct 1.13.
2 The so-called Upjohn warning stems from the U.S. Supreme Court’s 1981 decision in Upjohn
Co. v. United States, 449 U.S. 383 (1981) in which the court held that the attorney-client
privilege is preserved between the company and its attorney when its attorney communicates
with the company’s employees, despite the rule that communications with third parties constitute
a waiver of the attorney-client privilege.
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• [Law firm] has been retained by the Company to conduct a confidential
investigation into certain issues relating to [the subject of the investigation]. I
am conducting this interview to determine the facts and circumstances of [the
subject of the investigation] so I can provide legal advice to the Company and
help to advise the Company how best to proceed.
• Because you are an employee of the Company and I am interviewing you in
that capacity, this interview is protected by the Company’s attorney-client
privilege. The Company’s privilege requires that you keep the discussions we
have during this interview completely confidential. In other words, with the
exception of your own attorney, you must not disclose the substance of this
interview to anyone, including other Company employees, officers, or
directors, or to anyone outside of the Company, including your family.
• The attorney-client privilege that protects this interview belongs solely to the
Company, and not to you. Since the attorney-client privilege belongs to the
Company, the Company reserves the right to waive its privilege and to
provide the contents of our interview to third parties outside of the Company,
including state or federal government agencies and law enforcement
authorities. Whether the Company waives the privilege is the Company’s
decision alone. The Company is not required to consult with you or to notify
you before doing so.
• Is there anything I have said that you do not understand? Do you have any
questions? Are you willing to proceed?
It is important to document the fact that the Upjohn warning was given, preferably in a
post-interview memorandum or reflected in the notes of the interview. It is also possible to give
the employee a copy of the script and ask them to sign it. If such warnings are not properly
given, or not given at all, counsel could be deemed to also represent the employee, which raises a
litany of conflict of interest issues and could affect privilege.
For example, in In re Grand Jury Subpoena, 415 F.3d 333 (4th Cir. 2005), the court
ultimately found that company lawyers had provided just enough information to thwart
individual employees’ claims that the lawyers represented them on an individual basis, and thus
they (the individual employees) could not assert the attorney-client privilege against grand jury
subpoenas seeking documents related to an internal investigation.
Attorneys who conducted internal investigation informed interviewees at the outset: “We
represent the company. These conversations are privileged, but the privilege belongs to the
company and the company decides whether to waive it. If there is a conflict, the attorney-client
privilege belongs to the company.” But the attorneys also told the interviewees that they “could”
represent the witness too, as long as there was no conflict.
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The company wanted to waive privilege over the investigation; the employee-
interviewees tried to prevent waiver on the ground that they were the “client” and the holder of
the privilege. The court rejected this claim and found that the warnings were sufficient to render
the company the sole “client,” but criticized the “watered-down” Upjohn warnings that were
provided.
The court noted that the warnings given presented “a potential legal and ethical mine
field. Had the investigating attorneys, in fact, entered into an attorney-client relationship with
appellants, as their statements to the appellants professed they could, they would not have been
free to waive the appellants' privilege when a conflict arose. It should have seemed obvious that
they could not have jettisoned one client in favor of another. Rather, they would have had to
withdraw from all representation and to maintain all confidences. Indeed, the court would be
hard pressed to identify how investigating counsel could robustly investigate and report to
management or the board of directors of a publicly-traded corporation with the necessary candor
if counsel were constrained by ethical obligations to individual employees.” Id. at 340.
C. Is the Investigation Privileged?
Certainly, one of the reasons an attorney will give an Upjohn warning at the outset of an
internal investigation is to allow the lawyers to obtain facts in order to provide legal advice, and
preserve privilege while doing so. Two of the more significant recent decisions in dealing with
the privileged nature of internal investigations have come out of the D.C. Circuit.
1. The Investigation is privileged, KBR part 1
In In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014) the appeals court
reversed the district court's holding that the attorney-client privilege did not apply to documents
created by a DOD contractor’s compliance team during an internal corporate investigation
undertaken to comply with DOD regulatory requirements and corporate policy. The district
court ruled that the attorney-client privilege did not apply to these documents because obtaining
or providing legal advice was not the sole purpose of the communication. But the appeals court
rejected this “but-for” standard, and held that the privilege could protect a company's
investigation if its need for legal advice was one of the "primary" or "significant" motivating
purposes, even if not the only purpose:
In the context of an organization's internal investigation, if one of the
significant purposes of the internal investigation was to obtain or provide
legal advice, the privilege will apply. That is true regardless of whether an
internal investigation was conducted pursuant to a company compliance
program required by statute or regulation, or was otherwise conducted
pursuant to company policy.” In re Kellogg Brown & Root, Inc., 756 F.3d
754, 760 (D.C. Cir. 2014).
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The appeals court found that the district court erred in rejecting privilege on other
grounds as well. Specifically, it held:
• The requirement under government regulations to investigate alleged fraud did not
preclude the appellant's argument that a significant purpose of the investigation was
to seek legal advice;
• Fact that the interviews were conducted by non-attorneys was not dispositive
(“communications made by and to non-attorneys serving as agents of attorneys in
internal investigations are routinely protected”);
• The absence of explicit Upjohn warnings did not prevent privilege protection because
"nothing in Upjohn requires a company to use magic words."
• Although the employees' confidentiality agreements did not expressly mention the
company's need for legal advice, employees knew the law department was conducting
a sensitive investigation and were warned not to discuss their interviews without the
authorization of the appellant's general counsel.
In re Kellogg, 756 F.3d at 758-59.
2. No Waiver, KBR part 2
A little more than a year after the 2014 KBR decision issued, the case was back before
the D.C. Circuit Court of Appeals in In re Kellogg Brown & Root, 96 F.3d 137 (D.C. Cir. 2015).
While the 2014 decision broadly addressed the scope of attorney-client privilege in internal
investigations, the 2015 decision reduced the potential for opposing parties to argue that any
mention of an internal investigation in litigation will result in waiver. At issue in this case, was
the “at issue” waiver, which finds waiver of privilege if the party relies on a privileged
communication to support a claim or defense.
In this subsequent case, the appeals court rejected the district court’s holding that the
company waived privilege by putting its internal investigation “at issue” the litigation. The
Court of Appeals found no “at issue” waiver because the company did not “base a claim or
defense upon the attorney’s advice” or disclose the findings of the investigation. While the
company implied that the investigation found no wrongdoing because it stated that findings of
misconduct must be reported to the DOJ and no report was made in the case, this statement was
made in a footnote in the facts section of its summary judgment brief and not in the argument
section. Id. at 147-48.
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3. But Waivers can and do occur
As noted above, the 2015 KBR decision decided that no waiver occurred because KBR
did not put the privileged communication “at issue” in the case. But if a privileged
communication is put “at issue,” then waiver can and will occur. In the employment context, an
employer may choose to rely on the adequacy of its internal investigation as an affirmative
defense to a harassment claim. In the circumstance, the employer waives the privilege over the
investigation by putting its findings “at issue” in the case. Courts routinely hold that the
privilege may not be used as both “a sword and a shield.” See, e.g., Walton v. Mid-Atlantic Spine
Specialists, P.C., 280 Va. 113 (2010); Courtade v. United States, 243 F.Supp.2d 699, 702 (E.D.
Va. 2017) (noting that the “sword and shield” rule is rooted in fairness. “In practical terms, it
means that parties in litigation may not abuse the privilege by asserting claims the opposing
party cannot adequately dispute unless it has access to the privileged materials. … In such cases,
the party asserting the claim is said to have implicitly waived the privilege.”)
Waiver in an EEOC position statement? This may also occur under relatively new EEOC
practices. In 2016, as part of its efforts to create a consistent approach to be followed in all of
EEOC’s offices, the EEOC implemented nationwide procedures that provide for the release of
Respondent position statements and non-confidential attachments to a Charging party or her
representative upon request - while the charge is pending (previously these would be available
only after a lawsuit was filed).
Courts have found reference to the substance of otherwise privileged communications in
a position statement to be a waiver of privilege in a subsequent litigation. See, e.g., Leftwich v.
City of Pittsburg, Kansas, 2017 WL 2774774, at *2 (D. Kan. June 27, 2017) (“defendants
waived the privilege by intentionally injecting into the case, through their position statement to
the EEOC . . . the city attorney's participation in the termination decision”); cf. Robinson v.
Vineyard Vines, LLC, 2016 WL 845283, at *5 n.8 (S.D.N.Y. Mar. 4, 2016)(rejecting claim that
reference to internal investigation of harassment claim in EEOC position statement waived
privilege because there was no “evidence that Defendants have made any unfair ‘selective’ or
‘misleading’ presentation of evidence in this litigation”).
D. Who Should Conduct the Investigation? Internal or Third-party
Investigator?
With all of these privilege issues at stake, and concerns over conflicts of interest, the
question often arises as to who should conduct the investigation? Should it be HR? Should it be
the in-house lawyer? Should it be the in-house lawyer and HR? Or should it be an outside
consultant, investigator, or outside counsel? Obviously, who conducts the investigation will
affect whether the investigation is privileged, at least at the outset. But a good rule of thumb is
to reasonably segregate the attorney’s advice and other privileged communications. This places
the company in a better position to avoid waiver, irrespective of who the company chooses to
conduct the investigation.
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1. Do you choose an internal or third party investigator?
There are certain advantages to using an internal investigator. These include:
• Familiarity with corporate culture and the personalities involved, as well as
with employer rules and regulations and how they are enforced, enabling the
investigator to get started more quickly.
• Uniformity in the investigative process, reducing the risk of discrimination
allegations.
• Credibility with employees, if the chosen investigator has developed a
reputation for fairness.
• Not having to comply with the Fair Credit Reporting Act (FCRA).
• Cost effectiveness.
There are also a number of advantages in using an external investigator, which include:
• Increased objectivity due to lower likelihood of familiarity with any of the
individuals involved.
• Perception by complaining individuals that investigation is fair and
independent.
• Expertise and experience of professional investigator.
• If using an attorney, a stronger presumption of privileged communications
than with internal attorneys, who often provide business advice in addition to
legal advice.
The main disadvantage of using an external investigator is that their report may be
covered by the FCRA, prompting disclosure and permission requirements relative to the
individuals being investigated. The FCRA is a federal law regulating the use of third party
service providers to obtain background information on applicants and existing employees. If an
external investigator is considered a consumer reporting agency and the resulting report is
considered a consumer report under the FCRA, certain disclosures to and permissions from
employees being investigated are required. Other disadvantages of using an external investigator
include greater initial investment time and startup cost.
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2. Do you choose an attorney or non-attorney investigator?
Another important factor in choosing an investigator is whether the employer should use
an attorney (whether an attorney from the employer’s legal department or from an external law
firm). An attorney investigator allows the employer to apply the attorney-client privilege to the
investigation in many situations. But, of course, the attorney-client privilege is not absolute.
Where an in-house attorney plays a business and a legal role, the privilege may not apply if a
court deems the attorney to have been conducting the investigation primarily for a business
purpose, rather than in the attorney’s legal role. However, the privilege generally applies if
providing or seeking legal advice is one of the significant purposes of the investigation, even if
there is also a business purpose – See the reference to In re Kellogg Brown & Root, Inc., 756
F.3d 754 (D.C. Cir. 2014) (KBR, part 1), above.
Using a particular attorney or law firm to conduct the investigation may preclude using
that same attorney/firm from representing the company in a subsequent litigation. Va. Rule
3.7(a) sets this out:
A lawyer shall not act as an advocate in an adversarial proceeding in
which the lawyer is likely to be a necessary witness except where: (1) the
testimony relates to an uncontested issue; (2) the testimony relates to the
nature and value of legal services rendered in the case; or (3)
disqualification of the lawyer would work substantial hardship on the
client.3
Under this “witness-advocate” rule, courts have disqualified attorneys as trial counsel
when they conducted the internal investigation at issue in the litigation. E.E.O.C. v. Bardon,
Inc., 2010 WL 323067, at *1 (D. Md. Jan. 19, 2010) (disqualifying counsel who “had been
involved in the company's internal investigation into [plaintiff’s] complaint of sexual harassment
and in her termination from the company”); compare Goodwine v. City of New York, 2016 WL
379761, at *4 (S.D.N.Y. Jan. 29, 2016) (refusing to disqualify counsel who had attended a single
meeting with plaintiff and others regarding plaintiff’s workplace complaint but was not
otherwise involved in the investigation of the complaint).
Of course, if an attorney is involved in the investigation, either directly or indirectly, the
interviewees should receive the Upjohn warning discussed above.
In most situations, the HR department should be involved in the planning and execution
of the investigation. In an effort to preserve privilege when HR conducts the interviews without
counsel being present, HR should indicate on all interview notes and other documents that a
significant purpose of the investigation is to seek legal advice or that the interview is being
conducted at the direction of counsel for the purpose of seeking or providing legal advice
(remember KBR, part 1 above?). Additionally, all witnesses and participants in the investigation
3 See also D.C. Rule Prof. Conduct 3.7(a) (same); Md. Rule Prof. Conduct 3.7(a)(same)
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should be informed of the investigation’s purpose. If one of the members of the HR department
is accused of wrongful conduct, then the HR department should not be involved.
E. Presentation of findings
Once the investigation is concluded and certain findings have been made, you should
decide whether to report those findings in writing, or orally to the CEO, Board, or some other
person or body. There are various factors to consider when making such a decision. The
advantages of providing a written report include: it is easy to understand; it will contain carefully
crafted themes; it will convey the results of the investigation consistently; it will reduce the
likelihood that the recipient will misstate, misconstrue, or misremember the investigation’s
findings; and can show, where the investigation uncovered wrongdoing, that the company
undertook and investigation and has begun to implement remedial measures. On the other hand,
it increases the likelihood that, if litigation ensues, the plaintiff will obtain it in discovery, which
depending on the findings, may help his or her case and obtain a blueprint of potential
misconduct. It also more difficult to keep confidential, could jeopardize the attorney-client
privilege or work-product protection, and could be construed as an admission under the
applicable evidentiary rules.
An oral report is less likely to be discoverable, minimizes some risks of investigating,
more likely to remain confidential, and provides some flexibility to counsel if compelled to
testify about the investigation or its findings. On the other hand, an oral presentation can be later
affected by lack of memory or recall, which may create data integrity issues; and courts have
found a lack of a written report to be problematic in some circumstances, such as when a
factfinder is unable to scrutinize whether there was a thorough investigation and/or whether the
employer came to a sound, supported conclusion.
II. UNAUTHORIZED PRACTICE OF LAW CONCERNS: CAN YOU HANDLE A
MATTER THAT ARISES AT A COMPANY FACILITY IN A STATE IN WHICH
YOU ARE NOT LICENSED
It should go without saying that it is quite important to avoid the unauthorized practice of
law. Depending on the jurisdiction, engaging in the unauthorized practice of law can even result
in criminal penalties. For example, in Virginia, a person who practice law without being
authorized or licensed is guilty of a Class 1 misdemeanor. Va. Code § 54.1-3904. That being
said, many in-house counsel assume roles and responsibilities that do not constitute the practice
of law. Handling matters arising at company facilities in states in which you are not licensed
might not require further analysis than determining that your activities are not the practice of
law.
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A. So What is the Practice of Law?
What constitutes the practice of law varies from jurisdiction to jurisdiction and is defined
in statutes, rules, and case law. The practice of law in Virginia, Maryland, and the District of
Columbia is defined as follows:
1. Virginia:
The “practice of law” means “(i) private practice as a sole practitioner or
for a law firm, legal services office, legal clinic, or similar entity; (ii)
practice as an attorney for a corporation, limited liability company,
partnership, trust, individual or other entity, provided such practice
involved the primary duties of furnishing legal counsel, drafting legal
documents and pleadings, interpreting and giving advice regarding the
law, and preparing, trying or presenting cases before courts or
administrative agencies; (iii) practice as an attorney for the federal or a
state or local government with the same primary duties as described above
regarding attorneys for a corporation; (iv) employment as a judge for the
federal or a state government; (v) service as a judicial law clerk for a state
or federal court; or (vi) service on active duty in a branch of the armed
forces of the United States as a judge advocate or law specialist, as those
terms are defined in the Uniform Code of Military Justice, 10 U.S.C. §
801, as amended, provided that such position requires a valid license to
practice law and involves the same primary duties as described above
regarding attorneys for a corporation.” Virginia Supreme Court Rule
1A:1.
“[T]he relation of attorney and client exists, and one is deemed to be
practicing law whenever
(1) One undertakes for compensation, direct or indirect, to
advise another, not his regular employer, in any matter
involving the application of legal principles to facts or
purposes or desires.
(2) One, other than as a regular employee acting for his
employer, undertakes, with or without compensation, to
prepare for another legal instruments of any character, other
than notices or contracts incident to the regular course of
conducting a licensed business.
(3) One undertakes, with or without compensation, to represent
the interest of another before any tribunal--judicial,
administrative, or executive--otherwise than in the presentation
11
of facts, figures, or factual conclusions, as distinguished from
legal conclusions, by an employee regularly and bona fide
employed on a salary basis, or by one specially employed as an
expert in respect to such facts and figures when such
representation by such employee or expert does not involve the
examination of witnesses or preparation of pleadings.
(4) One holds himself or herself out to another as qualified or
authorized to practice law in the Commonwealth of Virginia.
Virginia Rule of Supreme Court Part 6 § 1(B)(1) (emphasis
added).
2. Maryland:
“The definition of the practice of law is established by law and varies from
one jurisdiction to another. Whatever the definition, limiting the practice
of law to members of the bar protects the public against rendition of legal
services by unqualified persons.” Md. Rule 19-305.5 Comment 2.
“With respect to [Rule 19-305.5(a)], to determine the unauthorized
practice of law, ‘the focus of the inquiry should be on whether the activity
in question required legal knowledge and skill in order to apply legal
principles and precedent.’” Attorney Grievance Comm’n of Md. v.
Maignan, 4322 Md. 191, 203 (2011) (quoting Attorney Grievance
Comm’n v. Fallin, 371 Md. 237, 241-42 (2002)).
“‘Practice law’ means to engage in any of the following activities: (i)
giving legal advice; (ii) representing another person before a unit of the
State government or of a political subdivision; or (iii) performing any
other service that the Court of Appeals defines as practicing law. . . . [and]
includes: (i) advising in the administration of probate of estate of
decedents in an orphans’ court of the state, (ii) preparing an instrument
that affects title to real estate, (iii) preparing or helping in the preparation
of any form or document that is filed in a court or affects a case that is or
may be filed in a court, or (iv) giving advice about a case that is or may be
filed in court.” Md. Bus., Occupations & Professions Code § 10-
101(h)(1)-(2).
3. District of Columbia:
“Practice of Law” means the provision of professional legal advice or
services where there is a client relationship of trust or reliance. One is
presumed to be practicing law when engaging in any of the following
conduct on behalf of another:
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(A) Preparing any legal document, including any deeds,
mortgages, assignments, discharges, leases, trust instruments or
any other instruments intended to affect interests in real or
personal property, will, codicils, instruments intended to affect
the disposition of property of decedents' estates, other
instruments intended to affect or secure legal rights, and
contracts except routine agreements incidental to a regular course
of business;
(B) Preparing or expressing legal opinions;
(C) Appearing or acting as an attorney in any tribunal;
(D) Preparing any claims, demands or pleadings of any kind, or
any written documents containing legal argument or
interpretation of law, for filing in any court, administrative
agency or other tribunal;
(E) Providing advice or counsel as to how any of the activities
described in subparagraph (A) through (D) might be done, or
whether they were done, in accordance with applicable law;
(F) Furnishing an attorney or attorneys, or other persons, to
render the services described in subparagraphs (a) through (e)
above.
D.C. Ct. App. Rule 49(b)(2).
Scenario: Robert, barred in Maryland, is General Counsel at Acme, Inc. Acme’s
headquarters is in Bethesda, where Robert works, but it has a branch office in Reston. Robert
asks Samantha, a financial analyst working in the Reston office, to review a letter of intent and to
draft a contract that complies with certain applicable federal regulations. Will Samantha be
engaged in the unauthorized practice of law in Virginia?
Answer: No. “[I]t does not constitute the unauthorized practice of law for a non-lawyer
to provide legal advice to or prepare legal instruments for his regular corporate employer since
the definition of the practice of law does not encompass one who undertakes to provide such
services to a regular employer.” Va. UPL Opinion 178.
Scenario: Christine is Acme’s CFO. Over Robert’s objection, she travels to Virginia
Beach and successfully represents Acme in a AAA arbitration before a panel of arbitrators.
After the arbitrators issue their ruling, the parties quickly reach a settlement agreement. Acme
does not seek to have its arbitration award confirmed in court. Has Christine engaged in the
unauthorized practice of law?
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Answer: No. The practice of law in Virginia does not include advising or preparing
legal instruments for one’s “regular employer.” While it does include representing the interests
of another “before any tribunal,” a “tribunal” “does not include an arbitration proceeding.” Va.
UPL Opinion 203. “It follows, therefore, that a non-attorney officer of a corporation can
represent that corporation and provide legal advice to the corporation/employer within the
context of an arbitration proceeding.” Id.
B. To What Extent is the Practice of Law Permitted Without Local Bar
Admission?
1. Virginia
Kurt is a member in good standing of the Swiss bar. Maria is a member in good standing
of the bar of Puerto Rico. Acme has hired both Kurt and Maria as deputy general counsels based
in the Reston office. Do they require Virginia licenses or registrations to practice, and are there
limitations on what they can do?
“Notwithstanding any rule of this Court to the contrary, after July
1, 2004, any person employed in Virginia as a lawyer exclusively
for a for-profit or a non-profit corporation, association, or other
business entity, including its subsidiaries and affiliates, that is not a
government entity, and the business of which consists solely of
lawful activities other than the practice of law or the provisions of
legal services (“Employer”), for the primary purpose of providing
legal services to such Employer, including one who holds himself
or herself out as “in-house counsel,” “corporate counsel,” “general
counsel,” or other similar title indicating that he or she is serving
as legal counsel to such Employer, shall either (i) be a regularly
admitted active member of the Virginia State Bar; (ii) be issued a
Corporate Counsel Certificate as provided in Part I of this rule
and thereby become an active member of the Virginia State Bar
with his or her practice limited as provided therein; or (iii)
register with the Virginia State Bar as provided in Part II of this
rule; provided, however, no person who is or has been a member
of the Virginia State Bar, and whose Virginia License, at the time
of application, is revoked or suspended, shall be issued a Corporate
Counsel Certificate or permitted to register under this Rule.” Va.
Rule 1A:5.
Without becoming members of the Virginia bar, Maria can qualify as a Virginia Corporate
Counsel, and Kurt can register as a Corporate Counsel Registrant.
• Virginia Corporate Counsel:
14
o Open to lawyers “admitted to the practice of law in a state (other than Virginia),
or territory of the United States, or the District of Columbia.” Id. Part I(a).
o “The practice of a lawyer certified pursuant to Part I of this rule shall be limited to
practice exclusively for the Employer furnishing the affidavit required by Part
I(b)(3) of this rule, including its subsidiaries and affiliates, and may include
appearing before a Virginia court or tribunal as counsel for the Employer.” Id.
Part I(f).
• Corporate Counsel Registrant:
o Open to lawyers who may also become Virginia Corporate Counsel and “[a]
person admitted to the practice of law only in a country other than the United
States, and who is a member in good standing of a recognized legal profession in
that country, the members of which are admitted to practice law as lawyers,
counselors at law, or the equivalent, and are subject to effective regulation and
discipline by a duly constituted professional body or public authority[.]” Id. Part
II(a).
o Requires oath that registrant “(i) . . . will at no time undertake to represent his or
her Employer or any other person, organization, or business entity before a
Virginia court or tribunal . . . (ii) his or her work is limited to business and legal
services related to issues confronting his or her Employer at a regional, national or
international level with no specific nexus to Virginia, and (iii) he or she will not
provide legal advice or services to any person other than his or her Employer.”
Id. Part II(b)(1).
Kurt has transferred to Acme’s Bethesda headquarters and become a member of the
Maryland bar. From his office in Bethesda, he regularly provides advice regarding Virginia and
federal law to employees working in Acme’s Reston office. Has Kurt engaged in the
unauthorized practice of law in Virginia?
No, A non-Virginia lawyer may render advice in a foreign jurisdiction to clients
residing in Virginia on matters not concerning Virginia law. “In fact, [the
Virginia UPL] Committee would not have jurisdiction over any activity
performed by you outside the Commonwealth of Virginia.” Virginia UPL
Opinion 122.
Acme has two wholly-owned subsidiaries in Virginia. Acme wishes to transfer rights to
certain intellectual property from one subsidiary to the other. Kurt meets with employees from
the subsidiaries in his Bethesda office, prepares the necessary documents there, and the
subsidiaries close on the transaction at the Bethesda headquarters. Has Kurt engaged in the
unauthorized practice of law in Virginia?
15
No. “[T]he preparation of legal documents in the District of Columbia by an
attorney licensed to practice in the District of Columbia, absent any actual activity
by the attorney in Virginia, does not constitute the unauthorized practice of law in
Virginia.” Virginia UPL Opinion 99.
Kurt primarily works out of his Bethesda office, although he will occasionally travel to
Acme’s Virginia office, where he sometimes conducts investigations, prepares documents, and
interviews employees. Are Kurt’s activities in Virginia permissible?
Yes. Virginia UPL Opinion 215 - Regarding foreign attorneys based in offices
outside Virginia, explains:
“The certificate and registration requirements of this rule apply
only to lawyers not licensed in Virginia who are working in
Virginia as corporate counsel, in-house counsel, general counsel,
etc.”
“When these lawyers provide advice and counsel regarding
Virginia law to employees of the financial institution employer
located in branches in Virginia, they are not engaged in
unauthorized practice. When they are providing the advice either
from their offices outside of Virginia or when they visit the
branches in-person in Virginia, this constitutes advising their
regular employer which is permitted under Part 6, §I (B)(1) of the
Rules of the Virginia Supreme Court. Should they have to prepare
documents in either situation, again, these lawyers are providing
this legal service only to their regular employer which is permitted
under Part 6, §I (B)(2). These lawyers also fall within the scope of
the temporary practice provisions of Part 6, §I (C). They represent
the employer elsewhere and have occasion to have to come into
Virginia in relation to that representation.”
2. Maryland
Maria has decided to take an opportunity to transfer from Acme’s Reston office to the
Bethesda headquarters. Maria is still a member in good standing of the Puerto Rico bar, and she
does not want to sit through the Maryland attorneys exam. Can she practice law as in-house
counsel in Maryland?
Yes. “An attorney admitted in another United States jurisdiction, and not
disbarred or suspended from practice in any jurisdiction, may provide legal
services in this jurisdiction that: (1) are provided to the attorney’s employer or its
organizational affiliates and are not services for which the forum requires pro hac
vice admission; or (2) are services that the attorney is authorized to provide by
16
federal law or other law of this jurisdiction.” Md. Rule 19-305.5(d) (emphasis
added).
Note regarding temporary practice in Maryland:
“An attorney admitted in another United States jurisdiction, and
not disbarred or suspended from practice in any jurisdiction, may
provide legal services on a temporary basis in this jurisdiction that:
(1) are undertaken in association with an attorney who is admitted
to practice in this jurisdiction and who actively participates in the
matter; (2) are in or reasonably related to a pending or potential
proceeding before a tribunal in this or another jurisdiction, if the
attorney, or a person the attorney is assisting, is authorized by law
or order to appear in such proceeding or reasonably expects to be
so authorized; (3) are in or reasonably related to a pending or
potential arbitration, mediation, or other alternative dispute
resolution proceeding in this or another jurisdiction, if the services
arise out of or are reasonably related to the attorney’s practice in a
jurisdiction in which the attorney is admitted to practice and are
not services for which the forum requires pro hac vice admission;
or (4) are not within subsections (c)(2) or (c)(3) of this Rule and
arise out of or are reasonably related to the attorney’s practice in a
jurisdiction in which the attorney is admitted to practice.” Rule
19-305.5(c).
“An attorney admitted in another United States jurisdiction, and
not disbarred or suspended from practice in any jurisdiction, may
provide legal services in this jurisdiction that: (1) are provided to
the attorney’s employer or its organizational affiliates and are not
services for which the forum requires pro hac vice admission; or
(2) are services that the attorney is authorized to provide by federal
law or other law of this jurisdiction.” Md. Rule 19-305.5(d).
“Subsection (c)(3) of this Rule permits an attorney admitted to
practice law in another jurisdiction to perform services on a
temporary basis in this jurisdiction if those services are in or
reasonably related to a pending or potential arbitration, mediation,
or other alternative dispute resolution proceeding in this or another
jurisdiction, if the services arise out of or are reasonably related to
the attorney's practice in a jurisdiction in which the attorney is
admitted to practice. The attorney, however, must obtain
permission pro hac vice in the case of a court-annexed arbitration
or mediation or otherwise if court rules or law so require.
17
Appearing and participating in an arbitration as counsel requires
“Special Admission” for out-of-state attorneys by the “circuit court
for the county in which the arbitration hearing is to be held or [by]
any other circuit court in which an action to review an arbitral
award entered by the arbitrator or panel may be filed.” Rule 19-
214 of the Rules Governing Admission to the Bar of Maryland.
3. District of Columbia
Of the three metro area jurisdictions, the District of Columbia has the most permissive
provisions regarding the activity of foreign-licensed in-house counsel, arbitration, and temporary
practice.
“The following activity in the District of Columbia is excepted
from the prohibitions [against the unauthorized practice of law]
provided the person is not otherwise engaged in the practice of law
or holding out as authorized or competent to practice law in the
District of Columbia: . . .
(6) Internal Counsel. Providing legal advice only to one’s regular
employer, where the employer does not reasonably expect that it is
receiving advice from a person authorized to practice law in the
District of Columbia.
(12) Practice in ADR Proceedings. Providing legal services in or
reasonably related to a pending or potential arbitration, mediation,
or other alternative dispute resolution (“ADR”) proceeding,
provided:
The person is authorized to practice law by the highest court of a
state or territory or by a foreign country, and is not disbarred or
suspended for disciplinary reasons and has not resigned with
charges pending in any jurisdiction or court.
The person may begin to provide such services in no more than
five (5) ADR proceedings in the District of Columbia per calendar
year.
The person does not maintain or operate from an office or location
for the practice of law within the District of Columbia or otherwise
practice or hold out to practice law in the District of Columbia,
unless that person qualifies under another express exception
provided in section (c) hereof.
18
(13) Incidental and Temporary Practice. Providing legal services in
the District of Columbia on an incidental and temporary basis,
provided that the person is authorized to practice law by the
highest court of a state or territory or by a foreign country, and is
not disbarred or suspended for disciplinary reasons and has not
resigned with charges pending in any jurisdiction or court.
D.C. Ct. App. Rule 49(c).
III. JOINT REPRESENTATIONS ISSUES – WHAT HAPPENS WHEN THE
EMPLOYEE SUES BOTH THE COMPANY AND THE BOSS PERSONALLY
Depending on the particular situation (and jurisdiction), an employee may file a claim
against the company seeking redress for alleged wrongdoing, but may also include as a
defendant the particular employee or supervisor at the heart of the alleged wrongdoing. In such
situations, it is not uncommon for an attorney to be called upon to represent both a company and
an employee, such as an officer, who has been accused of employment law violations. Such a
joint representation plainly raises the specter of conflicts of interest between the company and
the employee.
While there is no per se rule in Virginia prohibiting a joint representation, such a
representation can be problematic in a number of ways. At the outset, the attorney must
determine whether a potential for conflict exists and, if so, obtain the informed consent of both
clients to waive the conflict.
Virginia Rule of Professional Conduct 1.7 - Conflict of Interest: General
Rule.
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the
representation involves a concurrent conflict of interest. A concurrent conflict of
interest exists if:
(1) the representation of one client will be directly adverse to another
client; or
(2) there is significant risk that the representation of one or more clients
will be materially limited by the lawyer’s responsibilities to another client,
a former client or a third person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent conflict of interest under
paragraph(a), a lawyer may represent a client if each affected client consents after
consultation, and:
19
(1) the lawyer reasonably believes that the lawyer will be able to provide
competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one
client against another client represented by the lawyer in the same
litigation or other proceeding before a tribunal; and
(4) the consent from the client is memorialized in writing.
What is required to obtain informed consent, i.e. “consent after consultation,” is not
defined in the rules. The District of Columbia bar has, however, adopted a “joint statement of
facts” test, which can inform the consultation required to obtain an effective waiver.
District of Columbia Joint Statement of Facts Test
(1) The co-parties agree to a single comprehensive statement of facts
describing the occurrence.
(2) The attorney reviews the statement of facts from the perspective of
each of the parties and determines that it does not support a claim by one
against another.
(3) The attorney determines that no additional facts are known by each
party which might give rise to an independent basis of liability against the
other or against themselves by the other.
(4) The attorney advises each party as to the possible theories of recovery
which each may be foregoing through this joint representation based on
the disclosed facts.
(5) Each party agrees to forego any claim or defense against the other
based on the facts known by each at the time.
(6) Each party agrees that the attorney is free to disclose to the other party,
at the attorney's discretion, all facts obtained by the attorney.
(7) The attorney outlines potential pitfalls in multiple representation and
advises each party of the opportunity to seek the opinion of independent
counsel as to the advisability of the proposed multiple representation; and,
each either consults separate counsel or advises that no separate
consideration is desired.
20
(8) Each party acknowledges that the facts not mentioned now but later
discovered may reveal differing interests, which, if they do not
compromise these differences, may require the attorney to withdraw from
the representation of both without injuring either.
(9) Each party agrees that the attorney may represent both in the litigation.
District of Columbia Bar, Opinion No. 140 (July 7, 1984).
Additional considerations may arise during the course of the representation, which could
impede the attorney’s ability to “provide competent and diligent representation to each affected
client,” rendering the conflict non-waivable.
1.During the course of the representation, “substantial discrepancy in the
parties’ testimony, incompatibility in positions in relation to an opposing
party or the fact that there are substantially different possibilities of
settlement of the claims or liabilities in question.” Rule 1.7 Comment 23.
2.“As to the duty of confidentiality, continued common representation will
almost certainly be inadequate if one client asks the lawyer not to disclose
to the other client information relevant to the common representation.” Id.
Comment 31.
3.At the outset of the representation, one client has withheld information
that is material to the representation, such that the waiver was based on an
incomplete understanding of material facts. See id.
4.Clients assume materially different or adverse stances with respect to the
settlement of claims.
Where a conflict arises between jointly represented clients during the course of the
representation, “[o]rdinarily, the lawyer will be forced to withdraw from representing all of the
clients if the common representation fails.” Id.
In limited circumstances, Rule 1.9 would permit the continued representation of one
client, with informed consent and waiver, where a conflict has arisen between jointly represented
clients:
Virginia Rule of Professional Conduct Rule 1.9 - Conflict of Interest: Former
Client
(a) A lawyer who has formerly represented a client in a matter shall not
thereafter represent another person in the same or a substantially related
matter in which that person's interests are materially adverse to the
21
interests of the former client unless both the present and former client
consent after consultation.
(b) A lawyer shall not knowingly represent a person in the same or a
substantially related matter in which a firm with which the lawyer
formerly was associated had previously represented a client:
(1) whose interests are materially adverse to that person; and
(2) about whom the lawyer had acquired information protected by
Rules 1.6 and 1.9(c) that is material to the matter; unless both the
present and former client consent after consultation.
(c) A lawyer who has formerly represented a client in a matter or whose
present or former firm has formerly represented a client in a matter shall
not thereafter:
(1) use information relating to or gained in the course of the
representation to the disadvantage of the former client except as
Rule 1.6 or Rule 3.3 would permit or require with respect to a
client, or when the information has become generally known; or
(2) reveal information relating to the representation except as Rule
1.6 or Rule 3.3 would permit or require with respect to a client.
Where a conflict has arisen in the context of an employment dispute between a company
and an employee, continued representation of one may be a practical impossibility given the
attorney’s continuing obligations to maintain client confidences and prohibition against using
“information . . . gained in the course of the representation to the disadvantage of the former
client[.]” See Softwise, Inc. v. Goodrich, 62 Va. Cir. 301 (Roanoke 2003) (“[Rule 1.9(c)] may
present obstacles for defense counsel in continuing to represent the defendant as this case
proceeds”).
Additional issues requiring informed consent of both clients are discussed in Rule 1.8 and
include the following:
Virginia Rule of Professional Conduct 1.8
(b) A lawyer shall not use information relating to representation of a client
for the advantage of the lawyer or of a third person or to the disadvantage
of the client unless the client consents after consultation, except as
permitted or required by Rule 1.6 or Rule 3.3.
(f) A lawyer shall not accept compensation for representing a client from
one other than the client unless:
22
(1) the client consents after consultation;
(2) there is no interference with the lawyer's independence of
professional judgment or with the client-lawyer relationship; and
(3) information relating to representation of a client is protected as
required by Rule 1.6.
(g) A lawyer who represents two or more clients shall not participate in
making an aggregate settlement of the claims of or against the clients, or
in a criminal case an aggregated agreement as to guilty or nolo contendere
pleas, unless each client consents after consultation, including disclosure
of the existence and nature of all the claims or pleas involved and of the
participation of each person in the settlement.
In light of the difficulties of obtaining a fully informed waiver, and the potential for
conflicts to arise during the course of a representation, it may be advisable for companies and
their employees to retain separate counsel in employment disputes.
IV. ETHICS IN MEDIATION AND OTHER CONCILIATORY EFFORTS
DESIGNED TO RESOLVE EMPLOYEE DISPUTES
Often, in-house lawyers represent the employer in mediation efforts to resolve an
employee dispute. Such a scenario may arise when an employee has filed an EEOC claim, the
employer has prepared and submitted a position statement, and the EEOC offers mediation as an
alternative to a full blown investigation of the employee’s charge, or if either party requests
mediation and both parties agree. State and local fair Employment Practice Agencies (FEPAs)
may also offer mediation services.
So the parties have agreed to mediate a discrimination charge and you, as in-house
counsel (who happen to be a former litigator with the company’s outside law firm), attend the
mediation as the company’s representative. What ethical issues might arise surrounding this
mediation?
A. Bluffing or puffing about the value of the case
Mediators, in exploring with each party that party’s best alternative to a negotiated
agreement, will often challenge that party to discuss candidly the strengths and weaknesses of its
case. Lawyers often respond by shrugging the negative evidence, overstating the supporting
evidence, or both. The tactic is designed to bluff the mediator to pressure the other side to make
greater concessions. Is this an ethical tactic?
Comment [1] to Va. Rule 1.3 notes in part:
A lawyer should pursue a matter on behalf of a client despite
opposition, obstruction or personal inconvenience to the lawyer,
23
and may take whatever lawful and ethical measures are required to
vindicate a client's cause or endeavor. A lawyer should act with
commitment and dedication to the interests of the client and with
zeal in advocacy upon the client's behalf.
Rule 4.1, titled Truthfulness In Statements To Others, prohibits a lawyer a lawyer from
knowingly making a false statement of fact or law. But because this Rule refers to statements of
fact and recognizing the dictates of Rule 1.3, Comment [2] to this Rule notes:
This Rule refers to statements of fact. Whether a particular
statement should be regarded as one of fact can depend on the
circumstances. Under generally accepted conventions in
negotiation, certain types of statements ordinarily are not taken
as statements of material fact. Estimates of price or value placed
on the subject of a transaction and a party's intentions as to an
acceptable settlement of a claim are in this category, and so is the
existence of an undisclosed principal except where nondisclosure
of the principal would constitute fraud.
Thus, some bluffing about the value of a case at mediation would not likely violate the
lawyer’s ethical obligations. But bluffing that is more extreme would likely adversely affect the
negotiation process – it could offend the mediator or the other party. And if particularly
egregious, could jeopardize the company’s ability to settle. If the company’s objective is to
settle, then such conduct could violate Rule 1.2(a), which requires a lawyer to abide by a client’s
decision concerning the objectives of the representation.
B. Misrepresentations and Omissions
As noted above, Rule 4.1 requires a lawyer to be truthful when dealing with others on a
client’s behalf. Comment [1] to Rule 4.1 addresses misrepresentation and states:
A lawyer is required to be truthful when dealing with others on a
client's behalf, but generally has no affirmative duty to inform an
opposing party of relevant facts. A misrepresentation can occur if
the lawyer incorporates or affirms a statement of another person
that the lawyer knows is false. Misrepresentations can also occur
by failure to act or by knowingly failing to correct false statements
made by the lawyer's client or someone acting on behalf of the
client.
Scenario: In mediation, the lawyer for a plaintiff in a sexual harassment case demands that the
company pay the plaintiff her out-of-pocket damages for the costs of visiting a psychologist for
emotional distress, even though those visits were paid for by her health insurance. Is this
ethical?
24
As in judicial proceedings, misrepresentations of a material fact are not acceptable in
mediation. A misrepresentation of damages would qualify as a false statement of a material fact
under Rule 4.1.
Scenario: In mediation, the lawyer representing a terminated employee alleges gender
discrimination, but fails to mention that immediately before being terminated, his client punched
her supervisor and was removed from the premises by the police. Is this a misrepresentation of a
material fact?
Under Rule 4.1, the lawyer is not required to disclose this fact. Comment [1] notes that a
lawyer generally has no affirmative duty to inform an opposing party of relevant facts. The fact
is certainly relevant as to the reasons for the employee’s termination; but even without a duty to
inform the mediator of this fact, the employer would most likely already be aware of this fact and
would certainly raise it with the mediator at the first opportunity. Thus, to establish credibility, it
is likely better to raise and discuss candidly the facts that weaken the case.
C. Disclosure of Confidential Information Obtained in Mediation
There is no specific ethical rule prohibiting the disclosure to a third party information
related to settlement negotiations. In most jurisdictions, mediations are confidential by
agreement or applicable laws, and thus lawyers generally are not at liberty to discuss with others
what transpired during a mediation.
Information learned during settlement discussions may be confidential under Rule 1.6(a),
which states:
A lawyer shall not reveal information protected by the attorney-
client privilege under applicable law or other information gained in
the professional relationship that the client has requested be held
inviolate or the disclosure of which would be embarrassing or
would be likely to be detrimental to the client unless the client
consents after consultation, except for disclosures that are
impliedly authorized in order to carry out the representation, and
except as stated in paragraphs (b) and (c).
Rule 1.8(b) relating to Conflicts of Interest may also apply. That provision states:
A lawyer shall not use information relating to representation of a
client for the advantage of the lawyer or of a third person or to the
disadvantage of the client unless the client consents after
consultation, except as permitted or required by Rule 1.6 or Rule
3.3.
25
And certain evidentiary rules limit the use of conduct or statements made during
settlement negotiations. For example, Federal Rule of Evidence 408:
Rule 408. Compromise Offers and Negotiations
(a) Prohibited Uses. Evidence of the following is not admissible — on behalf of any party
— either to prove or disprove the validity or amount of a disputed claim or to impeach by
a prior inconsistent statement or a contradiction:
(1) furnishing, promising, or offering — or accepting, promising to accept, or
offering to accept — a valuable consideration in compromising or attempting to
compromise the claim; and
(2) conduct or a statement made during compromise negotiations about the claim
— except when offered in a criminal case and when the negotiations related to a
claim by a public office in the exercise of its regulatory, investigative, or
enforcement authority.
(b) Exceptions. The court may admit this evidence for another purpose, such as proving a
witness’s bias or prejudice, negating a contention of undue delay, or proving an effort to
obstruct a criminal investigation or prosecution.
Virginia Supreme Court Rule 2:408 is similar:
RULE 2:408. COMPROMISE OFFERS AND CONDUCT OR STATEMENTS DURING
NEGOTIATIONS
(a) Prohibited Uses. Evidence of the following is not admissible on behalf of any party
in a civil case--either to prove or disprove the validity or amount of a disputed claim, or
to impeach by a prior inconsistent statement or by contradiction:
(1) furnishing, promising, or offering--or accepting, promising to accept, or
offering to accept--a valuable consideration in compromising or attempting to
compromise the claim; and
(2) conduct or any statements made during compromise negotiations about the
claim.
(b) Exceptions. The court may admit such evidence for another purpose, such as proving
a witness’s bias or prejudice, or negating a contention of undue delay.
(c) Pre-Existing Documents or Physical Evidence. Otherwise admissible evidence that
existed before the negotiations began, including pre-existing documents or electronic
26
communications, is not excludable under this Rule merely because such evidence was
disclosed, produced, or discussed by a party during such negotiations.
D. Misuse of the Mediation Process
1. Lack of Good Faith
Sometimes in mediation, your opposing lawyer may show no interest in reaching
settlement. He or she may initially resist advancing a settlement proposal, or one that seems
reasonable, and indicates an interest in learning more about the case. Is this lack of good faith
ethical?
ABA Model Rule 3.2 (not adopted in Virginia) is titled “Expediting Litigation,” and
states:
A lawyer shall make reasonable efforts to expedite litigation
consistent with the interests of the client.
Va. Rule 4.4 is titled “Respect For Rights of Third Persons” and states:
In representing a client, a lawyer shall not use means that have no
purpose other than to embarrass, delay, or burden a third person, or
use methods of obtaining evidence that violate the legal rights of
such a person
These Rules come into play if your opposing lawyer is using mediation as a means to
disrupt or delay a litigation, or as a means of securing discovery. But generally, there is no bad
faith for a party to refuse to engage in settlement discussions or refuse to settle.
2. Threats
Scenario: In mediation, the plaintiff’s lawyer in a sexual harassment case threatens to file a
criminal complaint for sexual assault if the matter is not resolved. Is this threat ethical?
The ABA says yes. ABA Formal Opinion No. 92-363, issued July 6, 1992, says:
The Committee concludes, for reasons to be explained, that the
Model Rules do not prohibit a lawyer from using the possibility of
presenting criminal charges against the opposing party in a civil
matter to gain relief for her client, provided that the criminal matter
is related to the civil claim, the lawyer has a well-founded belief
that both the civil claim and the possible criminal charges are
warranted by the law and the facts, and the lawyer does not attempt
27
to exert or suggest improper influence over the criminal process. It
follows also that the Model Rules do not prohibit a lawyer from
agreeing, or having the lawyer's client agree, in return for
satisfaction of the client's civil claim for relief, to refrain from
pursuing criminal charges against the opposing party as part of a
settlement agreement, so long as such agreement is not itself in
violation of law.
BUT
Virginia says no. Virginia Rule 3.4, titled “Fairness to Opposing Party and Counsel,
section (i), specifically precludes a lawyer from making such a threat. It states:
A lawyer shall not … [p]resent or threaten to present criminal or
disciplinary charges solely to obtain an advantage in a civil matter.
Comment 5 explains the prohibition, and what Virginia lawyers may do:
Although a lawyer is prohibited by paragraph (i) from presenting
or threatening to present criminal or disciplinary charges solely to
obtain an advantage in a civil matter, a lawyer may offer advice
about the possibility of criminal prosecution and the client’s rights
and responsibilities in connection with such prosecution.
Virginia takes the position that the prohibition against threatening criminal prosecution
applies even if the lawyer’s client has a legitimate basis for bringing criminal charges against the
threatened party. Thus, while the client could rightfully file criminal charges, the lawyer may
not use the client’s threat of going to the police to leverage or extract a settlement of a civil claim
from the threatened party.
Virginia Legal Ethics Opinion 1361, issued June 28, 1990, illustrates this point. The
Committee addressed a scenario in which the defense lawyer learned that the plaintiff tried to
bribe a witness. The Committee acknowledged that the lawyer must advise the tribunal of the
potential crime (under Rule 3.3(d)) and may also advise the Commonwealth’s Attorney. The
Committee also acknowledged that the defense counsel’s presentation or threat to present a
criminal charge would only be unethical if the lawyer was acting “solely for the purpose of
obtaining an advantage in a civil matter.” Thus, the fact that the client or the lawyer may be
justified in reporting the opposing party’s crime to law enforcement is not a justification for
using the threat of criminal prosecution solely to obtain a civil advantage.
The D.C. Rule of Professional Conduct D.C. Rule 8.4(g) specifically holds that is
professional misconduct for a lawyer to:
28
(g) SEEK OR THREATEN TO SEEK CRIMINAL CHARGES
OR DISCIPLINARY CHARGES SOLELY TO OBTAIN AN
ADVANTAGE IN A CIVIL MATTER
Maryland does not have a similar corresponding prohibitive rule. Its Rule 19-303.4,
titled Fairness to Opposing party and Counsel, is substantially similar to the ABA Model Rule
3.4.
E. Lawyer’s Obligation to Consult with the Client in Mediation
During mediation, the mediator may request private caucuses with the lawyers, in order
to bypass the attorney-client dynamic and communicate more efficiently. If the lawyer believes
that her client’s emotion may hamper settlement discussions, she may also request private
caucuses with the mediator. After sharing and receiving information from the mediator, what are
the lawyer’s obligations in relaying information back to the client?
Rule 1.2 addressee the scope of the lawyer’s representation. Rule 1.2(a) states:
A lawyer shall abide by a client's decisions concerning the
objectives of representation, subject to paragraphs (b), (c), and (d),
and shall consult with the client as to the means by which they are
to be pursued. A lawyer shall abide by a client's decision, after
consultation with the lawyer, whether to accept an offer of
settlement of a matter. In a criminal case, the lawyer shall abide by
the client's decision, after consultation with the lawyer, as to a plea
to be entered, whether to waive jury trial and whether the client
will testify.
While Rule 1.4, titled “Communication,” dictates that a lawyer keep a client reasonably
informed about the status of the matter and shall inform the client of facts pertinent to the matter
and of communications from another party that may significantly affect settlement or resolution
of the matter, Rule 1.2(d) permits the lawyer to act on behalf of the client “as is impliedly
authorized to carry out the representation.”
Comment 5 to Rule 1.4 provides a little more guidance. It notes:
The client should have sufficient information to participate
intelligently in decisions concerning the objectives of the
representation and the means by which they are to be pursued, to
the extent the client is willing and able to do so. For example, a
lawyer negotiating on behalf of a client should provide the client
with facts relevant to the matter, inform the client of
communications from another party and take other reasonable
steps that permit the client to make a decision regarding an offer
from another party. A lawyer who receives from opposing counsel
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an offer of settlement in a civil controversy or a proffered plea
agreement in a criminal case should promptly inform the client of
its substance unless prior discussions with the client have left it
clear that the proposal will be unacceptable. See Rule 1.2(a). Even
when a client delegates authority to the lawyer, the client should be
kept advised of the status of the matter. Adequacy of
communication depends in part on the kind of advice or assistance
involved. For example, in negotiations where there is time to
explain a proposal, the lawyer should review all important
provisions with the client before proceeding to an agreement. In
litigation a lawyer should explain the general strategy and
prospects of success and ordinarily should consult the client on
tactics that might injure or coerce others. On the other hand, a
lawyer ordinarily cannot be expected to describe trial or
negotiation strategy in detail. The guiding principle is that the
lawyer should fulfill reasonable client expectations for information
consistent with the duty to act in the client's best interests, and the
client's overall requirements as to the character of representation.
Thus, where the lawyer and client have consulted and determined in advance the
minimum amount the client will accept, or the maximum amount the client will pay, the lawyer
may reject offers that fall outside of these ranges without first consulting with the client. But, if
the client is participating in the mediation, and mediation often is a fluid exercise, the lawyer
should advise the client of all offers, and follow the dictates of Rule 2.1, which governs the role
of an attorney as Advisor:
In representing a client, a lawyer shall exercise independent
professional judgment and render candid advice. In rendering
advice, a lawyer may refer not only to law but to other
considerations such as moral, economic, social and political
factors, that may be relevant to the client's situation.
V. WHAT CAN YOU DO WHEN AN EMPLOYEE TAKES WORK-RELATED
DOCUMENTS TO SUPPORT HIS CASE
Scenario: You are the general counsel for a mid-sized Virginia company. Recently, you
received a demand letter from a plaintiff’s employment lawyer claiming that her client had to
leave your company’s employ because the work situation was so intolerable – that is, everyone
who worked with her client made fun of his personal appearance. The former employee was
repeatedly subject to jokes and ridicule, often finding on his chair cartoons of characters having a
similar appearance, and had heard his female supervisors whispering behind his back. He is
claiming constructive discharge and discrimination. Some of the details in the demand letter
lead you to conclude that this former employee took company confidential and proprietary
information with him when he left the company’s employ, despite his signing a confidentiality
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agreement when he started working for the company that included a provision that he would not
disclose or use company information for any reason other than as needed for him to do his job,
and that he would return all company information upon termination. What, if any, ethical issues
are implicated by this scenario?
A. Virginia Legal Ethics Opinion 1786 (dated Dec. 10, 2004)
LEO 1786 is titled “Disclosure and Use of Confidential Documents Obtained by a Client
Without Authorization.” In this Opinion, the committee addresses a number of scenarios
involving an attorney receiving documents regarding the opposing party and addresses whether
the receiving attorney must return the documents and whether he can read and use the
information contained in the documents. The Committee acknowledged that the answers to these
questions will depend on various factors, such as whether the documents were copies or
originals, whether the employee was authorized to handles the documents, whether the
documents contained attorney-client materials, and other factors:
1. If the materials do not contain attorney-client material, but the client describes the
documents as “confidential,” meaning they are the types of documents that the employer
does not wish anyone outside the company to know of the contents of the documents – the
attorney is permitted to use the documents and keep receipt of the documents confidential,
except as governed by:
A. Rule 1.6(b)(1), which permits a lawyer to return documents where needed
to comply with “law or court order.” This would depend on the type of document and
the applicable law. The Committee provides, as an example, if the documents were
medical records, then the attorney may have to look at HIPAA.
B. Rule 3.4(a), which prohibits a lawyer from altering, destroying, or
concealing evidence with the purpose of obstructing a party’s access to evidence. If
the documents are simply copies, then this provision would presumably not apply.
C. Rule 4.4, which prohibits a lawyer from using methods to obtain evidence
that violate the legal rights of others. The applicability of this Rule too will depend
on whether the documents are copies or originals, whether litigation is foreseen,
whether the documents would be relevant to a potential litigation, and how the
employee obtained the documents.
2. If the documents do contain attorney-client communications, then:
A. The attorney should follow the procedures set out in Virginia LEO 1702
(dated Nov. 24, 1997) and notify opposing counsel, return the materials, and follow
that counsel’s instructions, with any dispute to be settled by a court. The Committee
noted that LEO relied in part on ABA formal opinions, but when the ABA revised its
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Model Rule 4.4 to require only notice, Virginia did not make a corresponding change
to its Rules. Thus, the notice and return provisions of LEO 1702 still apply.
B. But an attorney does not have to notify an opposing party if the employee
took the documents within the protection of a whistleblower statute.
C. If the employee took only copies, such that the employer was not deprived
of either the information or the documents, the lawyer may not need to notify the
opposing party.
3. An attorney may not direct her client to obtain evidence that the lawyer herself
would be prohibited from taking, else she may violate Rule 8.4(a), which precludes an
attorney from violating an ethical rule through the acts of another.
4. If the documents are actually “stolen” from the employer, the Committee directs
lawyers to review In re Ryder, 263 F. Supp. 360 (E.D. Va. 1967) as the leading case in
Virginia regarding an attorney’s receipt of the fruits or instrumentalities of a crime from a
client. The Committee considers documents to be within the scope of Ryder and its progeny.
B. Measures an employer can take to protect its confidential and proprietary
information
In the example identified above from Va. LEO 1786, the employee understood that the
term “confidential” referred to the types of documents that the employer does not wish anyone
outside the company to know of the contents of the documents. So what can an employer do to
try and protect itself from employees taking company documents outside the company for other
purposes? One of the first steps is to determine what information and documents does the
company want to protect? Is the information just confidential, or does it rise to the level of a
company “trade secret”?
1. Trade Secrets
Virginia has adopted the Virginia Uniform Trade Secrets Act (VUTSA), Va. Code Ann.
§§ 59.1-336 to 59.1-343. This statute defines “trade secret” as information that:
A. Includes a formula, pattern, compilation, program, device, method, technique, or
process;
B. That derives actual or potential independent economic values because it is: generally
unknown; and not readily ascertainable by proper means or by persons who can
obtain economic value from its disclosure or use; and
C. Is subject of reasonable efforts under the circumstances to maintain its secrecy.4
4 The federal Defend Trade Secrets Act of 2016 contains a similar definition. 18 U.S.C. §
1839(3).
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Virginia courts have found that customer lists, pricing information, marketing and sales
techniques, and product information may all qualify for trade secret protection. See, e.g.,
MicroStrategy, Inc. v. Business Objects, S.A., 331 F.Supp.2d 396 (E.D. Va. 2004). The Virginia
Supreme Court has noted that the most important characteristic of a trade secret is its secrecy,
not its novelty. Dionne v. Southeast Foam Converting & Packaging, Inc. 397 S.E.2d 110, 113
(Va. 1990).
Absolute secrecy is not required. Information is only required to be kept secret by
reasonable efforts under the circumstances. MicroStrategy, Inc., 331 F.Supp.2d at 416. For
example, a business owner may disclose his trade secret to a licensee, employee, or third party in
express or implied confidence, and still maintain its secrecy. Dionne 397 S.E.2d at 113. Such
reasonable efforts include restricting access to information and using confidentiality agreements.
MicroStrategy, Inc., 331 F.Supp.2d at 416.
2. Confidential Information
Businesses generally want to protect information that may not rise to the level of a
“Trade Secret.” To that end, companies often include in their employee handbook a policy on
Confidential Information. Such a policy might look something like this:
Confidentiality
During employment, Company employees may have access to Confidential Information.
Confidential Information is a valuable and unique asset of the Company or third parties
who have furnished it to the Company. The Company requires the employee to sign a
separate Confidentiality Agreement consistent with the terms of this policy as a necessary
condition of employment.
Confidential Information includes but is not limited to:
• Business and marketing plans, strategies, and programs.
• Financial budgets, projections, and results.
• Employee and contractor lists and records.
• Business methods and operating and production procedures.
• Technical, engineering, and scientific research, development, methodology, devices, and
processes.
• Formulas and chemical compositions.
• Blueprints, designs, and drawings.
• Trade secrets and unpublished patent applications.
• Software development tools and documentation.
• Pricing, sales data, prospects and customer lists, and information.
• Supplier and vendor lists and information.
• Terms of commercial contracts.
Notwithstanding the preceding paragraph, the term “Confidential Information” does not
33
include information that is or later becomes publicly available in a manner wholly
unrelated to any breach of this policy by you (in which case such information will cease
to be considered Confidential Information as of the date it enters the public domain).
If you are uncertain about whether something is Confidential Information, you should
treat it as confidential until you receive clarification from the Company that it is not
confidential. Confidential Information shall remain at all times the property of the
Company.
All personnel must be careful to discuss Confidential Information only when necessary
and appropriate in the context of business operations. Care should be taken to prevent
confidential discussions from being overheard by other clients or staff members who are
not involved. No one is permitted (unless such actions are part of the employee’s regular
professional duties) to distribute, remove, or make copies of any Company records,
reports, or other Confidential Information without prior approval from the Director of
Administration. This includes the electronic transfer of such information. Any
discussion of Confidential Information outside the property or similar violations of these
standards may result in disciplinary action up to and including immediate dismissal.
An employee’s obligation extends during the entire term of employee’s employment with
the Company and after the date of termination for any reason.
This sample policy defines what the company considers to be Confidential Information,
and notes that employees are required to sign a confidentiality agreement. This is so because
most employee handbooks these days contain explicit disclaimers clearly informing the
employee that the handbook is to provide only general information and is not intended as and
does not create, either expressly or by implication, a contract between the company and the
employee.
3. Contractual Obligations
Thus, if an employer wants to protect itself from an employee improperly disclosing
information the company deems confidential, it should, at a minimum, require all of its
employees to sign confidentiality agreements at the beginning of employment and as a condition
of employment, and be sure that the agreement clearly defines what it considers to be protectable
information. If the company’s needs change in terms of what it deems to be confidential, then it
should provide employees with updated confidentiality agreements.
One thing to keep in mind is that in Virginia, the courts look at Confidentiality
Agreements as a restraint of trade, and analyze similar to how they would analyze a non-compete
agreement – that is, they are strictly construed against the employer. See, e.g., Brainware, Inc. v.
Mahan, 808 F.Supp.2d 820, 828 (E.D. Va. 2011).
If the agreement is too broad, the court will not enforce it. “The protection afforded to
confidential information should reflect a balance between an employer who has invested time,
34
money and effort into developing such information and an employee’s general right to make use
of knowledge and skills acquired through experience in a filed or industry for which he is best
suited.” Id. Virginia Courts also will not simply strike the overbroad provision(s) in an
agreement in order to make it enforceable, or what is known as blue-pencilling. See, e.g.,
Lanmark Technology, Inc. v. Canales, 454 F.Supp.2d 524, 529 (E.D. Va. 2006).
C. Real Life Example 1: Brainware, Inc. v. Mahan
In Brainware, Inc., the plaintiff sued its former employee for breaching his employment
agreement, which contained a non-compete, a non-solicitation, and a non-disclosure clause. The
non-disclosure provisions at issue stated as follows:
Proprietary Information. The term “Proprietary Information” shall mean any
and all confidential and/or proprietary knowledge, data or information of the
Company. By way of illustration but not limitation, “Proprietary Information”
includes (a) trade secrets, other works of authorship, know-how, improvements,
discoveries, developments, designs and techniques (hereinafter collectively
referred to as “Inventions”); and (b) information regarding plans for research,
development, new products, marketing and selling, business plans, budgets and
unpublished financial statements, licenses, prices and costs, suppliers and
customers; and (c) information regarding the skills and compensation of
employees of the Company.
Recognition of Company’s Rights; Nondisclosure. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company’s Proprietary
Information ..., except as such disclosure, use or publication may be required in
connection with my work for the Company, or unless an officer of the Company
expressly authorizes such in writing.
While the defendant in that case argued that the non-disclosure provision was too broad
because it was not limited to trade secrets and was unlimited in time, the court disagreed that
such provisions made the non-disclosure agreement unenforceable. And, in fact, noted that
Virginia law suggests the opposite conclusion:
[The] breach of contract claims do not require a finding that the materials at issue
qualify as a trade secret, because the respective nondisclosure clauses apply to
any confidential or proprietary information owned or used by [plaintiff]. This
contractual language is broader than the definition of a trade secret under the Act
and, thus, the nondisclosure language may apply to the software code and other
proprietary materials at issue even if those materials are not covered by the Act.
Brainware, Inc., 808 F.Supp.2d at 828 (internal citations omitted). The court then went on to
why the non-disclosure provision was enforceable:
35
Moreover, Brainware’s non-disclosure agreement is narrowly limited to actual
confidential information and is not the kind that would prohibit defendant “from
telling a neighbor for the rest of [his] life anything about [plaintiff corporation],
including information that is not proprietary in nature.”
Id. At 828-829, quoting from Lasership, Inc. v. Watson, 79 Va, Cir. 205 (Fairfax 2009) (which
invalidated a non-disclosure provision that precluded disclosing to any person any information
concerning the plaintiff’s business.
The court ultimately held that because the non-disclosure provision struck an appropriate
balance between the defendant’s right to secure gainful employment and the plaintiff’s legitimate
interest in protection against direct competition by a former employee with confidential
information gained through his employment with the plaintiff, it was enforceable.
D. Real Life Example 2: Audio-Video Group, LLC v. Green
In Audio-Video Group, LLC v. Green, 2014 WL 793535 (E.D. Va. Feb. 26, 2014), the
court granted a temporary restraining order and a preliminary injunction against an employee
accused of breaching his confidentiality agreement and violating the Virginia Uniform Trade
Secrets Act (among other claims) after the employee left the company’s employ. Green worked
out of his home as a sales rep for AVG, and used a company-issued laptop. After AVG
terminated Green, it found on his laptop numerous invoices for audio video services performed
directly by Green himself, or indirectly through competitors of AVG, to actual or potential
customers of AVG. AVG also found at least one business solicitation by Green whereby he
would provide services to the potential customer, and the format used was the same one
developed and used by AVG, except that AVG’s name was replaced with Green’s name.
As a condition of his employment with AVG, Green signed a confidentiality agreement,
which provided in part:
1. Confidential Information.
Owner proposes to disclose certain of its confidential and proprietary information
(the “Confidential Information”) to recipient. Confidential Information shall
include all data, materials, products, technology, computer programs,
specifications, manuals, business plans, software, marketing plans, financial
information, and other information disclosed or submitted, orally, in writing, or
by any other media, to Recipient by Owner. Confidential Information disclosed
orally shall be identified as such within five (5) days of disclosure. Nothing
herein shall require Owner to disclose any of its information.
2. Recipient’s Obligations
A. Recipient agrees that the Confidential Information is to be considered
confidential and proprietary to Owner and Recipient shall hold the same in
36
confidence, shall not use the Confidential Information other than for the purposes
of its business with Owner, and shall disclose it only to its officers, directors, or
employees with a specific need to know. Recipient will not disclose, publish or
otherwise reveal any of the Confidential Information received from owner to any
other party whatsoever except with the specific prior written authorization of
Owner.
B. Confidential Information furnished in tangible form shall not be duplicated by
recipient except for purposes of this Agreement. Upon the request of Owner,
recipient shall return all Confidential Information received in written or tangible
form, including copies, or reproductions or other media containing such
Confidential Information, within ten (10) days of such request. At Recipient’s
option, any documents or other media developed by the Recipient containing
Confidential Information may be destroyed by Recipient. Recipient shall provide
a written certificate to Owner regarding destruction within ten (10) days
thereafter.
While the court did not go into any explicit analysis as to the whether the confidentiality
agreement was enforceable as written, it implicitly approved it by finding that the invoices found
on Green’s company-issued laptop was sufficient evidence to show that Green had breached his
duty to hold AVG’s confidential information in confidence and not use such information other
than for purposes of business with AVG. On that basis, the court concluded that AVG would
succeed on the merits of its claims for trade secret misappropriation. The court also found that
because the Confidentiality Agreement prohibited Green from duplicating AVG’s Confidential
Information and required him to return or destroy AVG’s Confidential Information upon request,
his retaining 23 project files after his termination supported AVG;s conversion claim.
******************************************************************************
As a practical matter, employers wishing to protect their confidential information,
including trade secrets, should, at a minimum, identify the policy in an employee handbook, and
require that all employees sign an appropriately-drafted confidentiality agreement.
Such agreements typically include the following key provisions:
• The persons or entities that are parties to the agreement.
• The business purpose of the agreement.
• The definition of confidential information.
• What is excluded from the definition of confidential information.
• All nondisclosure obligations.
• Any use and access restrictions.
• Any safekeeping and security requirements.
• The agreement’s term and the survival of nondisclosure obligations.
• Any provisions relating to the return or destruction of confidential information
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VI. USING SOCIAL MEDIA IN THE WORKPLACE
The use of social media in the employment context is an area where the law has not kept
up with life. Prior to the proliferation of social media, there was virtually a wall separating
employees’ personal lives from their professional lives. Social media has caused that wall to
crumble. An employer’s challenge is to maintain a secure workplace while respecting
employees’ privacy.
Consider that the internet is not only written in “permanent ink”, but its use is pervasive:
• 75% of the workforce in the United States uses social networking.
• Facebook has 2 billion active users, Twitter has 328 million, Snapchat has 300
million, and Instagram has 700 million users.
• 90% of 18-29 year old American adults use social media.
The use of social media can give rise to a number of liability concerns, including
harassment, hostile work environment, discrimination, defamation, and invasion of privacy.
Even if employees post harassing or derogatory information about coworkers away from the
workplace, for example, an employer may be liable for a hostile work environment if it was
aware of the postings, or if the harassing employee was using employer-owned devices or
accounts.
Enforcement agencies and legislators are increasingly paying attention to social media in
the workplace. For example, the National Labor Relations Board has, in the last several years
made a number of high profile decisions in cases relating to social media. The EEOC issued a
report in June 2016 regarding the study of harassment in the workplace, with a major focus on
harassment through social media. The EEOC held public meetings in December 2016 to discuss
how social media platforms affect the workplace in areas such as recruitment and hiring,
harassment, records retention, and litigation.
A. Statutory Protections Regarding Social Media
In 2015, Virginia enacted legislation regarding social media accounts of current and
prospective employees. Va. Code § 40.1-28.7:5. The statute provides as follows:
B. An employer shall not require a current or prospective employee to:
1. Disclose the username and password to the current or prospective
employee's social media account; or
2. Add an employee, supervisor, or administrator to the list of contacts
associated with the current or prospective employee's social media
account.
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C. If an employer inadvertently receives an employee's username and password
to, or other login information associated with, the employee's social media
account through the use of an electronic device provided to the employee by the
employer or a program that monitors an employer's network, the employer shall
not be liable for having the information but shall not use the information to gain
access to an employee's social media account.
D. An employer shall not:
1. Take action against or threaten to discharge, discipline, or otherwise
penalize a current employee for exercising his rights under this section; or
2. Fail or refuse to hire a prospective employee for exercising his rights
under this section.
E. This section does not prohibit an employer from viewing information about a
current or prospective employee that is publicly available.
F. Nothing in this section:
1. Prevents an employer from complying with the requirements of federal,
state, or local laws, rules, or regulations or the rules or regulations of self-
regulatory organizations; or
2. Affects an employer's existing rights or obligations to request an
employee to disclose his username and password for the purpose of
accessing a social media account if the employee's social media account
activity is reasonably believed to be relevant to a formal investigation or
related proceeding by the employer of allegations of an employee's
violation of federal, state, or local laws or regulations or of the employer's
written policies. If an employer exercises its rights under this subdivision,
the employee's username and password shall only be used for the purpose
of the formal investigation or a related proceeding.
Maryland likewise protects employees and prospective employees’ social media
usernames, passwords, and other means of accessing personal accounts:
Request for disclosure or user name, password, etc.
(b)(1) Subject to paragraph (2) of this subsection, an employer may not request or
require that an employee or applicant disclose any user name, password, or other
means for accessing a personal account or service through an electronic
communications device.
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(2) An employer may require an employee to disclose any user name, password,
or other means for accessing nonpersonal accounts or services that provide access
to the employer's internal computer or information systems.
Retaliation prohibited
(c) An employer may not:
(1) discharge, discipline, or otherwise penalize or threaten to discharge, discipline,
or otherwise penalize an employee for an employee's refusal to disclose any
information specified in subsection (b)(1) of this section; or
(2) fail or refuse to hire any applicant as a result of the applicant's refusal to
disclose any information specified in subsection (b)(1) of this section.
Downloading proprietary information or data
(d) An employee may not download unauthorized employer proprietary
information or financial data to an employee's personal Web site, an Internet Web
site, a Web-based account, or a similar account.
Permissible investigations
(e) This section does not prevent an employer:
(1) based on the receipt of information about the use of a personal Web site,
Internet Web site, Web-based account, or similar account by an employee for
business purposes, from conducting an investigation for the purpose of ensuring
compliance with applicable securities or financial law, or regulatory requirements;
or
(2) based on the receipt of information about the unauthorized downloading of an
employer's proprietary information or financial data to a personal Web site,
Internet Web site, Web-based account, or similar account by an employee, from
investigating an employee's actions under subsection (d) of this section.
Violations
(f)(1) Whenever the Commissioner determines that this section has been violated,
the Commissioner shall:
(i) try to resolve any issue involved in the violation informally by mediation; or
(ii) ask the Attorney General to bring an action on behalf of the applicant or
employee.
(2) The Attorney General may bring an action under this subsection in the county
where the violation allegedly occurred for injunctive relief, damages, or other
relief.
Md. Code Ann., Lab. & Empl. § 3-712 (West)
B. Social Media Use in Background Checks
Employers that use third-party background check service providers must be aware that
even social media background checks need to comply with the Fair Credit Reporting Act
(FCRA). The Federal Trade Commission’s May 9, 2011, Letter re: Social Intelligence
Corporation confirmed that it was acting as a consumer reporting agency by providing Internet
40
and social media background screening service for employers. Employers and consumer
reporting agencies must comply with FCRA and related regulations, including:
• Providing written notice that employer may use information in the report for decisions
related to their hiring or employment;
• Obtaining written consent to run the background check;
• Providing notice prior to adverse action based on information in the report; and
• Providing notice after taking adverse action.
If the employer does its screening in-house, it may not be subject to the FCRA.
However, it should still be wary of checking social media during the hiring process. The EEOC
has warned “that personal information-such as that gleaned from social media postings-may not
be used to make employment decisions on prohibited bases, such as race, gender, national origin,
color, religion, age, disability or genetic information . . . .” EEOC Press Release, Social Media
Is Part of Today’s Workplace but its Use May Raise Employment Discrimination Concerns
(Mar. 12, 2014). A public profile picture can reveal pregnancy status or sexual orientation, and
once viewed, that fact cannot be unlearned. Also bear in mind that social media information
might be incorrect, as was the case in Robins v. Spokeo, Inc.5 Depending on the scope and extent
of the search, even in-house searches might trigger FCRA requirements.
C. Best Practices for Using Social Media in the Hiring Process
• Do not request disclosure of social media usernames or passwords.
• Keep recruiting and hiring functions separate. Recruiters may view an applicant’s social
media profiles for legitimate reasons, such as verifying educational background. Avoid
having the hiring decision maker view the applicant’s social media profiles.
• Document what social media was reviewed, and by whom.
• Keep copies of all notices provided to applicants.
• Document the reasons for rejecting any applicants whose social media was reviewed. If
something on the applicant’s social media page was a reason for rejecting his or her
application, save a copy of the social media page as it appeared at the time of the
decision.
5 The latest decision in the Spokeo saga comes from the Ninth Circuit, issued on Aug. 15, 2017.
The initial case arose after Spokeo, Inc. published incorrect information about Robins’s age,
marital status, wealth, education level, and profession, and even included a photo of someone not
Mr. Robins. Robins sued under the Fair Credit Reporting Act alleging that Spokeo failed to
follow reasonable procedures to assure the accuracy of the information in his consumer report.
See Robins v. Spokeo, Inc., 867 F.3d 1108 (9th Cir. 2017).
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D. Social Media Policies in the Workplace
Key elements of an effective social media policy:
• Define “social media” and the scope and application of the policy;
• Specify that employees have no reasonable expectation of privacy when accessing social
media on company time and/or using company resources or devices, and that the
employer reserves the right to monitor social media use;
• Emphasize that the company’s policies regarding harassment, discrimination, retaliation,
confidentiality, trademark and logo usage, conflicts of interest, use of company resources,
and code of conduct all apply to social media activity, even when conducted off-site and
off duty; and
• Provide specific examples of prohibited conduct, such as disclosing trade secrets, and
posting discriminatory, pornographic or knowingly false content.
• Make sure the policy could not be misconstrued as discouraging “concerted activity”
under Section 7 of the National Labor Relations Act.
The following is an example of a social media policy, which the National Labor
Relations Board found to be entirely lawful:6
E. Sample Social Media Policy
Updated: May 4, 2012
At [Employer], we understand that social media can be a fun and rewarding way to share your life and
opinions with family, friends and co-workers around the world. However, use of social media also
presents certain risks and carries with it certain responsibilities. To assist you in making responsible
decisions about your use of social media, we have established these guidelines for appropriate use of
social media.
This policy applies to all associates who work for [Employer], or one of its subsidiary companies in the
United States ([Employer]).
Managers and supervisors should use the supplemental Social Media Management Guidelines for
additional guidance in administering the policy.
GUIDELINES
In the rapidly expanding world of electronic communication, social media can mean many things. Social
media includes all means of communicating or posting information or content of any sort on the
Internet, including to your own or someone else’s web log or blog, journal or diary, personal web
site, social networking or affinity web site, web bulletin board or a chat room, whether or not
associated or affiliated with [Employer], as well as any other form of electronic communication.
6 This particular policy was contained in the May 30, 2012 NLRB Report of the Acting General
Counsel Concerning Social Media Cases, Memorandum OM 12-59.
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The same principles and guidelines found in [Employer] policies and three basic beliefs apply to your
activities online. Ultimately, you are solely responsible for what you post online. Before creating
online content, consider some of the risks and rewards that are involved. Keep in mind that any of
your conduct that adversely affects your job performance, the performance of fellow associates or
otherwise adversely affects members, customers, suppliers, people who work on behalf of
[Employer] or [Employer’s] legitimate business interests may result in disciplinary action up to and
including termination.
Know and follow the rules
Carefully read these guidelines, the [Employer] Statement of Ethics Policy, the [Employer]
Information Policy and the Discrimination & Harassment Prevention Policy, and ensure your
postings are consistent with these policies. Inappropriate postings that may include discriminatory
remarks, harassment, and threats of violence or similar inappropriate or unlawful conduct will not be
tolerated and may subject you to disciplinary action up to and including termination.
Be respectful
Always be fair and courteous to fellow associates, customers, members, suppliers or people who work
on behalf of [Employer]. Also, keep in mind that you are more likely to resolved work- related
complaints by speaking directly with your co-workers or by utilizing our Open Door Policy than by
posting complaints to a social media outlet. Nevertheless, if you decide to post complaints or
criticism, avoid using statements, photographs, video or audio that reasonably could be viewed as
malicious, obscene, threatening or intimidating, that disparage customers, members, associates or
suppliers, or that might constitute harassment or bullying. Examples of such conduct might include
offensive posts meant to intentionally harm someone’s reputation or posts that could contribute to a
hostile work environment on the basis of race, sex, disability, religion or any other status protected by
law or company policy.
Be honest and accurate
Make sure you are always honest and accurate when posting information or news, and if you make
a mistake, correct it quickly. Be open about any previous posts you have altered. Remember that the
Internet archives almost everything; therefore, even deleted postings can be searched. Never post
any information or rumors that you know to be false about [Employer], fellow associates, members,
customers, suppliers, people working on behalf of [Employer] or competitors.
Post only appropriate and respectful content
• Maintain the confidentiality of [Employer] trade secrets and private or confidential
information. Trades secrets may include information regarding the development of
systems, processes, products, know-how and technology. Do not post internal reports,
policies, procedures or other internal business-related confidential communications.
• Respect financial disclosure laws. It is illegal to communicate or give a “tip” on inside
information to others so that they may buy or sell stocks or securities. Such online
conduct may also violate the Insider Trading Policy.
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• Do not create a link from your blog, website or other social networking site to a [Employer]
website without identifying yourself as a [Employer] associate.
• Express only your personal opinions. Never represent yourself as a spokesperson for
[Employer]. If [Employer] is a subject of the content you are creating, be clear and open
about the fact that you are an associate and make it clear that your views do not represent
those of [Employer], fellow associates, members, customers, suppliers or people working on
behalf of [Employer]. If you do publish a blog or post online related to the work you do or
subjects associated with [Employer], make it clear that you are not speaking on behalf of
[Employer]. It is best to include a disclaimer such as “The postings on this site are my own
and do not necessarily reflect the views of [Employer].”
Using social media at work
Refrain from using social media while on work time or on equipment we provide, unless it is work-
related as authorized by your manager or consistent with the Company Equipment Policy. Do not use
[Employer] email addresses to register on social networks, blogs or other online tools utilized for
personal use.
Retaliation is prohibited
[Employer] prohibits taking negative action against any associate for reporting a possible deviation
from this policy or for cooperating in an investigation. Any associate who retaliates against another
associate for reporting a possible deviation from this policy or for cooperating in an investigation will
be subject to disciplinary action, up to and including termination.
Media contacts
Associates should not speak to the media on [Employer’s] behalf without contacting the Corporate
Affairs Department. All media inquiries should be directed to them.
For more information
If you have questions or need further guidance, please contact your HR representative.
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