A federal judge has ordered Chipotle Mexican Grill to turn over attorney-client communications because the Company failed to meet a “good-faith” compliance requirement under federal law. This is a FLSA collective action case where the theory was that the chain misclassified a group of workers as exempt from overtime under the executive exemption of 29 USC 213(a). The case is entitled Scott v. Chipotle Mexican Grill Inc. and was filed in federal court in New York.
Magistrate Judge Netburn denied the request for a protective order on Company communications with its attorneys; the Court noted that one Chipotle affirmative defense was that it relied on administrative authority in classifying the plaintiffs as exempt and another was that it did not act willfully.
The Judge concluded that it had been shown that Chipotle had the advice of counsel on the issue, which completely undermined the use of the attorney-client privilege because the law that the Company was using to argue for the protection of the privilege required a showing that the employer acted in “good faith” to comply with the law.
The Court stated that “where the defendant has clearly benefited from the advice of counsel on the very issue on which it asserts good faith, it puts its relevant attorney-client communications at issue and thereby waives its privilege.” The Judge ordered the documents produced in three weeks. The Company had argued that the plaintiffs were not entitled to the discovery of the communications in order to determine if Chipotle had communicated with its attorneys on classifying the employees, because that would undermine attorney-client privilege.
The Judge did not see it that way. She found that the Company had placed the attorney-client communications “at issue” because two of its affirmative defenses relied on 29 USC 259/260, both of which required that the employer acted in “good faith” to meet its obligations under the FLSA. The Judge observed that even if Chipotle did not explicitly mention “good faith” in its defenses, it relied on statutes that required it.
The seemingly scary lesson learned here is that if counsel’s advice was relied upon in the classification analysis of employees, those communications could be subject to discovery. I wonder, though, if that is, ab initio, a bad thing. If the communications make a credible case for exemption, that might actually be a good thing for the defendant.