You and Employer Sharing Attorney? Uh-Oh

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One Lawyer Representing Both Company and Individual Defendants?

A person who wears one watch always knows what time it is.
A person who wears two watches is never certain.”

– Old Saying about Conflicts of Interest

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ACTUAL CASE HISTORIES*: Patrick was an SVP of Regulatory Affairs for a pharmaceutical firm. He was alerted by HR that two complaints had been received alleging a VP on his team was bullying team members. After an investigation confirmed the facts of the complaints, and Patrick consulted with the General Counsel, he directed HR to terminate the VP for misconduct.

Three months later, Patrick and the company were both named as defendants in a lawsuit by the VP alleging unlawful discrimination. The company arranged for it and Patrick both to be defended by its outside law firm. Several months later, a settlement was reached. Patrick was glad to have the matter behind him. To his great dismay, he soon learned that it was not, and may never be.
 

That was because in the next two years Patrick was recruited by three larger pharmaceutical firms for higher-level and better-paying positions. However, each time he learned from the recruiters that he did not pass their background screening due to the lawsuit. So, the lawsuit “career-blemish” would always be an obstacle “ahead” of him, and never “behind.”

LESSON TO LEARN: First, what is a “Conflict of Interest?” It is a situation in which a person’s attention and loyalty are “torn” in two different directions. A conflict of interest is not a sign of poor character or misconduct, but rather a result of facts and circumstances that need to be (a) disclosed, and (b) resolved, or (c) knowingly waived.

When a lawyer or law firm represents both employer and employee in this situation, there is always a conflict of interest, because each client’s interests are different: To an employer-defendant, the interests in this situation are primarily financial. To an employee-defendant, the risk is primarily reputational and career-centered. The critical question is this: which of these two different risks will the lawyer most faithfully seek to reduce, eliminate, protect? The defendant who has a long-term relation with the law firm, or the defendant without any real relation with it?

It is a fact of life that for an employee, being sued related to your work can result in long-term reputational and career damage. Within hours, if not minutes, the existence and allegations of the claim will likely be on internet search engines, and thus likely to come up in every future pre-employment background screening. And that is serious career risk.

And, it is not just one conflict of interest, but several, because each turn of events in a lawsuit may present a different set of facts and circumstances that may represent a new and different conflict of interest. In Patrick’s case, above, by settling the lawsuit early, the company saved on its legal expense and had no discernible loss of reputation because of it. Patrick may have been better served by not settling but rather by its lawyer pursuing different paths, and his doing so may have been resulted in his reputation and career being untarnished, as explained below.

WHAT YOU CAN DO: If you are named a defendant in a lawsuit related to your job, consider these thoughts:

1. Lawyers are required by ethics rules to identify and divulge to their clients any Conflict of Interest, and those that might be expected to arise. In addition to legal ethics rules, almost every legal malpractice insurance policy requires that law firms maintain a “conflicts avoidance” system to be used before taking on a new case. Even Judges are bound by these rules, too. It is viewed that just that one share of stock could “divide” an attorney’s or a judge’s objectivity, and affect how he or she might lean toward one side or the other of the dispute.

2. However, common sense reminds us that “Who pays the fiddler calls the tune.” Accept the simple fact that, if along with your employer, you are named a defendant in a workplace lawsuit your interests will surely differ from those of your employer. And accept, too, that, if your employer’s attorney(s) also represents you, you will quite likely fall prey to a conflict of interest.

3. For the employee, not Having to Pay Legal Fees Seems Great. While not having to pay legal fees sure is good for an employee, in the final analysis it may be a very bad deal. And, besides, there are other, safer, wiser ways to accomplish not having to pay legal fees, and asking for that first, is nothing less than good judgment.

4. Attorneys who simultaneously represent an employer and an employee almost always require the employee to sign a waiver of conflicts of interest. Why? Because (a) they know that what they are doing is a conflict of interest, (b) indeed, the conflict of interest is serious, (c) yet they want to engage in that conflict of interest anyway, and (d) not be held accountable.

Why? First, because they are naturally driven by the interests of their large, “paying” client’s interests (a) to obtain full knowledge of all you know, (b) and what your testimony will be, (c) have some “control” over your future testimony, and (d) the ability to affect, limit or modify your exercise of your critical strategic options throughout the lawsuit.

Second, the attorney’s knowing what you know and what you will say gives her or him an opportunity to weave it into a narrative that is best for their larger, and longer term, client, almost always at your expense. Third, representing two clients will very likely result in more legal fees.

An illustration: Suppose the CEO directed you to terminate an employee, and the employee then sued the company and you, personally. Might the CEO want to divert accountability away from him or her and over to you? Might the company attorney try to do that for the CEO? Probably. That is an example of a conflict of interest you likely would not anticipate, and may not even notice, either, so surely you could not have “knowingly waived” it.

5. As lawsuits move forward, new facts and circumstances often arise, and this creates new conflicts of interest. It is just the nature of lawsuits that the known facts, events and circumstances at the beginning of the lawsuit grow different and larger, and take on new meaning, as the case progresses, especially in the process called “discovery,” during document sharing and depositions. As this set of facts changes, many new conflicts of interest often arise.

6. The most critical conflict of interest arises during Settlement. If the plaintiff in the lawsuit agreed to settle the lawsuit for a sum of money, is that good for the employer? Almost always, yes, because it limits their costs. Is that good for you? Almost never, without some other way to show you did nothing wrong, if you ever leave this employer – and you likely will – you may well be nearly unemployable because your being named a defendant in this lawsuit will always come up in your “background check,” to your considerable detriment.

7. There are several ways to pursue both of your dual objectives, namely (a) eliminating (or at least reducing) your legal defense costs, and (b) avoiding being harmed by a Conflict of Interest. Here are just a few: 

    1. Ask your employer to advance (not reimburse) the fees of your own, separate defense attorney in light of possible conflict of interest that your attorney has identified and cautioned against;
    2. When it comes down to settlement talks, ask that your personal attorney be permitted to raise and address your primary concerns, including among them (a) the reputational harm already done, as well as (b) the likely career harm that will arise in the future.
    3. Insist that, for you, there be a separate Stipulation of Dismissal based not on negotiation, but on recognition that, with the full facts before the plaintiff, he or she has concluded that the offense was not a result of your actions or inactions. This is something that could later be shown to recruiters or to future interviewers, to your substantial benefit.
    4. Indeed, the plaintiff could even be persuaded to eliminate you as a defendant, and do so on official Court documents, before the lawsuit is settled, which at times is a feasible alternative. This, too, could reduce or eliminate reputational and/or career risk in your future.
    5. As to settlement, consider insisting that you will never settle, but would rather go to trial and see what the jury has to say as to your personal culpability. That is rarely viewed by a plaintiff, or a plaintiff’s lawyers, as a good option for them or their client.
There are other steps and measures to take, as well, in light of the unique facts and circumstances of your matter. “Where there is a will, there is a way.” But rarely do Joint Counsel have the individual employee’s interests in mind, the inclination, the motivation or even the insight, to make such suggestions when it is not necessarily in their “primary” client’s interests.

In Summary . . .

If an employer and an employee are both named as defendants in a workplace lawsuit, often one lawyer or law firm will be hired to represent both. That is very risky to the employee because (a) the employer generally sees such suits in terms of financial risk, (b) while the employee experiences it as reputational and career risk, and almost inevitably, even if subconsciously (c) the lawyers tend to be far more attentive to the employer’s client’s interests than to the employee’s. Such conflicts of interest can have very negative and long-lasting damage. But, forewarned is forearmed. Give some thought to the many steps you could take to “enjoy” both (a) not personally paying legal fees, but (b) also protecting your own very important personal interests.

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*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the State of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Results obtained by some clients have no bearing on results obtained by other clients. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.

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