Independent Workplace Investigations: A New Jersey Appellate Court Clarifies When Privilege May Be Lost

A few months ago, I wrote about the University of Michigan’s decision to retain an outside law firm to investigate allegations within its athletic department  [link to that blog]. At the time, I discussed why many employers—particularly those confronting allegations of harassment, discrimination, or executive misconduct—turn to independent outside counsel to conduct sensitive workplace investigations. Independence promotes credibility, helps ensure fairness, and often provides management with legal advice while minimizing accusations of bias.

A recently published decision from the New Jersey Appellate Division demonstrates that retaining outside counsel is only part of the equation. Employers must also understand when the work performed by investigating attorneys remains protected by the attorney-client privilege and work-product doctrine—and when those protections may be waived.

In C.S. v. Brick Recycling Company, the Appellate Division provides important guidance for employers, attorneys, and human resources professionals navigating internal investigations.

The Investigation

The plaintiff alleged that he had been subjected to workplace sexual harassment by a supervisor. After receiving the complaint, the company’s president retained outside employment counsel to conduct an independent investigation. The attorney conducted witness interviews, evaluated credibility, reviewed documents, and ultimately produced a detailed forty-five-page investigative report concluding that the harassment allegations were substantiated. The employer voluntarily produced the final investigative report during discovery but withheld various related materials, including attorney notes;  draft reports;  communications with company management; engagement letters;  draft agreements; and other investigative materials.  The plaintiff sought production of those additional documents. The trial court ordered all of the withheld documents produced, concluding they were not protected by privilege. The Appellate Division disagreed.

The Court Did Not Expand Privilege—But It Didn’t Eliminate It Either

The court reaffirmed the New Jersey Supreme Court’s landmark decision in Payton v. New Jersey Turnpike Authority, 148 N.J. 524 (1997), which has governed workplace investigation privilege issues for nearly thirty years. The key principle remains unchanged: Whether communications are privileged depends largely upon why the attorney was performing the investigation. If outside counsel is primarily providing legal advice or preparing for anticipated litigation, the attorney-client privilege and work-product doctrine may apply. If, however, counsel is simply functioning as an investigator carrying out the employer’s routine obligation to investigate workplace complaints, many materials may be discoverable. The answer is rarely all or nothing.

The Biggest Lesson: Waiver Matters

Perhaps the most significant portion of the opinion concerns waiver. Like many employers defending harassment claims, Brick Recycling asserted that it acted reasonably in responding to the employee’s complaint. In other words, it intended to rely upon the quality and thoroughness of its investigation as part of its defense. That strategic decision carried consequences. When an employer affirmatively argues that it conducted an effective investigation, it may waive privilege as to materials sufficiently related to proving—or disproving—that defense.  The Appellate Division emphasized that waiver is not automatic or unlimited. Instead, trial courts must perform a meticulous document-by-document, page-by-page, and even line-by-line review to determine: whether attorney-client or work-product protections apply;  whether privilege has been waived; and whether portions should be redacted because they contain confidential legal advice unrelated—or only “tenuously related”—to the employer’s affirmative defense.  That nuanced approach protects legitimate legal advice while ensuring plaintiffs receive discovery necessary to evaluate an employer’s claimed defense.

Draft Reports May Receive Greater Protection

One particularly interesting portion of the opinion addresses draft investigative reports. Although the court stopped short of creating a bright-line rule, it questioned whether draft reports should generally be discoverable, analogizing them to draft expert reports that ordinarily remain protected because they reveal attorney mental impressions, legal theories, and evolving analysis.  That observation will likely become an important consideration in future employment litigation.

Practical Lessons for Employers

The decision offers several practical takeaways.

1. Hire Independent Investigators When Appropriate Serious allegations involving executives, supervisors, sexual harassment, discrimination, retaliation, or other sensitive misconduct often warrant the use of experienced outside employment counsel. Independent investigations enhance credibility with employees, juries, and courts. As I discussed in my earlier article regarding the University of Michigan investigation, independence itself often strengthens confidence in both the investigative process and its conclusions.
2. Clearly Define Counsel’s Role One recurring issue in these cases is whether counsel is acting as a lawyer or merely as a fact finder. Engagement letters should clearly state that counsel has been retained to provide legal advice in anticipation of potential litigation—not simply to perform a routine HR investigation. That distinction may become critical if privilege is later challenged.
3. Assume the Final Report May Eventually Be Produced. Many employers expect investigative reports to remain confidential forever. That assumption can be dangerous. If the employer later relies on the investigation to establish that it exercised reasonable care under the Law Against Discrimination, portions—or all—of the investigation may become discoverable. Employers should therefore prepare investigative reports carefully, professionally, and with the expectation that a judge—or perhaps a jury—may eventually read them.
4. Separate Legal Advice from Factual Investigation Whenever possible, legal advice should be documented separately from factual findings. Mixing litigation strategy, legal opinions, and investigative facts within the same document unnecessarily complicates privilege analyses and increases the likelihood of disputes over redactions.
5. Maintain Detailed Privilege Logs. The Appellate Division encouraged employers to prepare detailed privilege logs that allow courts to evaluate privilege claims without revealing protected information. A thorough privilege log can significantly improve an employer’s chances of preserving legitimate protections during discovery.

A Balanced Decision

Importantly, this is not a plaintiff-friendly or employer-friendly decision. Instead, the Appellate Division recognized competing interests. Employees pursuing discrimination and harassment claims deserve meaningful discovery concerning whether an employer actually investigated their complaints appropriately. At the same time, employers must remain free to seek confidential legal advice from counsel without automatically forfeiting every privileged communication simply because an attorney conducted the investigation. The court’s solution—a careful, document-specific privilege analysis rather than an “all-or-nothing” approach—strikes an appropriate balance.

Final Thoughts

Internal workplace investigations are among the most consequential decisions an employer can make after receiving allegations of harassment, discrimination, retaliation, or other misconduct. Conducting a prompt, thorough, and impartial investigation remains essential. But employers should also recognize that how an investigation is structured may be just as important as what it ultimately concludes. Retaining experienced employment counsel, clearly defining counsel’s legal role, thoughtfully separating legal advice from investigative facts, and carefully considering whether to rely on the investigation as part of the employer’s defense can significantly affect whether privileged communications remain protected. As this decision demonstrates, privilege is not automatically lost—but it is not absolute either. Employers who understand those boundaries before litigation begins will be in a much stronger position when litigation eventually arrives.