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Courts have struggled with whether an entity’s attorney-client privilege can protect communications between the entity’s lawyer and a nonemployee who has information the entity’s lawyer needs to best advise the entity. The nonemployee might be a former employee. But increasingly in recent times, the nonemployee is an individual who was never an entity employee. Corporations and other entities have incorporated nonemployees in their economic enterprises in all sorts of roles—roles employees may have held in the past. Many courts have accepted that the privilege can apply to communications involving former employees.

When faced with nonemployees who are not former employees, some courts have used a functional equivalent analysis to decide whether the entity’s privilege protects nonemployee communications. Some courts have applied this doctrine so that a nonemployee cannot be a representative of the entity client unless the nonemployee is the functional equivalent of an entity employee, focusing on whether the nonemployee has traits, that, in these courts’ sometimes misguided opinion, are traits of employees. Some courts have required that the nonemployee have an even narrower set of traits that, if required of employees, would be incompatible with the accepted reach of the privilege for employees.

These approaches are flawed. A functional equivalent analysis that focuses on required traits of an entity employee in an employment law sense is becoming more and more useless as each day of the twenty-first century unfolds. The reality of entities of the twenty-first century is that nonemployees often have roles that employees had in the past. In addition, traits of employees, especially in post-pandemic times, may not match an employee definition based on earlier times. In any case, characteristics of the nonemployee that are important for employment law purposes generally do not relate logically with the entity’s attorney-client privilege and its underlying rationale. In addition, the relationship of the functional equivalent analysis, as many courts have applied it, to agency principles is murky at best.

A rational functional equivalent analysis consistent with the goals and rationale of the entity attorney-client privilege must focus on two issues. First, is the nonemployee a source of information integral to the entity lawyer’s representation of the entity? Second, does the nonemployee have a significant relationship with the entity and the matter—a relationship of closeness similar to the relationship an employee has to an employer? The focus is not on whether the nonemployee is the functional equivalent of an employee. The question is whether the nonemployee’s relationship with the entity is the functional equivalent of an employee’s relationship with the entity. What this sort of relationship might look like will vary from case to case. Economic entities of the postpandemic twenty-first century are many and varied; their method of staffing and pursuing their economic goals are varied as well. A focus on the significance of the relationship provides consistency of analysis for all nonemployees, whether they be former employees or other types of nonemployees. The analysis is consistent with the goals of the entity privilege and can be applied to the many forms entities take in the future.

Original Publication Information

125 Penn. State L. Rev. 465 (2022)