Attorney-Client Privilege Protections And Non-Employees: Criteria For The Functional Equivalent Test

Although federal courts recognize that the attorney-client privilege can protect communications between corporations and independent contractors who are the "functional equivalent" of employees, they disagree about the evidence required to meet the functional equivalent test. A federal district court in Pennsylvania recently joined the debate, adopting a "broad, practical approach" and rejecting the "stringent, multi-factor" tests used by some courts.

"The case law has not yet clearly established what the criteria for being deemed a 'functional equivalent of an employee' are so that privilege protection will attach to communications. It is an evolving area of the law," says Edna S. Epstein, Chicago, author of The Attorney-Client Privilege and the Work-Product Doctrine.

The Genesis of the Functional Equivalent Doctrine

The functional equivalent doctrine protects communications between organizations and non-employees who are the functional equivalent of employees. The doctrine emerged after Upjohn Company v. United States, in which the United States Supreme Court rejected the control group test, which had only protected communications with those who could control corporate action.

The Supreme Court held that the status of an employee is not a consideration for determining whether the attorney-client privilege applies, instead opting for a caseby- case analysis of the reasons for the communications. The Court did not address whether the privilege could apply to thirdparty contractors or consultants.

The U.S. Court of Appeals for the Eighth Circuit was the first federal appellate court to address whether communications between corporate counsel and a corporation's independent consultant could fall within the scope of the attorney-client privilege. In In re Bieter Company, a party challenged a privilege claim on communications between counsel and a contractor hired to provide real estate advice. The court in Bieter stated, "when applying the attorney-client privilege to a corporation or partnership, it is inappropriate to distinguish between those on the client's payroll and those who are instead and for whatever reason employed as independent contractors."

According to the Eighth Circuit, communications may fall within the privilege as long as the independent consultant is the functional equivalent of an employee. The court found that the real estate consultant was intimately involved on a daily basis in the client's business and "was in all...