Ethical Issues In Employment Law

I. INTRODUCTION

The topic of ethical issues in employment law practice divides into two subtopics:

What ethical rules govern lawyers in the practice of employment law?

Since most employment lawyers are also employers or employees, what ethical issues arise in lawyers' handling of employment matters within the lawyers' own offices?

Both areas of law are undergoing significant development in Pennsylvania and elsewhere.

II. ETHICAL ISSUES IN EMPLOYMENT PRACTICE

1. Overview

   1. Ethical issues in employment practice divide into two subcategories:

      Ethical issues that arise in a lawyer's decision to undertake or continue a representation.

      Ethical issues that arise during employment litigation.

      2. The Pennsylvania Rules of Professional Conduct apply to practice within Pennsylvania courts and the federal courts in Pennsylvania (e.g., F.R.Civ.P. E.D. Pa. 83.6(IV)(B)).

      3. A lawyer may not represent a client, and must withdraw from the representation of a client, if the representation will result in violation of the Rules of Professional Conduct or other law. Rule 1.16(a); Bayges v. Southeastern Pennsylvania Transportation Authority, 887 F. Supp. 108 (E.D. Pa. 1995).

      B. Participation in a Client's Personnel Actions

      In DeStefano v. Henry Michell Company, 2000 WL 433993 (E. D. Pa.), the Eastern District of Pennsylvania dismissed a complaint against a law firm for aiding and abetting discrimination on the basis of the law firm's transmittal of a letter on behalf of the employer that terminated plaintiff's employment. The Court held that (1) liability under 43 P.S. 955(e) did not arise solely from the scope of a law firm's agency relationship; (2) the law firm had not intended to aid the client's discriminatory behavior; (3) the law firm had not shared a common purpose with the client to retaliate against the plaintiff.

      C. Undertaking or Continuing Representation

   1. Rule 1.7(a) - Direct conflict of interest

      1. Rule 1.7(a) provides:

      A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:

      the lawyer reasonably believes that the representation will not adversely affect the relationship with the other client; and

      each client consents after consultation.

      b. Rule 1.7(a) articulates the general rule that loyalty to a client prohibits a lawyer from undertaking a representation directly adverse to that client without that client's consent. It should be self-evident that a lawyer may not represent two opposing parties in the same litigation. But Rule 1.7 also covers many less obvious conflicts. Thus, a lawyer ordinarily may not act as an advocate against an entity represented by the lawyer in another matter, even if the two matters are wholly unrelated. On the other hand, simultaneous representations in unrelated matters for clients whose interests are only generally adverse, such as competing economic enterprises, does not require consent of the respective clients. But see Maritrans GP Inc. v. Pepper, Hamilton & Scheetz, 529 Pa. 241, 602 A.2d 1277 (1992). See generally, Comment to Rule 1.7.

      c. A client may consent to representation notwithstanding a conflict. However, under both Rule 1.7(a) and Rule 1.7(b), when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer involved cannot properly ask for the client's agreement to the conflicting representation and cannot provide representation on the basis of the client's consent. (The lawyer considering the conflicting representation only has to analyze the conflict as would a disinterested lawyer; the lawyer need not seek an opinion from a disinterested lawyer.) When more than one client is involved, the lawyer has to resolve conflict issues as to each client. At times, it may be impossible to make the disclosure necessary to obtain consent. See Comment to Rule 1.7(a); in these circumstances, a lawyer must refuse the conflicting representation. As a practical matter, consents under Rule 1.7(a) are difficult to obtain.

      d. Although Rule 1.7(a) does not require written consent, it is vitally important to document consent by obtaining the client's consent in writing after the lawyer makes a full written disclosure of the adverse representation and the basis for the reasonable belief that the adverse representation will not affect the relationship with the other client.

      2. Rule 1.7(b) - Indirect conflict of interest

      a. Rule 1.7(b) provides:

      A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:

      the lawyer reasonably believes that the representation will not be adversely affected; and

      the client consents after full disclosure and consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

      b. Rule 1.7(b) applies where a lawyer is constrained not to consider, recommend, or carry out an appropriate course of action because of the lawyer's other responsibilities or interests. As with Rule 1.7(a), the lawyer has to evaluate conflicting obligations from the viewpoint of a disinterested lawyer. See Comment, Rule 1.7 and the above discussion of Rule 1.7(a).

      3. Comment

      Rule 1.7's prohibitions against present conflicts of interest are explicit; possibly because of the explicit nature, few reported employment law cases deal with these rules. Rule 1.7(a) applies when two clients of a lawyer are on opposite sides in the matter in which the attorney advised them. See, e.g., Ragan Henry Broadcast Group, Inc. v. Hughes, 1992 WL 151308 (E.D. Pa.). Rule 1.7(b) applies when one lawyer may represent multiple parties in a litigation (e.g., where an employment lawyer represents an employer and key employees who are sued in an employment claim). In this situation, the lawyer should explain the implications of the common representation, the advantages and the risks involved, and should obtain written consent from each client.

      4. Joint defenses

      If a lawyer cannot predict the outcome of a common representation, the lawyer may recommend that each party aligned on the same side retain separate counsel. In this situation, a Joint Defense Agreement can allow the parties to share defense materials without waiving the privilege attaching to use and disclosure of these materials. A sample Joint Defense Agreement for non-compete litigation is attached as Appendix A. The parties never used this Joint Defense Agreement, since counsel for the corporate defendant agreed to take over the defense of all parties.

      5. Indemnification

      a. Where a lawyer represents an individual employee who is named in an employment claim, the lawyer should request indemnification from the corporate defendant. Pennsylvania corporate law generally provides for indemnification of employees named in lawsuits if allowed by the corporate by-laws, if an individual is sued by reason of the fact that the individual was a representative of the corporation. 15 Pa. C.S. 1741. The indemnification covers both liabilities to opposing parties and legal fees. There is an absolute right to indemnity if the defense of the litigation is successful.

      b. The rules governing indemnity are subject to a number of limitations, including the following:

      To qualify for indemnity, the individual must have acted in good faith and in a manner that the individual reasonably believed to be in, or not opposed to, the best...