When workplace issues such as harassment, discrimination, or retaliation arise, employers often seek quick and efficient solutions. Professional employer organizations (PEOs), third-party HR administrators, and external investigation providers offer convenience and efficiency, but relying on them to conduct employment investigations can mean that the investigation is not privileged, meaning it is discoverable in future litigation.

Why Privilege Matters in Investigations

Attorney-client privilege is one of the most important safeguards during sensitive workplace investigations. It ensures that communications and findings remain confidential and cannot be disclosed during litigation. When investigations are conducted by legal counsel, this privilege typically applies. However, PEOs, HR vendors, and third-party investigators are not attorneys, and their involvement does not create privilege in the same way. 

As a result, any reports, emails, or notes generated by the employer and sent to the vendor during the investigation, and any summaries or findings of investigations by the vendor are discoverable in litigation. Losing this protection can expose internal deliberations and investigative details of the employer that they may have assumed were confidential. 

The Hidden Risks of Outsourcing Investigations

Outsourcing investigations to non-attorney vendors introduces several risks beyond the loss of privilege. Employers should understand that they remain legally responsible for compliance with employment laws, even when a third party conducts the investigation or offers strategic guidance on employment issues with current employees.

If the vendor mishandles the process or fails to follow state-specific requirements, the liability falls squarely on the employer, not the vendor, unless there is a specific indemnity clause in the contract with the vendor. Second, outsourcing reduces control over the investigative process. Third party investigation resources often rely on standardized procedures that may not align with your organization’s culture, policies, or strategy. 

Preserving Privilege

Internal HR teams can work under the guidance of attorneys, or outside counsel can lead the investigation directly in order to preserve privilege. Legal counsel brings the experience needed to navigate complex employment statutes and tailors the investigative steps to an organization’s unique needs. 

While some may argue that involving counsel in workplace investigations is a standard business function and therefore not privileged, this interpretation overlooks the critical distinction between routine HR activity and legal risk management. When counsel is engaged specifically to guide an investigation for the purpose of assessing potential liability, ensuring compliance, and preparing for possible claims, the communication is made in anticipation of litigation.

Courts have recognized that privilege applies when legal advice is sought for risk mitigation through an anticipatory legal function, not merely for operational or administrative input. These functions go beyond ordinary business operations and are inherently legal in nature, making the communications privileged.

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