What California Employers Need to Know About Investigations and Attorney-Client Privilege
A sexual harassment complaint can turn into a legal minefield fast, and not just because of what happened. In many cases that we have noticed, nothing happened; the employee was about to be terminated and turned the attention to the manager instead; we dealt with two such cases in the past year.
How your company responds afterward can decide whether your investigation stays confidential and whether you have a real defense if the case ends up in court. Courts have been actively weighing in on these questions, including a major 2026 ruling that expands how much of an internal investigation an employer can be forced to hand over. We’ve been receiving a lot of questions about this from clients, and as San Diego sexual harassment lawyers, here’s what we think you need to know:
What Should You Do the Moment a Complaint Comes In?
How the first 48 hours are handled shapes everything that follows, including whether a court later views your response as reasonable.
– Take the complaint seriously, no matter how it’s phrased or who raises it, and whether it is credible or not (people can surprise you so provide the complaining employee the benefit of the doubt). Anonymous reports still have to be evaluated, as anonymity alone isn’t a reason to skip investigating.
– Don’t decide guilt or innocence on day one. The only immediate call is whether the allegation, if true, would violate policy or law, and whether any interim protective steps are required immediately.
– Lock down evidence: emails, texts, chat messages, security footage, badge or login records.
– Make it clear to everyone involved that retaliation is off the table. Retaliation claims are often easier for a plaintiff to win than the underlying harassment claim, so don’t let this slide. Do not ever even think of retaliation.
– Decide who’s going to investigate before anyone starts asking questions. As you’ll see below, that one decision controls whether anything you learn is ever protected from disclosure.
Does Hiring a Lawyer Automatically Protect Your Investigation?
No, and this trips up a lot of employers. Attorney-client privilege doesn’t attach just because a lawyer is technically involved. California courts ask whether the “dominant purpose” of the engagement was to provide legal services, not simply to gather facts as a routine HR matter.
The key case here is City of Petaluma v. Superior Court (2016), where the city hired outside counsel to investigate a harassment complaint, and the engagement letter specifically stated the lawyer would gather facts but wouldn’t provide legal advice on what to do next. The employee argued that meant no attorney-client relationship existed and thus no privilege. The Court of Appeal disagreed, holding that a lawyer doesn’t have to provide advice on next steps for privilege to apply, as long as the dominant purpose of the investigation was to provide legal services in anticipation of litigation.
In plain terms: if you want your investigation to be privileged, retain outside counsel specifically for that purpose and document why – not just because it feels safer to have a lawyer in the room. If a non-lawyer HR investigator runs the process as ordinary personnel business, there’s usually no privilege to begin with. The interview notes and the report are just business records, and they’re discoverable, which in plain English means all of your private files have to be handed over to the other side.
The Privilege Trap: How Employers Lose Protection Over Their Own Investigation
Here’s the catch. Even a properly privileged investigation often gets produced anyway – not because the employer did anything wrong going in, but because of what happens later in the lawsuit. Under FEHA, an employer defending a harassment claim can raise the “avoidable consequences” defense: that it took reasonable steps to prevent and correct harassment, the employee unreasonably failed to use those steps and using them would have prevented at least some of the harm. (State Dept. of Health Services v. Superior Court (2003)). Proving that defense almost always means pointing to your investigation as proof you acted reasonably, which puts the investigation itself on the table.
The foundational case is Wellpoint Health Networks, Inc. v. Superior Court (1997), which held that an employer can’t rely on its investigation as a defense while also withholding the underlying materials as privileged.
In plain terms: you can’t use your investigation as a shield in court while also treating it as a secret: pick one.
The 2026 Case Every California Employer Should Know
In April 2026, the Sixth Appellate District decided Paknad v. Superior Court (2026). The employer had outside counsel investigate a sexual harassment complaint, then leaned on the thoroughness of that investigation to support its avoidable consequences defense while trying to keep the investigator’s reports and interview notes privileged.
The Court of Appeal wasn’t having it. It held that the waiver reached not just the attorney-client communications, but the attorney’s core work product too – including the investigator’s factual findings and anything relevant to how thorough or adequate the investigation actually was. In the court’s words: “the Superior Court should disclose to petitioner any information relevant to the scope and adequacy of the attorney’s investigations – irrespective of whether such information would otherwise qualify for core attorney work product protection.”
Even the normally well-protected “this is our attorney’s internal thinking” material isn’t safe if you plan to tell a jury your investigation was thorough and independent. Because this ruling only came out in April 2026, don’t assume your existing playbook already accounts for it.
One Way to Protect Yourself: Separate the Fact-Finding From the Legal Advice
There’s a workaround worth knowing about. In Guardian Storage Centers, LLC v. Simpson (2012), the Court of Appeal held that where a non-attorney (like an HR manager) conducts the internal investigation, and the employer relies only on that non-privileged file, the employer doesn’t automatically waive its separate attorney-client privilege over confidential legal advice provided behind the scenes by outside counsel.
In plain terms: have HR (or a professional investigator) handle the fact-finding and keep any separate legal risk assessment or strategy conversation with counsel in its own confidential channel. That way, if the factual file eventually has to be produced, your lawyer’s legal advice doesn’t automatically go with it.
What About the Employee Who’s Accused?
Private employers aren’t bound by constitutional due process; that only applies to government action, not private employment decisions, unless a union or individual contract says otherwise. An at-will employee generally doesn’t have a legal right to a hearing or an appeal before discipline.
That stated, a fair process is still the smart move. It leads to more accurate outcomes, cuts down on wrongful termination and defamation exposure, and is what California regulators expect from a defensible investigation.
– Don’t presume guilt from the accusation alone, and hold off on discipline until the investigation wraps up, unless there’s an immediate safety issue or the perpetrator admits fault. The best thing to do is to place the alleged perpetrator on leave while the investigation continues so that you do not risk more incidents and you protect your staff, which is of primary importance: think of them first.
– Provide the accused a real chance to respond and name their own witnesses. An investigation that never asks for the accused’s side is vulnerable no matter who loses.
– Where you can, keep interim measures neutral rather than punitive. A schedule or location change is easier to defend than an unpaid suspension imposed before any findings are made.
– Know your standard of proof: investigators decide whether it’s more likely than not that the conduct happened, not proof beyond a reasonable doubt.
– Don’t let an accusation become cover for treating the accused unfairly based on a protected characteristic. That’s its own separate FEHA problem.
Remember, too, that California employers can lawfully terminate someone based on a good-faith, reasonably supported belief that harassment occurred, even if that belief later turns out to be wrong. The real exposure comes from using a harassment finding as pretext for something else, or from a process so thin that a jury doubts you took it seriously.
Meeting California’s Investigation Standard
This isn’t just best practice – it’s codified. FEHA’s implementing regulations require employers to maintain a written prevention policy guaranteeing an “impartial and timely” investigation by “qualified personnel,” with the investigation itself being “fair, timely, and thorough,” giving “all parties appropriate due process,” and reaching “reasonable conclusions based on the evidence collected.”
– Use an impartial investigator with no stake in the outcome and no reporting relationship that creates the appearance of bias.
– Interview the complainant, the accused, and relevant witnesses, and document everything as you go.
– Investigate anonymous complaints and remote-work conduct the same as anything else; Neither is a free pass to skip the process.
– Provide a complaint channel that doesn’t force someone to report straight to their own supervisor – a hotline, direct HR contact, or ombudsperson works.
– Be upfront that confidentiality “will be kept … to the extent possible,” but don’t promise the investigation will be completely confidential – that overpromise is a compliance problem of its own. A
And don’t forget training: employers with five or more employees must provide at least two hours of interactive harassment-prevention training every two years for supervisors, and at least one hour every two years for everyone else, with new hires trained within six months. Regulators treat this as part of the baseline “reasonable steps” obligation, and skipping it undercuts your defense before a complaint ever comes in.
What This Means for You
The rules around workplace harassment investigations aren’t standing still. Paknad alone significantly widens what you can be forced to hand over if you lean on your investigation as a defense, and the accused employee’s rights matter just as much as the complainant’s when it comes to building a process that actually holds up. The short version: decide who investigates and why before you start. If you plan to use your investigation as a shield later, assume you’ll be handing over the file – plan the structure accordingly from day one. And whichever way the facts break, provide both the complainant and the accused a fair, well-documented process; that’s what keeps you defensible whether the case settles quietly or ends up in front of a jury.
If you’re a California employer facing a sexual harassment complaint — or you just want your investigation process reviewed before you need it — our team at San Diego Biz Law is here to help. If you have any questions, call us at (619) 793-4827; we handle cases all over California.
