In Texas employment lawsuits, sometimes both a manager and the company are named in a lawsuit. In such situations, the employer typically provides a lawyer for the management official. "Provides" generally means pay for. Almost always, the same defense lawyer represents both the manager and the company. But, the manager’s interest and the employer’s interest are not always the same. In a recent case, the New Jersey Supreme Court looked at the arrangement used by the employer and found some ethical problems.
The employer told the employee which attorneys they could hire, agreed to pay for them, but said the employer could cease payments at any time. The company told the employees they could hire their own attorney if they wished. The matter was criminal. The state Attorney General was the plaintiff. The AG’s office objected to this arrangement and tried to disqualify the counsel for the employees.
The New Jersey Supreme Court disapproved of the "take it or leave it" nature of the attorney representation plan. Relying on several ethical rules, common to most states, the court found 1) that in the future, the employee would have the right to pick his/her own lawyer at the employer’s expense, 2) that the employer could not stop paying the lawyer without court approval, 3) the counsel could not withdraw without court approval, and 4) specifically held that the employer could not terminate payments simply because the employer did not like the tack the employee and his counsel were taking. See In re State Grand Jury.
Texas has a similar ethical rule to New Jersey’s: no one but the client can tell the attorney how or what to do in a litigation. In some situations, both the company and a lower level manager are named in a lawsuit. The employer provides the same lawyer for both he company and the manager. In such situations, who is the client? Sharing the same lawyer works well for some situations, but not for others. What happens, for example, when the company has some liability regarding a policy which the manager faithfully followed? That is, the company’s policy is at fault, but not the manager. Or, what happens if a higher level manager uttered some discriminatory statement about which the lower level manager has personal knowledge? These are conflict of interest situations. But, the company’s lawyer has strong financial interest not to raise these potential conflicts. If the company’s layer raises these potential issues, he risks losing a valuable client for the law firm.
When you have a conflict of interest situation, the company’s lawyer should quit. He cannot represent both parties any longer. If the company then provides a separate lawyer for the lower level manager the company cannot control the tactics employed by that lawyer. And, relying on this New Jersey decision, the company cannot terminate the lawyer once the representation heads south for the employer.