Australia's Fair Work Commission orders production of external investigation report despite privilege claim 

What you need to know

• In determining whether legal privilege attaches to an external investigation report, courts will focus on an employer's operative purpose at the time the investigation is commissioned and the report used. How such an investigation is framed by external lawyers will not be determinative.
• If the investigation is launched pursuant to an internal disciplinary process to determine policy breaches and inform disciplinary outcomes, its dominant purpose may be characterised as disciplinary rather than for legal advice.
• To sustain a legal advice privilege claim, employers need cogent evidence from the actual decision makers about the purpose and must align the investigation structure with that purpose.
• Disclosures made in outcome communications to the respondent can amount to waiver. Statements that reveal evidentiary bases or investigative reasoning, especially when implementing disciplinary outcomes, risk undermining confidentiality.
• The risk of waiver increases where outcome or appeal decision communications substantively reference or rely on the investigation report to justify the disciplinary outcomes.

What you need to do

• Define and document the investigation’s dominant purpose at the outset, capturing decision maker intent contemporaneously.
• Structure the process to reflect the stated purpose, including clear scopes, instructions, and separation between disciplinary processes and legal advisory work.
• To maintain a privilege claim, limit outcome communications to what is strictly necessary for procedural fairness. Avoid summarising evidence, reasoning, or quoting the report. Instead, communicate necessary findings at an appropriate level of generality.
• Maintain confidentiality protocols for the report and legal advice, and ensure only those with a need to know have access.

FWC orders production of external investigation report despite privilege claim

A recent Fair Work Commission decision has significant implications for the maintenance of client legal privilege over documents produced in the course of external workplace investigations.

In James Crafti v Cohealth Limited [2025] FWC 3285, Deputy President Faroque ordered production of an external investigation report and associated materials, notwithstanding the employer’s claim of legal advice privilege. The decision provides practical guidance on the dominant purpose test and imputed waiver in the context of disciplinary investigations conducted alongside legal advice.

Background

The matter comprises two related proceedings being heard together: a dispute under section 739 of the Fair Work Act 2009 (Cth) (FW Act) and the dispute settlement procedure in the relevant enterprise agreement, and a subsequent unfair dismissal application.

The discrete issue determined at this stage of the proceedings was whether the Commission should order production of an external investigation report and related documents where the employer asserted client legal privilege over those materials.

Cohealth, a not-for-profit community health organisation, commenced an internal investigation following a client’s verbal complaint about an interaction with employee, Mr Crafti, a Community Health Worker at its Innerspace service. Cohealth notified Mr Crafti of the details of the complaint and that he would be placed on alternative duties during the investigation. In the course of the internal investigation, four witness statements were obtained from staff and put to Mr Crafti for his response.

Mr Crafti, who was represented by a union, challenged the adequacy of the evidence gathered in the witness statements and raised concerns regarding procedural fairness. He refused to participate in an interview with Cohealth, which ultimately led to the notification of a dispute under the enterprise agreement.

Cohealth then sought legal advice from a law firm, who in turn engaged counsel to conduct an external investigation under terms of reference framed for the purpose of providing legal advice.

Counsel then proceeded to interview witnesses and the respondent, before providing a report to the law firm. The law firm then provided legal advice to Cohealth.

Cohealth notified Mr Crafti of the outcome of the external investigation. In doing so, it disclosed counsel’s determinations and identified evidentiary bases for particular findings in relation to the allegations. In the same letter, Mr Crafti was also informed of the disciplinary outcome (a written warning) in respect of the substantiated allegations and that a performance improvement plan would also be imposed. A subsequent internal appeal conducted by Cohealth’s General Counsel upheld the outcome by reference to the “investigation report and supporting documents.”

Cohealth later dismissed the employee for non-compliance with directions related to the performance improvement plan and insufficient improvement.

In the proceedings, the employee sought production of the external investigation report and related materials under section 590(2)(a) of the FW Act. Cohealth asserted client legal privilege on the basis of legal advice privilege and denied waiver.

Applicable principles on client legal privilege

Deputy President Faroque applied the Full Bench guidance in Stephen v Seahill Enterprises Pty Ltd [2021] FWCFB 2623, including that:

• the party asserting privilege bears the onus of establishing it;
• privilege attaches where the document was prepared for the dominant purpose of obtaining legal advice; and
• privilege may be lost by imputed waiver if the holder’s conduct is inconsistent with maintaining confidentiality, assessed through the lens of fairness and the nature and extent of disclosure.

Relevantly the legal advice purpose must be the "ruling, prevailing, paramount or most influential purpose" and not merely the "primary" or "substantial" purpose.

Dominant purpose: legal advice versus disciplinary decision-making

The Commission held that there were multiple purposes for the external investigation.

While the engagement letter and solicitor evidence stated that the external investigation was commissioned to enable legal advice, the Commission focused on the employer’s operative purpose. It found that Cohealth had a concurrent and substantial disciplinary purpose to determine potential Code of Conduct and policy breaches and, if substantiated, to impose disciplinary action in accordance with its policies and disciplinary procedure. The Commission found that the disciplinary purpose was evidenced by five factors:

1. In commencing the internal investigation, Cohealth’s operative purpose was disciplinary: namely, to determine whether Mr Crafti breached the Code of Conduct and to discipline him if so.
2. Cohealth’s Workplace Grievance and Misconduct Policy contemplated misconduct allegations being addressed, including via external investigation.
3. Email correspondence indicated a disciplinary purpose for engaging an “external independent investigator,” driven by concerns about the internal process and the gravity of the allegations.
4. The same email showed the continuity of the disciplinary purpose in commissioning the external investigation, stating that Cohealth would “continue the investigation” and “finalise” it through the external investigator.
5. The notice of allegations letter which required Mr Crafti to respond to the allegations in an interview with counsel, warned that substantiated allegations could lead to disciplinary action up to dismissal. It also attached relevant policies, evidencing the ongoing disciplinary purpose behind engaging counsel.

Crucially, there was no direct evidence from a Cohealth decision-maker that Cohealth’s dominant purpose in authorising the external investigation was to obtain legal advice. On the totality, the Commission was not satisfied that the advice purpose was the dominant purpose.

Imputed waiver: disclosure beyond what is necessary for procedural fairness

The Commission also addressed waiver. Applying Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1, the question is whether the privilege holder’s conduct is inconsistent with maintaining confidentiality in the privileged communication.

Even if privilege had attached, the Commission held it was waived. Cohealth’s outcome letter went beyond disclosing bare findings. It identified the evidentiary bases relied on by the external investigator and thereby revealed elements of the reasoning. Those disclosures were made in the course of imposing a disciplinary sanction and performance improvement plan, rather than to provide the employee a further pre-outcome opportunity to respond. The Commission also noted the Full Bench’s observation in Stephen v Seahill that procedurally fair workplace investigations intended to be acted upon and communicated are not ordinarily confidential to the employer.

Key takeaways

• Privilege will not attach unless the employer can discharge the onus of proving the investigation was undertaken for the dominant purpose of obtaining legal advice. This is judged by the employer’s actual purpose, not merely the law firm’s terms of reference or even the legal advisor's purpose (which in this case was accepted to be for the purposes of providing legal advice).
• Where a disciplinary purpose is operative, parallel legal involvement may not suffice to establish privilege, particularly absent direct evidence from employer decision-makers.
• Disclosing findings and evidentiary bases in outcome or appeal communications may amount to imputed waiver, especially where the disclosures support the imposition of disciplinary outcomes.
• Employers seeking to preserve privilege should carefully structure investigations, separate the advisory and disciplinary processes into distinct stages, and carefully draft communications to avoid unnecessary disclosure of the content or reasoning of external investigation reports.