The FCA Protects Whistleblowers from Employer Retaliation

By Jonathan DeSantis and Sherrie Savett

Employers frequently retaliate against whistleblower employees through a variety of adverse actions, including termination, demotion, failure to promote, or reassignment to a less desirable position.   Employers will often attempt to justify retaliation by creating an excuse that is unrelated to an employee’s attempts to uncover or report fraud when the employer’s real motivation is to punish the employee or stop the employee from further investigation.

Retaliation has a chilling effect on employees who would otherwise be willing to report fraud under the False Claims Act (“FCA”).  This is particularly troubling given that employees are often in the best position to learn about, investigate, and disclose fraud.

Fortunately, the FCA contains strong employment protections for whistleblowers.[1]  The FCA provides:

Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of [the FCA].

31 U.S.C. § 3730(h)(1).  The retaliation provision is “designed to protect persons who assist the discovery and prosecution of fraud and thus to improve the federal government’s prospects of deterring and redressing crime.”[2]  To impose liability against an employer for improper retaliation under the FCA, an employee must show that “(1) he engaged in protected activity, (2) his employer, or the entity with which he has contracted or serves as an agent, knew about the protected activity, and (3) he was retaliated against because of his protected activity.”[3]

The FCA Retaliation Provision

The scope of the retaliation provision is wide, but not unlimited.  It protects employees from retaliation based on both (1) furtherance of an action under the FCA and (2) an attempt to stop a violation of the FCA regardless of whether the employee, another individual, or the government pursues an action under the FCA.   Importantly, under the first category, the employee need not personally bring a lawsuit under the FCA’s qui tam provisions but must merely act in furtherance of an FCA lawsuit.  For example, if the government files its own FCA lawsuit, an employee’s lawful conduct in support of the lawsuit would be protected.[4]  Additionally, an employee’s investigation of potential fraud is protected under the statute, as is filing an internal complaint with an employer.[5]  Likewise, even if an employee unsuccessfully attempts to pursue an FCA claim as a qui tam relator, this does foreclose application of the anti-retaliation provision subject to the below discussion on whether the employee had a reasonable belief of fraud. [6]

However, courts have also limited the scope of the retaliation provision by requiring that an employee have a subjectively and objectively reasonable belief that the employer engaged in fraud.[7]  Put differently, “the employee must undertake the protected conduct with the actual and reasonable belief that the employer is committing fraud against the government.”[8]

Remedies for Retaliation

The FCA also provides the remedies available to employees who are the victims of retaliation:

Relief . . . shall include reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.

31 U.S.C. § 3730(h)(2).  Importantly, the remedies provision utilizes the mandatory language “shall,” and courts generally hold that if a plaintiff successfully pursues a retaliation cause of action, a district court must award the available remedies.[9]

Collaboration Between Qui Tam Lawyers and Employment Lawyers

Retaliation claims also present an opportunity for qui tam lawyers and employment lawyers to collaborate.  Retaliation claims can be brought in the same lawsuit as the underlying FCA claims or in a separate lawsuit.  In either case, qui tam lawyers ordinarily do not practice employment law and will require the assistance of employment lawyers with respect to retaliation claims.    Employment lawyers are often the first to know about potential FCA claims since employees are often fired or suffer other adverse employment actions due to investigating or reporting fraud.  Likewise, qui tam lawyers often learn about potential retaliation claims through evaluation and pursuit of claims for substantive violations of the FCA.   Employment lawyers and qui tam lawyers can mutually benefit by working together in such circumstances.

[1] State false claims also contain similar protections against retaliation for whistleblowers. E.g. Minn. Stat. § 181.932 (Minnesota); Fla. Stat. § 68.088 (Florida); 740 Ill. Comp. Stat. 175/4(g) (Illinois).

[2] U.S. ex rel. Schweizer v. Oce N.V., 677 F.3d 1228, 1237 (D.C. Cir. 2012) (internal quotation marks omitted); see also Jones-McNamara v. Holzer Health Sys., 630 F. App’x 394, 397 (6th Cir. 2015) (explaining that the purpose of the retaliation provision is “[t]o protect employees who expose fraud against the federal government”).

[3] U.S. ex rel. Bias v. Tangipahoa Par. Sch. Bd., 816 F.3d 315, 323 (5th Cir. 2016); see also United States ex rel. Uhlig v. Fluor Corp., 839 F.3d 628, 635 (7th Cir. 2016) (“[A] plaintiff must prove that he was engaged in protected conduct and was fired “because of” that conduct.”).

[4] See Schweizer, 677 F.3d at 1237.

[5] E.g. Young v. CHS Middle E., LLC, 611 F. App’x 130, 132 (4th Cir. 2015) (“Protected activities include collecting information about a possible fraud.”) (internal quotation marks omitted); U.S. ex rel. Grenadyor v. Ukrainian Vill. Pharmacy, Inc., 772 F.3d 1102, 1109 (7th Cir. 2014) (explaining that “retaliation for filing an internal complaint . . . is forbidden”).

[6] E.g. ABC v. NYU Hosps. Ctr., 629 F. App’x 46, 49 (2d Cir. 2015) (“The failure of [the plaintiff’s] qui tam action does not necessarily preclude him from seeking protection from retaliation under § 3730(h).”).

[7] See United States ex rel. Uhlig v. Fluor Corp., 839 F.3d 628, 635 (7th Cir. 2016) (“To determine whether an employee’s conduct was protected, we look at whether (1) the employee in good faith believes, and (2) a reasonable employee in the same or similar circumstances might believe, that the employer is committing fraud against the government.”) (internal quotation marks omitted); Jones-McNamara, 630 F. App’x at 399 (imposing a “reasonable belief requirement”).

[8] U.S. ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699, 715 (7th Cir. 2014) (internal quotation marks omitted).

[9] See Townsend v. Bayer Corp., 774 F.3d 446, 465 (8th Cir. 2014) (discussing whether “shall” in § 3730(h)(2) imposes a mandatory requirement and citing related cases).

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By | 2018-03-27T02:12:17+00:00 February 1st, 2017|False Claims Act Information|