President Lincoln signed the False Claims Act (FCA) in response to scoundrels who sold the Union Army “gunpowder” kegs full of sawdust, uniforms sewn with used rags that disintegrated when wet, and boots made of cardboard that fell apart when worn. To incentivize citizens to protect the government, the FCA provided a bounty to individuals (“relators”) who brought successful lawsuits against those who had defrauded, or made false claims to, the government.
This gave birth to qui tam actions in the United States. For the non-Latin scholars out there, qui tam is short for qui tam pro domino rege quam pro si ipso in hac parte sequitir — that is, “who sues on behalf of the king as well as for himself.” The FCA has evolved since Lincoln. Currently, it provides for treble damages, with a percentage of those damages payable exclusively to the relator: 15-25% if the government joined in prosecuting the case and to 25-30% if the relator handled the case without government support.
Relators have often been insiders: whistleblowers in modern parlance. But, the FCA now includes anti-retaliation provisions in addition to those bounty percentages: “[a]ny employee, contractor, or agent shall be entitled to all relief necessary to make that [individual] whole if [he or she] 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 … in furtherance of an action under [the FCA] ….” 31 U.S.C. § 3730(h).
FCA cases are on the rise. 2014 was a record year, with the government collecting $5.69 billion in FCA settlements and judgments. In addition to defense contractors, FCA suits have been increasingly aimed at health care providers seeking reimbursement from Medicare and other government-run health care programs and financial institutions in connection with federal mortgage and housing programs. This is not just about gunpowder kegs or boots anymore.
Indeed, it is important enough that you should test your FCA anti-retaliation IQ:
1. Does the FCA’s anti-retaliation provision protect every employee who reports to a government agency that his or her employer attempted to defraud the government?
To be protected under the FCA, the employee’s report of alleged fraud must be objectively reasonable and made in good faith in furtherance of a filed FCA claim or a claim that could be legitimately filed. An employee who “played the part of Chicken Little” and “imagined fraud but lacked any objective basis for that belief” does not engage in protected activity. In fact, an “employee who fabricates a tale of fraud to extract concessions from the employer, or who just imagines fraud but lacks proof, legitimately may be sacked.” See, e.g., Lang v. Northwestern Univ., 472 F.3d 493, 495 (7th Cir. 2006) (affirming dismissal of FCA retaliation case) (internal citation omitted), quoted in U.S. ex rel. Marshall v. Woodward, Inc., 85 F. Supp. 3d 973, 987 (N.D. Ill. 2015).
2. Is an employer who terminates, demotes or otherwise disciplines an employee who assisted the government in an FCA investigation or litigation per se liable under the FCA anti-retaliation provision?
For an employer to be liable under the anti-retaliation provision of the FCA, the employer (i) must have had knowledge that the employee engaged in a protected activity and (ii) retaliated against the employee “because of” the protected activity. That is the same language as in the Age Discrimination in Employment Act (“ADEA”) suggesting a “but for” test. Gross v. FBL Fin. Servs., 557 U.S. 167 (2009) (statutory language “because of” in ADEA dictates “but for” standard); U.S. ex rel. Marshall v. Woodward, Inc., 85 F. Supp. 3d 973, 985 (N.D. Ill. 2015) (same under FCA). Similar to defending claims for violations of anti-discrimination and other anti-retaliation employment statutes, employers have a valid defense to an FCA retaliation claim that the employment decision was made for legitimate, non-discriminatory and non-retaliatory reasons.
3. Is a supervisor involved in terminating or disciplining an employee subject to individual liability for violations of the anti-retaliation provisions of the FCA?
The 2009 FCA Amendments deleted the modifying language “by his or her employer” in the anti-retaliation provision. The majority of district courts hold that this Amendment does not give rise to individual liability because it simply reflects the fact that the FCA was amended to protect retaliation against contractors and agents. Aryai v. Forfeiture Support Assocs., 25 F. Supp. 3d 376, 385-87 (S.D.N.Y. 2012) (no individual liability). But, a few courts, however, have left open the question of whether an individual may be liable. Fitzsimmons v. Cardiology Assocs. of Fredericksburg, Ltd., No. 3:15CV72, 2015 WL 4937461, at *8 (E.D. Va. Aug. 18, 2015)(possible individual liability).
4. Is an employer immune from claims of alleged post-employment retaliation, such as failure to re-hire or make certain payments to former employees?
The majority of courts have held that the plain language of the FCA does not create liability for post-employment conduct. However, some district courts have determined that a post-employment FCA retaliation claim is cognizable. See Fitzsimmons, 2015 WL 4937461, at *6-7 (collecting cases). Significantly, post-employment retaliation claims are permissible under Title VII. Robinson v. Shell Oil, 519 U.S. 337 (1997) (negative reference given on former employee may be actionable retaliation).
5. Is there a “duty speech” exception under the FCA?
There is case law elsewhere in the retaliation realm holding that employees who report because it is their duty to make such reports are not engaged in protected activity and may not claim retaliation for such reports. Garcetti v. Ceballos, 547 U.S. 410 (2006) (no First Amendment protection for whistleblowing assistant DA whose duty included making those reports). Consistent with that premise, some FCA decisions have held “fraud-alert” employees “must make clear their intentions of bringing or assisting in an FCA action in order to overcome the presumption that they are merely acting in accordance with their employment obligations.” McBride v. Peak Wellness Ctr., Inc., 688 F.3d 698, 704 (10th Cir. 2012); U.S. v. KForce Gov’t Sols., Inc., No. 8:13-CV-1517-T-36TBM, 2014 WL 5823460, at *10-11 (M.D. Fla. Nov. 10, 2014) (collecting cases).
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President Lincoln not only bequeathed the False Claims Act. He also bequeathed key advice on assisting clients in complying with that and every other law as well as defending their interests when litigation ensues:
Dear Sir: Yours of the 24th. asking ‘the best mode of obtaining a thorough knowledge of the law’ is received. The mode is very simple, though laborious, and tedious. It is only to get the books, and read, and study them carefully. …Work, work, work, is the main thing.
The Collected Works of Abraham Lincoln edited by Roy P. Basler, Volume IV, “Letter to John M. Brockman” (September 25, 1860), p. 121.
Thus, at Honest Abe’s direction, it’s important to keep up-to-date and read and study those FCA decisions to stay on top of this significant subset of retaliation law.