CHAPTER § 8.04 Whistleblower Protection Under the False Claims Act

• Jurisdiction: United States

§ 8.04 Whistleblower Protection Under the False Claims Act

[1] Introduction

In 1986, Congress added a whistleblower-protection provision to the FCA¹⁵⁶ in an effort to protect persons who investigate, initiate, testify in furtherance of, or otherwise assist in the discovery and prosecution of fraud. Currently, the text of 31 U.S.C. § 3730(h) states:

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, or agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter. . . . 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. An action under this subsection may be brought in the appropriate district court of the United States for the relief provided in this subsection.¹⁵⁷

The primary purpose of Section 3730(h) was to encourage qui tam disclosures and case filings by eliminating whistleblowers' fear of reprisal.¹⁵⁸ The Fraud Enforcement and Recovery Act of 2009 ("FERA") amended Section 3730(h) by adding further protections for contractors and subcontractors.¹⁵⁹ Prior to the amendments, the anti-retaliation provisions of the FCA prohibited discrimination against an employee "in the terms and conditions of employment by his or her employer because of lawful acts . . . in furtherance of an action under [the FCA]."¹⁶⁰ Under this statutory language, a defendant in an FCA retaliation action could argue that Section 3730(h) limited coverage only to employers and employees.¹⁶¹ However, FERA's 2009 amendments expanded the FCA's retaliation provisions to protect litigants who fell outside of the employee-employer relationship, including independent contractors.

The FCA was further amended by the Dodd-Frank Act enacted on July 21, 2010.¹⁶² Dodd-Frank expanded the FCA's whistleblower provisions to cover conduct by persons "associated" with a whistleblower.¹⁶³ It also broadened the scope of what constitutes protected activity under the FCA. Protected activity now includes lawful acts done "in furtherance of an action under this section" as well as "other efforts to stop 1 or more violations of this subchapter."¹⁶⁴ Finally, Dodd-Frank provided, for the first time, a 3-year statute of limitations for FCA retaliation claims.¹⁶⁵

Because Congress clarified that 31 U.S.C. § 3730(h) should not be applied retroactively, courts generally apply the version that was "valid at the time the incidents alleged in the Complaint occurred."¹⁶⁶

[2] Definitions

[a] Covered Employees

The FCA protects employees, contractors, or agents who file a false-claim lawsuit from being fired, demoted, threatened, or harassed by their employer for filing the suit. The Act further protects from retaliation those employees, contractors, or agents who investigate or report information in furtherance of possible claims under the Act.¹⁶⁷ The amended FCA also prohibits retaliation against employees, contractors, or agents who attempt to stop a violation of the FCA.¹⁶⁸

[b] Covered Employers

FCA applies to any person who knowingly makes a false record or files a false claim with the government for payment.¹⁶⁹ "Person" means any natural person, partnership, corporation, association, or other legal entity, including any state or political subdivision of a state.

[3] Civil Action

An employee, contractor, or agent may bring a claim for retaliation for activity protected by the FCA by filing suit in federal court. The suit may be brought where the defendant can be located, resides, transacts business, or where any act proscribed by the Act occurred.¹⁷⁰

The Act does not provide for administrative procedures as do other statutes with anti-retaliation provisions.

[a] Timing

Prior to the Dodd-Frank amendments in 2010, the FCA did not specifically provide for a time limit for bringing a retaliation action under the whistleblower protection provision of the Act. As a result, it was unclear whether the 6-year statute of limitation applicable to Section 3729 violations also applied to retaliation claims until the Supreme Court held that it did not in 2005.¹⁷¹ Accordingly, in the absence of a specific statute of limitations, courts applied the most analogous state-law limitations period.¹⁷²

The Dodd-Frank Act amended the FCA to establish a 3-year statute of limitations for FCA retaliation claims.¹⁷³ Few courts have considered the issue of whether the 3-year statute of limitations applies retroactively. However, the Supreme Court has generally refused retroactive application under similar circumstances,¹⁷⁴ and the Third Circuit has ruled that Section 3730(h)(3) applies prospectively and not retroactively.¹⁷⁵

[b] Complaint

FCA retaliation plaintiffs may bring their claims pursuant to Section 3730(h) as part of a qui tam action. There are no additional procedural requirements for filing a retaliation claim from the procedures listed for bringing an FCA action. However, FCA retaliation plaintiffs need not be relators. They may bring their Section 3730(h) claims directly, without filing a qui tam action, and are not required to involve the government.¹⁷⁶ Moreover, the heightened pleading requirement of Rule 9(b) does not apply to FCA retaliation claims. Rather, courts have found that an FCA retaliation plaintiff is only required to meet the notice-pleading standard of Rule 8(a).¹⁷⁷

[c] Relief

Under the FCA, the "employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole."¹⁷⁸ An employee who is discharged, demoted, harassed, or otherwise discriminated against in furtherance of such an action or as a consequence of the employee's whistleblowing activity is entitled to all relief necessary to make the employee whole.¹⁷⁹ Such relief may include reinstatement with seniority, double back pay plus interest, and compensation for special damages, including litigation costs and reasonable attorneys' fees.¹⁸⁰

[d] Arbitration

There is nothing in the Act that precludes the pre-dispute arbitration of retaliation claims.¹⁸¹

[4] The Prima Facie Case

In order to establish a prima facie case of retaliation under the FCA, a plaintiff must show: (1) he engaged in protected activity; (2) his employer knew he was engaged in such conduct, and; (3) his employer discriminated against him because of such protected conduct or that he otherwise suffered some adverse employment action.¹⁸²

[a] Protected Activity

A whistleblower may be found to have engaged in protected activity even if he has not filed a qui tam lawsuit or even developed a winning claim at the time of the alleged retaliation.¹⁸³

Instead, a plaintiff need only show that he engaged in acts "in furtherance of" matters that could reasonably lead to a viable FCA action or "other efforts" to stop one or more FCA violations.¹⁸⁴ Accordingly, an investigation may be sufficient to constitute protected activity, even if the employee does not realize that he may file a qui tam action at the time he conducts the investigation.¹⁸⁵

Similarly, complaints—even those made to the employer and not to the federal government—may constitute protected activity under the Act.¹⁸⁶ The only requirement is that the protected activity relate to the plaintiff's concern about false or fraudulent claims. Concerns about an employer's compliance with the law generally are insufficient to constitute protected activity within the meaning of the Act. Instead, the employee's internal report must at least be related to activity violative of the FCA.¹⁸⁷

[b] Knowledge of the Protected Activity

To establish the second prong of an FCA retaliation claim, a plaintiff must show that his employer knew of the protected activity at the time it discriminated against him.¹⁸⁸ In order to satisfy this prong, some courts require a plaintiff to have informed his employer that he planned to inform the government of alleged violations of the law or to file a qui tam action.¹⁸⁹ Most courts, however, do not so require. This is primarily for two reasons. First, requiring a plaintiff to inform his employer that he is contemplating bringing a qui tam action is inconsistent with the fact that a plaintiff need not even know about the FCA when he engages in protected activity. As the D.C. Circuit has stated:

[S]ince there is no requirement that a plaintiff know his investigation could lead to a False Claims Act action, there likewise can be no requirement that he "suggest[ ] to defendant" that he is contemplating such an action. A plaintiff who need not even have heard of the False Claims Act can hardly be required to inform his supervisor that he "intend[s] to utilize his allegations in furtherance of an action under that Act."¹⁹⁰

Second, as another court put it, "[i]t would be unrealistic to expect an employee to accuse a supervisor of committing fraud when that supervisor has the power to demote him or her or to influence her advancement in the company."¹⁹¹ Instead, the employer must simply know that the plaintiff is engaged in activity that reasonably could lead to an FCA case.¹⁹²

[c] Discrimination Because of the Protected Activity

The final prong of an...