Courts Narrow Liability for Retaliation Claims.

• Author: Roybal, Scott F.
• Position: Ethics Corner

Over the past year, several courts have limited the circumstances under which an employee may recover for violation of the federal False Claims Act's anti-retaliation provision, which prohibits an employer from disciplining an employee who reports an FCA violation.

Courts held that for the employer to be liable: the person making the disciplinary decision for the employer must have actual knowledge of the employee's False Claims Act complaint (at least where the decision-maker has made a good faith inquiry into the reasons for the discipline); the alleged retaliation must have occurred during the employee's course of employment and not afterwards; the employee must show that their complaint was the main reason for the discipline as opposed to just one contributing factor; and the employer's executives, including a CEO and sole owner, cannot be held liable in their individual capacities.

In Armstrong v. Arcanum Group, the Tenth Circuit Court of Appeal, which covers Colorado, Kansas, Oklahoma, Utah and Wyoming, dismissed the plaintiff's (Armstrong's) retaliation claim against the defendant (Arcanum), a staffing agency, because there was no proof that her supervisor at Arcanum knew about her FCA complaint when he terminated her.

Arcanum had placed Armstrong with the Bureau of Land Management. Thereafter, she complained to the bureau that its employees were doctoring records. The bureau demanded that Arcanum remove Armstrong. Her supervisor asked the government agency for an explanation, but received an email stating only, "[she] is not working out and we would like to terminate her effective immediately."

Shortly thereafter, Armstrong was terminated. The court explained that a deliberate ignorance theory (i.e., sticking your head in the sand) could not be used to impute knowledge of Armstrong's complaint to her supervisor, as is required for a retaliation claim, because he tried to learn why the Bureau of Land Management was unhappy with her performance and was rebuffed.

In Potts v. Center for Excellence, the Tenth Circuit drew additional lines around the False Claims Act's anti-retaliation provision when it dismissed a claim because the alleged retaliation occurred after the employee had already been terminated. The plaintiff (Potts) resigned her position with the defendant (the Center for Excellence), an operator of nonprofit colleges, because she believed that organization lied to maintain its accreditation. Importantly, accreditation was...