Image of Sixth Circuit Construes FCA to Prohibit Post-Employment Retaliation

Sixth Circuit Construes FCA to Prohibit Post-Employment Retaliation

 

When Congress enacted the whistleblower protection provision of the False Claims Act, it recognized that “few individuals will expose fraud if they fear their disclosures will lead to harassment, demotion, loss of employment, or any other form of retaliation.”   S. Rep. No. 99-345, at 34 (1986).  Although Congress intended to provide robust protection to whistleblowers opposing or trying to stop fraud against the government, some courts have weakened the whistleblower protection provision of the False Claims Act by construing it to prohibit only retaliatory acts that occurs during an employment relationship.  For example, the Tenth Circuit held in Potts v. Ctr. for Excellence in Higher Educ., Inc., 908 F.3d 610, 618 (10th Cir. 2018) that the FCA’s anti-retaliation provision excludes relief for retaliatory acts occurring after the employee has left employment.

This narrow construction of § 3730(h) gives fraudsters free rein to retaliate and intimidate qui tam relators helping the government prosecute their qui tam actions where the relators no longer work for the companies that defrauded the government.  A company defending a qui tam action could blacklist the relator or bring a retaliatory lawsuit against the relator to try to force the relator to abandon their qui tam action.

On March 31, 2021, however, the Sixth Circuit rejected Potts and in a well-reasoned opinion that effectuates the purpose of the FCA’s whistleblower protection provision, the court held in United States ex rel. Felten v. William Beaumont Hospital that the FCA protects former employees alleging post-termination retaliation.

Felten’s FCA Claim

While working for his then-employer William Beaumont Hospital, Felten filed a qui tam action alleging that Beaumont paid kickbacks to various physicians and physicians’ groups in exchange for referrals of Medicare, Medicaid, and TRICARE patients. In 2018, Beaumont Health paid $84.5 million to resolve allegations under the FCA of improper relationships with referring physicians, resulting in the submission of false claims to the Medicare, Medicaid and TRICARE programs.

Felten subsequently amended his complaint to add allegations of retaliation that took place after Beaumont terminated his employment.  He alleged that he had been unable to obtain a comparable position in academic medicine because Beaumont “intentionally maligned [him] . . . in retaliation for his reports of its unlawful conduct,” thereby undermining his employment applications to almost forty institutions.  The district court granted Beaumont’s motion to partially dismiss Felten’s allegations of post-employment retaliation, holding that the FCA’s anti-retaliation provision does not extend to retaliation against former employees.

Sixth Circuit Applies Robinson v. Shell Oil

Reversing the district court, the Sixth Circuit construed the FCA consistent with the roadmap for statutory interpretation laid out by the Supreme Court in Robinson v. Shell Oil Co., 519 U.S. 337 (1997), where the Court held that the Civil Rights Act of 1964 bars discrimination against current and former employees.

  • First, there is no temporal qualifier accompanying “employee” in 3730(h) suggesting that it refers solely to current employees. Instead, the reference to “any employee” can apply to any employee who has ever been employed by a particular employer. Further, half of the retaliatory acts proscribed by the statute – “threatened,” “harassed,” and “discriminated” – are not restricted to a current employment relationship and can refer to former employees.  And the FCA’s catch-all category of retaliation – discrimination in the “terms and conditions of employment” — does not limit actionable retaliation to personnel actions taken while the whistleblower works for the employer.  Examples of terms and conditions of employment that can persist after an employee’s termination include non-competition and confidentiality restrictions and discontinuance of severance pay.
  • Second, the statutory and dictionary definitions of “employee” reveal that the FCA’s anti-retaliation provision protects former employees. Although the FCA does not define the word employee, the term “employed” can refer to someone who “is employed” or “was employed.”
  • Third, other aspects of the statutory framework suggest that it protects former employees. For example, one of the remedies authorized under the statute is reinstatement, which is available only to a former employee (only someone who has lost a job can be reinstated). Likewise, the FCA’s authorization of “special damages sustained as a result of the discrimination” provides a remedy for misconduct that is not dependent on whether the plaintiff is still an employee.

Finally, the Sixth Circuit assessed the FCA’s broader context and found that Congress intended to encourage employees to report fraud against the government and facilitate the government’s ability to stymie crime by protecting whistleblowers: “If employers can simply threaten, harass, and discriminate against employees without repercussion as long as they fire them first, potential whistleblowers could be dissuaded from reporting fraud against the government.”

Implications for Whistleblowers

In an article titled Whistleblowers Need Not Apply, Professors Leora F. Eisenstadt and Jennifer M. Pacella examine the glaring lack of legal protection for whistleblower job applicants that confront blacklisting.  They note the “negative trail follows whistleblowers, labeling them as disloyal, suspicious, and, ultimately, not ideal employees, and, thus, unable to find work.”

Felten is an important win for whistleblowers and kudos to Bracker & Marcus and Brooks Wilkins Sharkey & Turco for establishing precedent that should be persuasive to other circuits addressing the scope of prohibited retaliation under the FCA and under similar whistleblower protections laws that prohibit discrimination “against an employee in the terms and conditions of employment,” including the whistleblower protection provisions of the Sarbanes-Oxley Act and Dodd-Frank Act.

But post-Felten, qui tam whistleblowers remain vulnerable to blacklisting and other forms of post-employment retaliation.  Indeed, the Sixth Circuit declined to address in Felten whether blacklisting is a form of prohibited retaliatory action proscribed by the FCA.  As Professors Eisenstadt and Pacella recommend in their article, Congress should amend the FCA to protect applicants for employment.

False Claims Act Whistleblower Damages and Remedies

Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.

Katherine Krems represents employees in discrimination, sexual harassment, and whistleblower retaliation cases. She is focused on finding creative solutions and maximizing her clients’ recoveries. Prior to law school, she worked on policy reforms in Congress to strengthen the rights of workers, women, and marginalized groups.