Qui Tam/False Claims Act

The False Claims Act (“FCA”) is a federal law that prohibits the making of false or fraudulent claims for payment to the United States. 31 U.S.C. § 3729. The False Claims Act also protects whistleblowers who investigate or report information in furtherance of potential suits under the Act from being discharged or subjected to other retaliation by their employers.

Background: FCA And Qui Tam Suits

The FCA was enacted in 1863 during the Civil War in response to false and fraudulent claims by contractors to be paid by the Government for defective and shoddy war material. The FCA prohibits any person from making a false or fraudulent claim for payment to the United States and from causing such a claim to be made. In addition to defense contractor fraud, many cases under the FCA have involved the making of false or fraudulent claims by healthcare providers, drug companies and others. The Act’s prohibition applies to claims for payment for goods or services whether under a federal contract, grant or otherwise.

Along with the Government itself, private individuals play vital roles in enforcing the False Claims Act. The Act’s prohibition of false or fraudulent claims for payment may be enforced in suits filed by the U.S. Attorney General which in many instances are based on information provided by individuals. The prohibition may also be enforced in suits, known as “qui tam” suits, brought in the Government’s name by private persons. In many instance, the individuals with information leading to an FCA suit are employees who find that their employers may be submitting false or fraudulent claims and who proceed to blow the whistle. The FCA encourages private persons to provide information regarding false or fraudulent claims by allowing them between 15% and 25% of any settlement or judgment on behalf of the Government in a suit under the Act.

An employee who suspects that his employer is submitting false or fraudulent claims may well be motivated based on a sense of civic duty to investigate further and report his or her findings to internally the employer or to the Government.

Such employees may unsurprisingly become targets for discharge or other adverse actions by their employers.

The FCA’s Protection Against Retaliation

Congress has recognized the vital role of employees in investigating and reporting what they reasonably believe to be false or fraudulent claims. Congress amended the FCA in 1986 to protect whistleblowers from discharge and other adverse action because of actions in furtherance of potential suits under the FCA.

The FCA’s anti-retaliation provision, 31 U.S.C. § 3730(h), provides:

Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee on behalf of the employee or others in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section, shall be entitled to all relief necessary to make the employee whole. Such relief shall include reinstatement with the same seniority status such employee 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 employee may bring an action in the appropriate district court of the United States for the relief provided in this subsection.

Which Employees Are Protected By The FCA?

The FCA broadly protects employees who investigate or report information in furtherance of possible suits under the Act. The Act’s protection extends to former employees who are subjected to retaliation such as by negative references. The Act does not cover individuals who are independent contractors rather than employees. However, the employer’s classification of an individual as an independent contractor may not control. Depending on the degree of the employer’s control over the individual’s work performance, a court may find the individual to be an employee entitled to protection under the FCA.

What Does The Whistleblower Have To Prove?

A whistleblower in an FCA retaliation case must prove:

That the employee engaged in protected activity;
That the employer took adverse action against the employee; and
That the adverse action was motivated at least in part by the protected activity.

An employee is not required to show that his employer actually made false or fraudulent claims for payment to show that he or she was engaged in protected activity under FCA. By the same token, an employee is not required to initiate a False Claims Act or qui tam case to be protected from retaliation.

An employee is engaged in protected activity if he or she is merely investigating matters that could reasonably lead to a viable, that is meritorious, False Claims Act or qui tam case. An employee who reports such matters to internally to the employer or provides such information to the government will also be protected from retaliation so long as the information could reasonably lead to a viable FCA case.

Although the employee must reasonably believe that the information could lead to a viable suit under the Act, he or she need not necessarily be correct. So long as the employee’s belief is reasonable, the employer may not retaliate even if the employee is ultimately shown to be mistaken.

When Does An Employee Suffer An Adverse Action?

An employee suffers an adverse action when the employee is “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment” because of his or her protected activity under FCA. Under a standard established by the Supreme Court under other discrimination laws, the prohibition will extend to any action that is “materially adverse”. An action is “materially adverse” if it would dissuade a reasonable employee from investigating or reporting information in furtherance of a possible FCA suit. This would certainly include firings, demotions, cuts in pay or denial of promotions, but it could also include reassignment of job duties and responsibilities, assignment of undesirable shifts, harassment, micromanagement, excessive supervision, or exclusion from important company activities.

Procedure For Contesting Retaliation Under The FCA

An employee may challenge retaliation for activity protected by the FCA by filing suit in federal court.

Because the FCA does not state the time limit for bringing such a suit, the Supreme Court has held that the time for filing must be determined by reference to state law. That is, the time limit will be determined by reference to the time limit for the most similar type of suit in the state where the claimed retaliation occurred or which otherwise governs the employment relationship. Because the question may be complex, employees are well advised to consult an attorney regarding the time limit for FCA retaliation claims.

What Remedies Are Available To Successful Whistleblowers?

The FCA provides that the employee “shall be entitled to all relief necessary to make the employee whole.” A terminated or demoted employee is entitled to reinstatement to his job with full seniority. He is entitled to double the amount of his back pay plus interest on the back. The law allows him to recover compensation for special damages, in addition to his economic loss, such as emotional damages and damage to reputation. He will be entitled to recover his litigation expenses and reasonable attorney’s fees.

How Do I Decide Whether And How To Report Unlawful Conduct?

Employees face difficult questions in considering whether to blow the whistle as well as in considering when to do so, how and to whom. Whistle-blowing can put a career at risk. On the other hand, conscience and civic duty may weigh heavily in favor. Moreover, as stated above, the FCA also offers substantial incentives to employees and other individuals to provide information which leads to a recovery by or on behalf of the Government.

The decision to blow the whistle in the context of the FCA or otherwise should be made only based on competent legal advice. Employees have achieved success in cases under the FCA in challenging employer retaliation as well as in exposing unlawful fraud on the Government and taxpayers.If you are thinking about reporting such concerns, or if you already have and are facing retaliation, contact the experienced whistleblower lawyers at Katz, Marshall & Banks, LLP for an evaluation of your whistleblower case with no further obligation.

Video transcript:

The False Claims Act was passed during the Civil War to target unscrupulous government contractors who were committing fraud in providing supplies to the Union Army. For example, providing faulty rifles or rancid food.

Nowadays, the types of fraud on the government are a bit different. For example, you have pharmaceutical companies who sometimes engage in what's known as off-label marketing. They’ll promote sales of their product in a way that's not approved by the FDA approved label. You might have other healthcare providers or hospitals that are overbilling the government and all of this is paid for through reimbursement by Medicare or Medicaid which of course is being paid for by the government. You also still have defense contractors or other government contractors that are committing fraud on the government. For example, overbilling labor charges or billing for goods or services that they did not in fact provide.