Can the False Claims Act Protect Former Employees?

April 2nd, 2021

red-whistle-headA recent decision out the 6th Circuit reinforces that former employees are protected from retaliation under the False Claims Act – even when the retaliatory conduct happens after they are fired or leave the company.

In the lawsuit, an employee alleged he was “marginalized” for insisting on compliance with the law during his employment and then “blacklisted” in his industry after being fired. He filed an FCA case that the hospital where he had been working was providing illegal kickbacks to physicians in exchange for referrals – conduct that would clearly violate the False Claims Act. The employee applied to nearly 40 different companies and alleged the hospital’s retaliatory conduct kept him from successfully securing new employment.

The anti-retaliation provision of the FCA provides that any employee, contractor, or agent shall be entitled to all the relief necessary to make them whole if they are a) discharged, b) demoted, c) suspended, 4) threatened, 5) harassed, or 6) in any other manner discriminated against regarding the terms and conditions of their employment for acts done to stop violations of the FCA.

According to the 6th Circuit, these protections are broad and far-reaching – even so far as to reach former employees: “the anti-retaliation provision of the FCA may be invoked by a former employee for post-termination retaliation by a former employer.”

In making the decision, the Court noted that the purpose of the FCA’s anti-retaliation provision is to encourage the reporting of fraud and facilitate the federal government’s ability to stop fraudulent conduct by protecting those who assist in its discovery and prosecution. The Court further said: “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.”

Employees are entitled to significant damages when their employees retaliate against them in violation of the FCA. In fact, they are “entitled to all relief necessary to make that employee whole.” Most notably, and unlike many other employee protections, current and former employees may receive double back-pay damages under the FCA. This amount can be large, especially when an underlying FCA case may go on for years while the government litigates the matter. Employees may also be entitled to reinstatement, front pay, emotional distress, other special damages, and their attorneys’ fees and costs.

The 6th Circuit decision is controlling authority in the states of Michigan, Ohio, Kentucky, and Tennessee. The 10th Circuit has ruled that the FCA does not cover former employees. This ruling applies in Oklahoma, Kansas, New Mexico, Colorado, Wyoming, and Utah. Other circuits have not yet taken a position on this issue, but this new ruling will make the argument more compelling in circuits that haven’t yet decided.

For many current or former employees facing retaliation after reporting fraudulent conduct or insisting that their employer follow the law, their rights are now more strongly protected. If this situation applies to you, you should contact an experienced attorney with deep knowledge of the False Claims Act and employment law. At Halunen Law we have both.

Download a PDF of the 6th Circuit Decision

NathanielS-headshot-300×300Having recovered millions of dollars on behalf of whistleblowers in both employment retaliation cases and qui tam whistleblower lawsuits under the False Claims Act (FCA), attorney Nathaniel F. Smith is relentless in his pursuit of justice.

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