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Courts Enforcing Broad Whistleblower Protections


Amendments to False Claims Act expanded remedies for retaliation against contractors and others.

Hillary Clinton came in for criticism when word emerged that she’d bypassed her government email account while running the State Department in favor of her private account. But Corporate America is in no position to criticize, we learn in this special section—mixing of private and company email is rampant, and dangerous. We also investigate the difficulties liberal marijuana laws raise for employers and changes in federal whistleblower-protection laws.

On May 29, 2009, Congress enacted the Fraud Enforcement and Recovery Act of 2009 to expand the reach of the Civil False Claims Act, 31 U.S.C. 3730, et. seq., and safeguard taxpayer funds. In doing so, Congress amended Section 3730(h) of the Civil False Claims Act (FCA), the anti-retaliation provision, to broaden protections for whistleblowers who alert their employers and/or the government about the misuse of taxpayer funds. Following these amendments, Congress sharpened the FCA’s enforcement teeth to not only recoup taxpayer money but also to further encourage the reporting of fraudulent conduct in an effort to help the government combat fraud and abuse in the administration of its programs.

The U.S. government is one of the world’s largest consumers and the single largest purchaser of goods and services within the United States. The FCA authorizes the government to recover monetary damages from parties who file fraudulent claims for payment when supplying it with goods or services. Actions under the FCA can be initiated either by the government or via a qui tam action. See 31 U.S.C. 3730(b)-(d); see also Mann v. Heckler & Koch Defense (4th Cir. 2010) (a qui tam action is brought by a private party “in the name of the United States”).

Qui tam actions are brought by whistleblowers, referred to as “relators,” on behalf of the government, and are the most common enforcement mechanism of the FCA. Those cases are filed under seal and served on the attorney general and the U.S. attorney in the jurisdiction in which the case is filed. At the conclusion of an investigation, the government may elect to “intervene” in the case and take the lead in litigating, settle it or choose to “decline” to intervene, in which case the relator may bring the case on behalf of the government. In a qui tam action, whether intervened or not, it is the government’s damages at issue; not the relator’s.

The FCA also contains anti-retaliation protections for whistleblowers. When Congress passed the major provisions of the FCA encouraging whistleblowers to report fraud, there was common-sense recognition that whistleblowers—and in particular employees of government contractors—would be at great risk of retaliatory actions if and when their employers learned they blew that whistle. The anti-retaliation provisions of the FCA are intended to provide full relief to the whistleblower for his or her damages resulting from the retaliatory acts of their employer for reporting fraud. So the relator’s damages are at issue, not the government’s.

Following the passage of the Fraud Enforcement and Recovery Act of 2009 (FERA), Congress broadened the scope of the FCA’s anti-retaliation protections by expanding the list of protected persons and activity covered, and created a uniform three-year statute of limitations from the date of the retaliation. Previously, the anti-retaliation protections only applied when the whistleblower was engaged in conduct (e.g., investigating) directly in furtherance of an actual action under the FCA, the employer knew about the employee’s investigation, and then retaliated against the employee as a result.

While the prior iteration covered only employees and only acts in furtherance of filed or to be filed FCA claims, the FERA amendments expanded the scope of covered persons to “employees, contractors, agents or associated others,” and expanded the protected conduct to “lawful acts … in furtherance of an action under this section or other efforts to stop one or more violations of th[e statute].”

So if there was any doubt before as to whether internal reporting to company officials to stop a violation suffices as protected activity under the act, the FERA amendments dispensed with the issue. The FERA amendments also included a specific prohibition against retaliation against persons based on their association with a whistleblower.

As a result of the FERA amendments, a retaliation action can be initiated on multiple types of relationships outside of the traditional employer-employee context. Significantly, independent contractors, who make up a significant portion of the government contractor workforce, are protected from retaliation under the FERA amendments. Moreover, recently a number of courts have found that the amendments now permit individual liability against those who retaliate against a whistleblower by removing the reference to retaliation “by [an] employer.” See e.g., Huang v. Rector (W.D. Va. 2013); Aryai v. Forfeiture Support Associates LLC, (S.D.N.Y 2012).

Overall, most courts that have had the opportunity to review FERA’s amendments to Section 3730(h) have made clear that they view the amendments as having increased the scope of the protections afforded to whistleblowers. But some courts have maintained deference to pre-FERA amendments precedents when deciding whether an individual has taken “steps in furtherance” of an action under the FCA.

For example, district courts in the Fourth and Fifth circuits acknowledged that the FERA amendments to Section 3730(h) were, indeed, intended to broaden the scope of protected activity by whistleblowers. Yet courts in these circuits have taken a narrow approach and relied on pre-FERA precedent in holding that relators must show they engaged in some form of conduct (e.g. investigations, inquiries, etc.) that could lead to the “distinct possibility” of a viable FCA qui tam claim. See e.g., Layman v. MET Labs., (D. Md. 2013); United States ex. rel. George v. 
Boston Scientific Corp., (S.D. Texas 2012).

These decisions appear to ignore the intent behind the FERA amendments by tying protected activity to bringing a qui tam case, when FERA plainly disposed of that requirement. However, for cases in those jurisdictions there appears to be a higher burden for a whistleblower to succeed on a retaliation claim.

The retaliation provisions of the amended Section 3730(h) include significant remedies for prevailing plaintiffs and entitle employees to recover damages for retaliatory acts taken by the employer after the employee has engaged in protected activity. Recoverable damages include reinstatement, two times back pay plus interest and “compensation for any ‘special damages’ sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.” The remedies provision is intended to be a particularly powerful deterrent to unlawful retaliation. United States ex rel. Chandler v. Hektoen Inst. for Med. Research, (N.D. Ill. 1999).

It is now well-settled that the term “special damages” includes an award of pain and suffering. For example, in Hammond v. Northland Counseling Center Inc., (8th Cir. 2000), the court held that not only were pain and suffering damages recoverable under Section 3730(h), but that those damages were recoverable even without a showing of economic loss. Similarly, in Neal v.Honeywell, (7th Cir. 1999), the court held that the employee was able to recover compensation for emotional distress caused by an employer’s retaliatory conduct as “special damages.”

Because of the broadened scope of retaliation claims under the FCA post-FERA, higher awards may be in the offing for an employer’s retaliatory conduct—especially if accompanied by expert testimony—for emotional distress as “special damages” under the FCA. Looking toward the future, it is quite likely that more FCA retaliation cases will be brought (both with and without qui tam claims). Those cases could see significant emotional distress damages recovered as a result of the retaliation—especially since there is no cap on these damages, unlike the cap for noneconomic damages under Title VII of the Civil Rights Act.

Although other provisions of the FERA amendments apply retroactively for qui tam cases, the recent amendments to the anti-retaliation protections of Section 3730(h) do not apply retroactively prior to the date of the FERA enactments. See Pub. L. No. 111-21, 4(f) (2009).

Congress’ recent amendments to Section 3730(h) were enacted to expand the protections afforded to whistleblowers. While a minority of courts have chosen to align with pre-FERA precedent, most have not and rule consistent with Congress’ clear intent to broaden the scope of protected activity and afford whistleblowers more protection under the anti-retaliation provisions. Good news for whistleblowers and bad news for those who retaliate in violation of the FCA.


Reprinted with permission from the April 13, 2015 issue of The National Law Journal. Copyright 2015 ALM Media Properties LLC. Further duplication without permission is prohibited. All rights reserved.

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