Rights of Whistleblowers Harmed for Reporting Fraud on Federal Contracts

employee whistleblowers
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When an employee alerts an employer that it may be submitting false claims for payment to the United States, one would hope that the employer would thank the employee for the heads up and take efforts to correct the wrongful conduct. Unfortunately, all too often, the employer’s reaction is to threaten, demote, write up, fire or take other negative action against the employee trying to prevent the fraud. The usual reason is that stopping the wrongful conduct will cost the employer money.

Is there a legal remedy for employees who suffer negative employment consequences for attempting to stop their employer from submitting false claims to the United States? The Federal False Claims Act has a section providing what is often misunderstood as whistleblower “protection.” This section is often misunderstood because, in reality, it almost never protects a whistleblower from being terminated. Rather, it provides compensation to the whistleblower for the wrongful actions taken against him. The FCA section entitled “Relief from Retaliatory Actions” provides as follows:

In general, any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.

“In order to bring a successful claim, a plaintiff must first establish a prima facie case by showing that “(1) that [s]he engaged in protected activity, (2) that [s]he suffered an adverse employment action, and (3) that a causal link existed between the protected activity and the adverse action.”

When an employer takes adverse actions against a whistleblowing employee, the section provides the following relief:

Relief … shall include reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, two times (2X) 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.

Reinstatement of the employee is highly unlikely. Seldom is an employee reinstated, and employees rarely ask to be reinstated. Therefore, the matter comes down to appropriate compensation. Two times back pay and interest on back pay sounds pretty simple, but how is it calculated? Often many years have passed since the termination to the resolution of the retaliation claim.

First, the lawyer should gather evidence regarding the seniority status and pay rate the employee would have been likely to achieve had they remained employed. Second, the amount of back pay is doubled. Next, the employee has a duty to mitigate their damages and the employer is entitled to off set any pay the employee earned from the time of termination until resolution. The difference is then doubled and interest applied. The employee is also entitled to “special damages” such as moving and relocation expenses, health insurance costs, loss of other benefits provided by the employer and emotional distress damages. The employee is also entitled to reasonable attorney’s fees and expenses.

What constitutes an effort to stop one or more false claims? An internal complaint to a supervisor has been found sufficient if that complaint alleges fraud on the Government.

While an actual False Claims Act suit is an action brought by the whistleblower on behalf of the Government, a retaliation claim belongs to the whistleblower. That means all of the money paid by the employer on the retaliation claim is allocated to the whistleblower and not shared with the Government. Further, an FCA retaliation claim does not have to be filed under seal and may be filed as a stand-alone claim in federal court. However, there are strategic reasons that a lawyer may want to file the retaliation claim under seal as pendant to the underlying FCA claim.

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Lawyers representing currently employed whistleblowers should advise their clients to document their efforts to stop the wrongful conduct. Employees should e-mail their complaints to the appropriate chain-of-command and any compliance personnel. The employee should include a blind copy to their personal email, because employees are often abruptly terminated and denied access to their work computers and email. Employees should note the date and time of any calls made to an employer or government compliance hotline so those recordings can later be obtained in discovery. Don McKenna

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