MANAGING INTERNAL AND GOVERNMENT INVESTIGATIONS
October 30- November 1, 2002
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Stephen J. Immelt
Hogan & Hartson
Baltimore, MD
Whistleblower Protections under the False Claims Act
In conducting an internal investigation of matters that may entail possible False
Claims Act (“FCA”) violations, an employer must be aware of the broad protections
enjoyed by “whistleblower” employees. The statute allows an employee to bring a claim
for retaliation if he or she is
discharged, demoted, suspended, threatened, harassed, or in any other
manner discriminated against in the terms and conditions of employment
by his or her employee because of lawful acts done by the employee on
behalf of the employee or others in furtherance of an [FCA] action,
including investigation for, initiation of, testimony for, or assistance in an
action filed or to be filed . . . .
31 U.S.C. § 3730(h). An employee who prevails on a retaliation claim may demand
reinstatement and recover two times the amount of back pay, interest, and compensation
for special damages, including litigation costs and reasonable attorneys’ fees. Id.
To minimize the possibility of liability under this provision, an employer must
have an understanding of two basic elements: (a) what activities by an employee confer
the § 3730(h) protections upon him or her; and (b) what actions by the employer
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constitute actionable “retaliation” under that provision.
I. Who is a whistleblower?
The statutory language defines a whistleblower by reference to the employee’s
protected activity. Thus, an employee may qualify as a whistleblower if his or her
“lawful acts” are “in furtherance of” an FCA action “filed or to be filed.” This
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William Brockman, an associate at Hogan & Hartson, provided substantial assistance in the preparation of
this analysis.
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The elements of a claim under § 3730(h) are (1) the employee engaged in lawful conduct in furtherance of
an FCA action; (2) the employee was discharged or otherwise discriminated against in the terms and
conditions of employment by an employer; and (3) the discriminatory action was motivated by the
employee’s protected conduct. See, e.g. McKenzie v. BellSouth Telecomm., Inc., 219 F.3d 508, 514 (6th
Cir. 2000); Eberhardt v. Integrated Design & Constr., Inc., 167 F.3d 861 (4th Cir. 1999); United States ex
rel. Yesudian v. Howard Univ., 153 F.3d 731, 736 (D.C. Cir. 1998). This memorandum focuses primarily
on the first and third elements of a § 3730(h) claim.
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formulation presents a number of interpretive questions that have been addressed by the
courts.
a. The “in furtherance of” requirement
First, the courts have uniformly rejected any bright-line temporal rule requiring
that the whistleblower file an FCA suit, or be preparing to file such a suit, or even be
aware of the existence of a qui tam cause of action, to receive the protection afforded by
§ 3730(h). [Eberhardt, Yesudian]. In support of a broader definition for actions done “in
furtherance” of an FCA suit, courts have noted that the statute expressly includes as an
example of protected activity “investigation,” which may never lead to litigation. See
Neal v. Honeywell Inc., 33 F.3d 860, 863-65 (7th Cir. 1994); see also Yesudian, 153 F.3d
at 740 (stating that Congress intended “to protect employees while they are collecting
information about a possible fraud, before they have put all the pieces of the puzzle
together.”). In the absence of a bright-line rule, litigants are left to wonder what
employee actions are done “in furtherance” of an FCA suit.
The test the courts have adopted is whether, at the time the employee acted,
“litigation was a distinct possibility.” Id. at 864; Childree v. UAP/AG GA Chem. Inc., 92
F.3d 1140, 1146 (11th Cir. 1996); see also Yesudian, 153 F.3d at 740 (stating that “it is
sufficient that a plaintiff be investigating matters that ‘reasonably could lead’ to a viable
False Claims Act case” and averring that Congress intended “to protect employees while
they are collecting information about a possible fraud, before they have put all the pieces
of the puzzle together.”); Hopper, 91 F.3d at 1269 (“plaintiff must be investigating
matters which are calculated, or reasonably could lead, to a viable FCA action”);
Eberhardt, 167 F.3d at 869 (endorsing Neal, Childree, and Hopper formulations and
advancing “reasonable possibility” of litigation as a standard). One court has equated this
standard with the lenient pleading standard of Rule 11 of the Federal Rules of Civil
Procedure. See Neal, 33 F.3d at 864. Because the reasonableness of the whistleblower’s
reports or investigation are determined at the time they took place and are judged by the
lenient Rule 11 standard, it is no defense to a retaliation charge that the employer was
later vindicated with respect to the substance of the false claims charges.
b. The requirement of a nexus to a viable FCA “action”
Although the “distinct possibility of litigation” standard permits a wide variety of
employee activities to be characterized as protected activity, the standard contains one
significant limitation. The activity must be related to claims that could support a viable
FCA claim; that is, “the plaintiff’s investigation or reports must concern ‘false or
fraudulent’ claims.” Eberhardt, 167 F.3d at 868 (quoting 31 U.S.C. § 3729(a)); see also
McKenzie, 219 F.3d at 516 (requiring “nexus to a qui tam action, or fraud against the
United States government”). Thus, for instance, an internal dispute about whether an
employer’s practices complies with federal regulations, without more, is not protected
activity related to false or fraudulent claims and cannot be the basis for an FCA suit or
protection under the anti-retaliation provisions of § 3730(h). See Luckey v. Baxter
Healthcare Corp., 183 F.3d 730, 733 (7th Cir. 1999). As the Seventh Circuit explained,
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“An employer is entitled to treat a suggestion for improvement as what it purports to be
rather than as a precursor to litigation . . . . Saber-rattling is not protected conduct.” Id.
Similarly, “an employee who fabricates a tale of fraud to extract concessions from the
employer, or who just imagines fraud but lacks proof, legitimately may be sacked . . . .
[E]mployees who use reports of fraud to better their own position, or who behave like
Chicken Little” are not protected by § 3730(h). Neal, 33 F.3d at 864. It is therefore clear
that an employee will not obtain whistleblower protection merely by blowing a whistle
about generalized wrongdoing; section 3730(h) applies only if the employee’s
investigation or report is related to possible fraud or false claims involving the United
States government.
c. The “lawful acts” requirement
To merit protection under § 3730(h), a whistleblower’s activities must be “lawful
acts.” This requirement raises intriguing questions, not yet addressed by the case law,
about what forms of employee misbehavior in furtherance of an FCA action would
deprive the employee of whistleblower protection. An ostensible whistleblower could,
for instance, surreptitiously record phone calls as part of his or her investigation of fraud
against the government. Similarly, most employers would regard unauthorized removal
of company documents as theft, while the employee might think it a necessary precaution
against the destruction of evidence.
Ultimately, the “lawful acts” limitation on whistleblower protection seems
unlikely to act as a substantial bulwark against employer liability. In the situations
hypothesized above, the employees’ investigations would likely have entailed both lawful
acts and arguably unlawful acts. In such a situation, a plaintiff may be able to argue that
the employer’s retaliation was motivated by the employee’s lawful activities in
furtherance of an FCA action, not the unlawful activities. (Note that the language of §
3730(h) does not deny protection if the employee acts unlawfully; rather, it grants
protection if the employee acts lawfully.) The question of the employer’s true motivation
in such a situation raises factual issues that frequently will not be capable of resolution on
a motion for summary judgment. (The issue of employer motivation, and the particular
case of mixed motivation, is discussed in greater detail below.)
II. What employer actions can be the basis for a retaliation claim?
Section 3730(h) imposes liability on an employer that “in any . . . manner
discriminate[s] against” the whistleblower “in the terms and conditions of employment . .
. because of” the whistleblower’s protected activity. Thus, a retaliation claim can arise if
(a) an employer has taken certain adverse employment actions toward the whistleblowing
employee, and (b) the employer’s actions were motivated by (“because of”) the
employee’s protected activity.
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a. Discriminatory treatment
Section 3730(h) provides a non-exhaustive set of examples that can constitute
discriminatory treatment of an employee “in the terms and conditions of employment,”
giving rise to a possible retaliation claim: discharge, demotion, suspension, threats, and
harassment. Some of these types of actions will be readily ascertainable, e.g., whether an
employee was discharged. Others, however, will involve raise fact-specific questions
familiar to employment law practitioners from the Title VII context. And the employer
actions placed in the residual category (discrimination “in any other manner”) similarly
may involve factual disputes that cannot be resolved at the summary judgment stage. It
seems likely that the courts will look to precedent under the anti-retaliation provision of
Title VII and related case law in determining whether a particular employment action
constituted discriminatory treatment within the meaning of § 3730(h). Indeed the Ninth
Circuit has recently held that an employer’s behavior cannot constitute retaliation under
the FCA “unless it would be sufficient to constitute an adverse employment action under
TitleVII.” Moore v. California Inst. of Tech. Jet Propulsion Lab., 275 F.3d 838, 847-48
(9th Cir. 2002). The Ninth Circuit elaborated on this standard by stating that employer
“action may be cognizable as discrimination under the [FCA] . . . if it is reasonably likely
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to deter employees from engaging in activity protected under the [FCA] . . . .” Id.
b. The “because of” causal requirement
A plaintiff bringing a claim under § 3730(h) must establish that his or her
protected activity was the reason for the employer’s discriminatory treatment. This
element of the claim requires the plaintiff to prove the employer’s motivation, and
provides a significant opportunity for the employer to introduce other reasons for its
treatment of the whistleblowing employee.
Notice
An employer cannot possibly act “because of” a whistleblower’s protected
activity unless it has knowledge of the protected activity. See McKenzie, 219 F.3d at 514
n.4; Norbeck v Basin Elec. Power Coop., 215 F.3d 848, 850-51 (8th Cir. 2000); Hopper,
91 F.3d at 1269. The plaintiff carries the burden of establishing the employer’s
awareness of the protected activity. Norbeck, 215 F.3d at 850-51. (The employer need
not know that the activity is protected under the FCA; it must merely know of the
existence and nature of the activity.) As discussed above, it can be difficult to discern
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whether an employee’s activity is “in furtherance of” an FCA “action.” The courts have
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This memorandum does not address the discriminatory treatment element of a § 3730(h) claim in depth
because it is not unique to the FCA context. One noteworthy aspect of the FCA anti-retaliation provision,
however, is the form of damages prescribed: “all relief necessary to make the employee whole. . . .” Thus,
it is possible that an employment action, such as a temporary suspension with pay, could be found to be
discriminatory treatment, but that the resulting liability would be minimal.
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Accordingly, the analysis of whether an employee’s conduct was protected and the analysis of whether an
employer had knowledge of its protected character tend to merge at this point.
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provided limited guidance on this question. The Fourth Circuit has stated that an
employee can put an employer on notice of the protected activity
by expressly stating an intention to bring a qui tam suit, but [notice] may
also be accomplished by any action which a factfinder reasonably could
conclude would put the employer on notice that litigation is a reasonable
possibility. Such actions would include, but are not limited to,
characterizing the employer’s conduct as illegal or fraudulent or
recommending that legal counsel become involved.
Eberhardt, 167 F.3d at 868.
The question of whether an employer had adequate notice becomes particularly
complex in the context of intracorporate complaints and investigations. A
whistleblower’s activities frequently will first come to the attention of an employer
through the employee’s internal complaints or reports. The courts have held that such
complaints, although never reported to the government, as would be required to initiate a
FCA qui tam suit, see 31 U.S.C. § 3730(b)(2), may nevertheless be sufficient to confer
whistleblower protections on the complaining employee. As noted above, an employer
should be able to “treat a suggestion for improvement as what it purports to be rather than
as a precursor to litigation,” i.e. as notice of a distinct possibility of litigation. Neal, 33
F.3d at 864. From the employer’s perspective, this presents a particular difficulty when
the employee’s duties include compliance reporting or investigating. In such cases, the
courts have typically required greater notice than in cases where the employee’s duties
did not include investigating potential fraud. Compare Childree, 92 F.3d at 1143
(employee with no investigative responsibilities testified at USDA hearing about billing
practices) with Robertson v. Bell Helicopter Textron, Inc., 32 F.3d 948, 952 (5th Cir.
1994) (employee’s duties as a contract administrator included substantiating charges of
fraud, and employee “never expressed any concerns to his superior other than those
typically raised as part of a contract administrator’s job”); see also United States ex rel.
Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1523 & n.7 (10th Cir. 1996)
(employees whose jobs “entail[] the investigation of fraud . . . must make clear their
intentions of bringing or assisting in an FCA action in order to overcome the presumption
that they are merely acting in accordance with their employment obligations.”).
Motivation
If a § 3730(h) plaintiff is successful in establishing that the employer was aware
of the protected conduct, he or she must still show that the employer’s discriminatory
treatment was motivated by its knowledge of this conduct. See Norbeck, 215 F.3d at 850
& n.2; Yesudian, 153 F.3d at 736 (retaliation must be “motivated, at least in part, by the
employee’s engaging in [the] protected activity” (quoting S. Rep. No. 99-345, at 35)). If
the plaintiff establishes the retaliatory motive, the burden then shifts to the employer to
prove that the adverse employment action would have been taken even if the employee
had not engaged in the protected activity. See Norbeck, 215 F.3d at 850 n.2; Yesudian,
153 F.3d at 736 n.4. In other words, the employer can assert a “mixed motivation”
defense. The availability of this defense will is an important weapon against frivolous
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retaliation suits. Frequently, purported whistleblowers are nettlesome or disgruntled
employees, and their charges of retaliation often arise only after they have been
dismissed, demoted, etc. The employer that can document ample non-retaliatory reasons
for its adverse employment action may be able to short-circuit a § 3730(h) retaliation
lawsuit and avoid much aggravation.
III. Considerations for Employers
In view of the uncertain scope of liability created by § 3730(h), what should a
prudent employer do to protect itself? The following suggestions may help.
(1) Adopt and disseminate a written code of conduct. The code should (a) state
that violations of law are forbidden and should be reported; (b) set forth procedures for
reporting violations; and (c) affirm that reprisals against informants will not be tolerated.
(2) Ensure that complaints are quickly brought to the attention of high level
officials. This is a challenge in the decentralized world of academia, but it is absolutely
critical to minimize conduct that can not only create liability but color the way that
enforcement agencies may view the situation. The relevant supervisors, who may include
departmental chairs, need to understand their obligation not to engage in reprisals against
complainants.
(3) Obviously, it is important to exercise care when dealing with complainants.
Not infrequently an employee who engages in protected activity related to allegations of
False Claims Act violations is being considered for termination for arguably unrelated
reasons. These claimants present high risk for liability under § 3730(h), and should be
handled with extreme care.
(4) Any documentation of the investigation that ensues should consider the
possibility of a § 3730 (h) claim. Care should be taken to document efforts to avoid
retaliation and that any allegations were thoroughly explored.
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