When Qui Tam Retaliation Lawsuits Get Tricky
What happens when a compliance officer is the whistleblower in a qui tam retaliation lawsuit?
Bringing a qui tam lawsuit against your employer for defrauding the federal government isn’t necessarily the best of career moves. That’s why the False Claims Act (FCA) includes protections from retaliation. Specifically, Section 3730(h)(1) creates a “private right of action,” i.e., allows individuals to sue for money damages if they’re “discriminated against in the terms and conditions of their employment for engaging in protected activity.” The first thing the employee must prove to make out a case for “discrimination in employment,” aka, retaliation, is that he/she engaged in “protected activity.” The FCA defines “protected activity” as:
- Lawful acts done by the employee...in furtherance of” an FCA legal action; or
- “Other efforts to stop one or more” FCA violations.
The “other efforts” category, which Congress only added to the FCA in 2010, has been a source of confusion, particularly in cases where the employee hasn’t actually filed a qui tam lawsuit at the time the alleged retaliation occurs. Consider the following scenario.
During her stormy 11-month tenure, the chief compliance officer (CCO) of durable medical equipment (DME) manufacturer ERMI raised repeated concerns about the company’s marketing and billing practices. For example, she sounded the “illegal inducement” alarm after learning that a salesperson had offered free DME to a doctor whose patient had been denied insurance coverage. This practice must “stop immediately,” she wrote to management. But instead of appreciating the counsel, the boss, Mr. B, became “extremely angry” and ordered the CCO to stop looking into the matter.
And so, things continued until the CCO learned that the company was planning to fire her and that Mr. B was deliberately sabotaging her compliance efforts. So, she sent an email to the chief executive officer (CEO) indicating that “there will be repercussions if I am fired. This is not a threat, it is my professional evaluation and prediction...I will not go voluntarily or quietly.” But the email didn’t say anything about filing an FCA qui tam suit.
Meanwhile, the CCO’s relationship with Mr. B and other ERMI executives got uglier and uglier. She allegedly got bullied during meetings, with Mr. B continuing to pooh-pooh her compliance concerns and suggesting they were the product of an undiagnosed anxiety disorder. But for all of this, the CCO didn’t file or threaten to sue—at least not until after she had agreed to resign at year’s end when she confided to the CEO that she was thinking about filing a whistleblower lawsuit against ERMI. Maybe I’ll join the lawsuit, the CEO responded. But soon after that, the CCO’s resignation was “accelerated” and she was locked out of her office. A few months after losing her job, she sued the company for retaliation under Section 3730(h)(1).
Did the CCO engage in “protected activity”?
A. No, because she didn’t file a qui tam retaliation lawsuit until after she got fired
B. Yes, because she got fired in retaliation for voicing compliance concerns
C. No, because she didn’t do enough to stop the company from submitting false claims
D. Yes, because the CCO’s actions were enough to make ERMI think that a whistleblower lawsuit was a distinct possibility
D. The CCO would satisfy the “protected activity” requirement necessary to make out a qui tam retaliation case under the “distinct possibility” standard.
This scenario, which is based on a Georgia federal court case called United States ex rel. Cooley v. ERMI, LLC (2022 U.S. Dist. LEXIS 179806, 2022 WL 4715679), illustrates the distinct possibility standard, which is followed in at least two Circuits—the Fourth and Eleventh. In applying the standard in this case, the court considered whether an employee’s actions “are sufficient to support a reasonable conclusion that the employer could have feared…being sued in a qui tam action by the employee.” ERMI argued that the CCO’s conduct didn’t make litigation a distinct possibility. Yes, she pointed out and expressed concerns over what she perceived to be fraudulent practices, it contended. But as a compliance officer, it was her job to do that. She didn’t do anything that would suggest she was thinking about suing.
The US District Court for the Northern District of Georgia agreed that the “distinct possibility” standard for proving “protected activity” is, in fact, higher for compliance officers or others whose job duties include regulatory compliance or investigating fraud. Such employees must do or say something to put the employer on guard that a qui tam lawsuit is on the table. The CCO’s attempts to curb fraud and vague threats of “repercussions” if she was fired weren’t enough to push her “distinct possibility” claim across the goal line.
However, her conversation with the CEO about filing a qui tam lawsuit against the company was. Although it’s not the only way to do it, “threatening to file a qui tam suit or to make a report to the government . . . clearly is one way to make an employer aware of protected activity,” the court reasoned.
Why Wrong Answers Are Wrong
A. is wrong because the FCA has changed. Before 2010, “protected activity” was limited to action taken by employees to further a qui tam lawsuit or other FCA legal action. So, initiating FCA action only after getting fired would have doomed a retaliation lawsuit. But now there’s another form of “protected activity,” namely, other efforts to stop FCA violations.
B. is wrong because the FCA protection from retaliation requires more than objecting to fraudulent practices or trying to get a company to comply. Employees must actually take or threaten legal action under the FCA to be protected from retaliation—although employees that get fired for expressing compliance concerns may have a valid claim for retaliation under other laws.
C. is wrong because the CCO did do enough to stop ERMI’s fraud, at least to make out an initial claim of FCA retaliation. In other words, her actions did constitute “protected activity.”
Significance of the Cooley Case
The Cooley case just means that the CCO was able to survive ERMI’s motion to dismiss. In other words, all the court concluded was that the retaliation claim was legally valid and deserved to go to trial. At trial, the CCO will have the burden of proving that:
- She engaged in protected activity;
- The company took an adverse employment action against her; and
- There was a causal relationship between the company’s adverse action and the protected activity, i.e., that she got fired because she engaged in the protected activity.
How to Protect Yourself
Preventing whistleblower lawsuits is a hell of a lot easier and less expensive than defending them. The best way to prevent lab employees from filing such lawsuits is to promote an open workplace where all employees, not just compliance officers, feel free to report wrongdoing or retaliation they suffer as a result of reporting it. Use the Model Whistleblower Non-Retaliation Policy on the G2 website as a template that you can adapt to create an effective policy for your own lab. Like the Model, make sure that your policy:
- Clearly states that employees, providers, and patients won’t suffer retaliation of any kind for asking about or reporting possible wrongdoing by your lab;
- Defines retaliation broadly as including not just termination and discipline but any form of adverse employment action, harassment, and coercion;
- Explains what activity is protected from retaliation;
- Lays out the roles and responsibilities of management, supervisors, and employees in preventing retaliation;
- Provides a mechanism for employees to report actual or suspected retaliation or wrongdoing;
- Provides a mechanism for investigation reports of retaliation or wrongdoing;
- States that those found to have committed retaliation or wrongdoing will be subject to disciplinary action; and
- Clarifies that protection from retaliation doesn’t include individuals who report retaliation or wrongdoing in bad faith.
For more on preventing lab employees from filing whistleblower lawsuits, see “Six Ways to Reduce Risk of Employee Turning Whistleblower Against Your Lab,” LCA, June 3, 2015.
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