Recent False Claims Act Amendments Fully Protect Whistleblowers

In the wake of rampant government fraud and heightened financial uncertainty, Congress has finally decided to fully protect America’s courageous whistleblowers. Specifically, in the Fraud Enforcement and Recovery Act of 2009 (FERA) and the soon-to-be-enacted Financial Reform legislation, Congress has closed debilitating loopholes that have undermined the False Claims Act’s anti-retaliation provision, 31 U.S.C. § 3730(h). Most importantly, these amendments widen the scope of protected conduct, expand the list of protected individuals, and lengthen the statute of limitations period for anti-retaliation suits.

Prior to FERA, the False Claims Act (FCA) imposed liability on any employer who discriminated in the terms or conditions of employment against an employee because of the employee’s lawful acts in furtherance of a qui tam action. However, the FCA arguably did not cover the following common types of retaliation: (i) retaliation against those who plan to file a qui tam action that never gets filed, who blow the whistle internally or externally without the filing of a qui tam action, or who refuse to participate in the wrongdoing; (ii) retaliation against the family members and colleagues of those who have blown the whistle; and (iii) retaliation against contractors and agents of the discriminating party who were not technically “employees.”

Widening the scope of protected activity, the amendments ensure that Section 3730(h) not only protects “lawful actions done…in furtherance of an [FCA] action,” but it also protects, “other efforts to stop one or more [FCA] violations.” Thus, in addition to protecting steps taken in furtherance of a potential or actual qui tam action, the FCA also protects steps taken to remedy the misconduct through methods such as internal reporting to a supervisor or company compliance department and refusals to participate in the misconduct that leads to false claims, whether or not such steps are clearly in furtherance of a potential or actual qui tam action.

Addressing the concern about indirect retaliation against colleagues and family members of the person who acts to stop the FCA violations, the amendments also clarify Section 3730(h) by adding language expressly protecting individuals from employment retaliation when “associated others” made efforts to stop FCA violations. This language is intended to deter and penalize indirect retaliation by, for example, firing a spouse or child of the person who blew the whistle.

Protecting persons who seek to stop violations of the Act regardless of whether the person is a salaried employee, an employee hired as an independent contractor, or an employee hired in an agency relationship, the amendments change Section 3730(h) so that it expressly protects no just “employees” but also “contractors” and “agents.” Among other things, the amendments ensure that Section 3730(h) protects physicians from discrimination by health care providers that employ them as independent contractors, and government subcontractors from discrimination or other retaliation by government prime contractors.

Finally, to ensure that wronged individuals have sufficient time to avail themselves of Section 3730(h) protections, the amendments add an explicit three-year statute of limitations period for all FCA anti-retaliation actions. This much-needed amendment is underscored by a recent U.S. Supreme Court decision which held that the Act lacked an applicable statute of limitations provision and that the courts, therefore, must apply the statute of limitations period from the “most analogous” state statute[1]. The resulting statute of limitations patchwork injected uncertainty into the practice area and greatly shortened applicable time periods to less than twelve months for the vast majority of jurisdictions. The amendments replace this confusion with a set, straightforward time limitation.

For more information about whistleblower protection,  qui tam law and health care fraud, contact Nolan & Auerbach, P.A.