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Whistleblower protections for government contractors and grantees

Disclosures by whistleblowers under the qui tam provisions of the False Claims Act (FCA) have enabled the federal government to recover more than $40 billion. But with strong protections against retaliation, whistleblowers would be reluctant to come forward. This course, presented by Jason Zuckerman, Principal at Zuckerman Law, provides an overview of whistleblower protections for employees of government contractors and grantees, focusing on the whistleblower protection provisions of the FCA and National Defense Authorization Act (NDAA). The course will also offer practical tips and insights for practitioners on how to evaluate potential whistleblower claims and overlapping remedies to maximize damages. In addition, the course will address the challenging issues that arise when a whistleblower simultaneously prosecutes both retaliation and rewards claims.

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Whistleblower protections for government contractors and grantees

  1. 1. Whistleblower Protections for Government Contractors and Grantees Jason Zuckerman Zuckerman Law
  2. 2. Agenda • False Claims Qui Tam Actions • False Claims Act Whistleblower Protection • NDAA Whistleblower Protection • Strategies for effective representation of whistleblowers disclosing fraud on the government
  3. 3. False Claims Act Qui Tam • Whistleblower qui tam cases have led to the recovery of more than $40B in taxpayer funds • 30 states have adopted FCAs: acts/ • 80 percent of the cases brought under the FCA are brought by whistleblowers
  4. 4. False Claims Act Qui Tam • First-to-file bar • Public disclosure bar and original source exception • Filed under seal • Relator share: • If government intervenes, 15 to 25 percent • If government declines to intervene, 25 to 30 percent • Heightened pleading requirement
  5. 5. Why Protect FCA Whistleblowers? • “Few individuals will expose fraud if they fear their disclosures will lead to harassment, demotion, loss of employment, or any other form of retaliation.” • FCA “seeks to halt companies and individuals from using the threat of economic retaliation to silence whistleblowers, as well as assure those who may be considering exposing fraud that they are legally protected from retaliatory acts.” S. Rep. No. 99-345, at 34 (1986).
  6. 6. FCA Retaliation: Scope of Coverage • Protects: • Employees; • Contractors; and • Agents
  7. 7. FCA Protected Conduct • 2 forms of protected conduct: • 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 the FCA
  8. 8. FCA Protected Conduct • In furtherance of qui tam: • Investigating a potential FCA violation • Opposing FCA violation internally • Reporting FCA violation to the government • Assisting a qui tam relator • Some courts limit the first prong to actions taken in furtherance of a viable False Claims Act case
  9. 9. FCA Protected Conduct • Efforts to stop FCA violation: • The focus of the second prong is preventative—stopping “violations” – and it is met if the whistleblower demonstrates that he took lawful measures to stop or avert what he reasonably believed would be a violation of the FCA. • Purpose of second prong is to untether protected efforts from the need to show that an FCA action is in the offing • “[A] layperson should not be burdened with the ‘sometimes impossible task’ of correctly anticipating how a given court will interpret a particular statute.” Singletary v. Howard Univ., No. 18-7158, 2019 WL 4554535 (D.C. Cir. Sept. 20, 2019).
  10. 10. FCA Protected Conduct • Disclosures about fraud committed by a third party are protected. O’Hara v. Nika Technologies, Inc., 2017 WL 6542675 (4th Cir. Dec. 22, 2017) • § 3730(h) does not condition protection on the employment relationship between a whistleblower and the subject of his disclosures. • Protection under the statute depends on the type of conduct that the whistleblower discloses—i.e., a violation of the FCA—rather than the whistleblower’s relationship to the subject of his disclosures.
  11. 11. Duty Speech/“Step Out” Defense • Malanga v. NYU Langone Med. Ctr., 2015 WL 7019819 (S.D.N.Y. Nov. 12, 2015) (FCA) (duty speech doctrine invalid post-FERA) • United States ex rel. Reed v. KeyPoint Government Solutions, No. 17-1379, (10th Cir. Apr. 30, 2019) • Senior Quality Control Analyst discovered fraud while performing job duties and reported it through her chain of command. • Not protected because job duties may have required her to seek remedial action from employees other than her direct supervisor.
  12. 12. FCA Prohibited Retaliation • Adverse actions: • discharged; • demoted; • suspended; • threatened; • harassed; or • in any other manner discriminated against in the terms and conditions of employment.
  13. 13. FCA Prohibited Retaliation Constructive Discharge • If an employer ignores or fails to remediate a whistleblower’s internal disclosures, does that constitute constructive discharge? • Smith v. LHC Grp., Inc., 727 F. App'x 100 (6th Cir. 2018) • Smith raised concerns about employees altering reimbursement paperwork and making false representations about staffing for the purpose of admitting patients • As Director of Nursing, Smith was concerned about potential prosecution and jeopardizing her nursing license. • Company ignored her disclosures and failed to take remedial action • Requiring an employee “to engage in activity she considers illegal and immoral” may create intolerable working conditions
  14. 14. FCA: Causation • FCA retaliation claims require proof of ‘but-for’ causation. DiFiore v. CSL Behring, LLC, 879 F.3d 71, 78 (3d Cir. 2018). • “But for” caution is not tantamount to sole factor causation. Burrage v. United States, 134 S. Ct. 881, 888-89 (2014) (an act is a “but-for” cause “[even if it] combines with other factors to produce the result, so long as the other factors alone would not have done so – if, so to speak, it was the straw that broke the camel’s back.”)
  15. 15. Proving Causation • Pretext/inconsistent or shifting explanations • Close temporal proximity • Retaliatory animus • Suspicious timing • Disparate treatment • Deviation from company policies
  16. 16. FCA Retaliation Remedies • Reinstatement • 2 times the amount of back pay • Uncapped special damages • Emotional distress • Reputational harm • Humiliation
  17. 17. FCA Retaliation Remedies • In lieu of reinstatement, a judge can award front pay to compensate plaintiff until such time as they can regain their former career track. • Get expert analysis and testimony about career damage • Track mitigation efforts • Analyze available comparable positions • Document harm to reputation
  18. 18. FCA Retaliation Procedure • 3-year statute of limitations • Heightened pleading standard does not apply • No exhaustion requirement • Retaliation claim can be brought under seal
  19. 19. Interplay of FCA Qui Tam and FCA Retaliation • Respect the seal (breaching seal waives relator share) • If retaliation claim is not under seal, it may open the door for employer discovery • Settling a retaliation claim with a global release can waive the right to relator share if the whistleblower has disclosed the fraud to the government
  20. 20. NDAA Retaliation Provisions •DoD, NASA, and Coast Guard Contractors, 10 U.S.C. § 2409 •Contractors of other agencies, 41 U.S.C. § 4712
  21. 21. NDAA Scope of Coverage •Covers employees of nearly all government contractors, subcontractors and grantees, and personal services contractors •Excludes contractors of Intelligence agencies
  22. 22. NDAA Protected Conduct • Broad scope of protected conduct: • Violation of law, rule, or regulation relating to federal contracts, including competition for or negotiation of a contract; • Gross mismanagement, gross waste of federal funds, abuse of authority; or • Substantial and specific danger to public health or safety
  23. 23. NDAA Prohibited Retaliation • NDAA whistleblower provisions bar a broad range of retaliatory acts, including: • discharging; • demoting; or • otherwise discriminating against a whistleblower.
  24. 24. NDAA Causation and Affirmative Defense • “Contributing factor” causation • Knowledge and timing suffice (WPA standard) • Same-decision affirmative defense must be proven by clear and convincing evidence
  25. 25. NDAA Remedies • Reinstatement • Back pay • Uncapped compensatory damages (emotional distress damages); and • Attorney fees and costs
  26. 26. NDAA Procedure • Must file initially with OIG • Complainant can remove to federal court 210 days after filing • OIG investigates and issues report • Not later than 30 days after receiving IG report, agency head required to act on findings • Contractors and grantees have 60 days from the issuance of an order to appeal to Circuit Court.
  27. 27. FCA or NDAA?
  28. 28. FCA Anti-Retaliation Provision Sections 827 and 828 of NDAA Coverage Employee, contractor, or agent Employee of a contractor, subcontractor, or grantee/personal services contractor Protected Conduct Lawful acts done by the employee, contractor, agent or associated others 1) in furtherance of an action under the FCA or 2) other efforts to stop 1 or more violations -Violation of law, rule, or regulation related to a federal contract -Gross mismanagement of a federal contract or grant -Gross waste of federal funds -Abuse of authority relating to a federal contract or grant -Substantial and specific danger to public health or safety Administrative Exhaustion File directly in federal court Must file initially at OIG; can remove to federal court after 210 days Causation Standard “But for” causation (not sole factor) Contributing Factor Damages Double back pay, reinstatement, special damages (emotional distress damages and harm to reputation), attorney fees Back pay, reinstatement, special damages, attorney fees Statute of Limitations 3 years 3 years
  29. 29. Pleading Considerations • With the exception of hostile work environment, each adverse action has its own statute of limitations (although time-barred acts are still evidence) • Administrative exhaustion requirement for each adverse action • Split of authority about pleading standard at administrative agencies • Advantages and disadvantages to pleading multiple claims
  30. 30. Additional Claims • State FCAs • SOX if employer is public company • State whistleblower protection statutes • State common law wrongful discharge claims • Haddle v. Garrison, 525 U.S. 121 (1998) (intimidation or retaliation against witnesses in federal-court proceedings)
  31. 31. Prohibition Against “Gag Clauses” in NDAs • The rights and remedies provided for in the NDAA may not be waived by any agreement, policy, form, or condition of employment • Federal Acquisition Regulation 3.909-1 prohibits confidentiality agreements that prevent employees from reporting waste, fraud, or abuse to the government • SEC Rule 21F-17
  32. 32. FAR 3.909-1 3.909-1 Prohibition. (a) The Government is prohibited from using fiscal year 2015 and subsequent fiscal year funds for a contract with an entity that requires employees or subcontractors of such entity seeking to report waste, fraud, or abuse to sign internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or subcontractors from lawfully reporting such waste, fraud, or abuse to a designated investigative or law enforcement representative of a Federal department or agency authorized to receive such information. See section 743 of Division E, Title VII, of the Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 113-235) and its successor provisions in subsequent appropriations acts (and as extended in continuing resolutions.)
  33. 33. Using Company Documents • Avoid mass, indiscriminate downloading • Assume that employer will perform forensic analysis of client’s work computer and network activity • Avoid reviewing privileged documents • If client potentially has privileged communications, warn DOJ/SEC/CFTC so that they can screen the documents using taint team
  34. 34. Using Company Documents • Determine early on what client possesses and how client obtained the information • Warn client about gathering evidence post-termination or resignation • If pursuing only retaliation claim, consider having current employee index key documents and provide the documents to in- house or outside counsel for preservation