When it comes to whistleblower claims, employers in the healthcare and defense industries must consider an additional piece of legislation: the federal False Claims Act (FCA). Based on the sharp increase in FCA whistleblowers bringing major actions against health care organizations and other businesses in recent years, the need for a sharpened awareness is not unfounded.
Under the FCA, individual whistleblowers, referred to as “relators,” bring lawsuits on behalf of the government alleging that some entity (generally their employer) has somehow defrauded the federal government by either overcharging or misspending federal money. One potential motivation to bring such a claim? Money. And a lot of it. The government shares monies it recovers with relators, who generally receive between 15 and 25 percent of any recovered damages. From 1987 to 2013, the government recovered $38.9 billion under the False Claims Act and $27.2 billion (or 70%) was from qui tam cases brought by relators.
Employers should be aware that the FCA also contains an anti-retaliation provision. Should an employer discipline or discharge a “relator” in retaliation for bringing an FCA suit, the relator is entitled to double damages plus attorney fees in addition to reinstatement (which is on top of sharing in the financial recovery for the government).
As noted above, companies in the healthcare industry (pharmaceutical settlements are among the FCA’s largest) and businesses who contract with the military or other government spending programs have all been the subject of huge multi-million dollar settlements. These settlements have, in turn, resulted in major payments to the original whistleblowers.
Ultimately, if you are an employer in an industry that receives federal funds or that does business directly with the federal government, it is important to carefully scrutinize all of your employment actions and put all employment and compensation arrangements in writing. For example, an experienced business lawyer can assist you in ensuring that employee compensation is at “fair market value” and that no salary is being used to incentivize an illegal purpose, as well as provide you with guidelines on how employee expenses relating to gifts, meals, and other nonmonetary compensation should be monitored for best practices.
Lastly, like all other areas of California employment law, preparation is key. Prioritize the training of management on the ins and outs of the FCA and set up effective avenues of internal reporting of potential violations, followed by prompt investigation.
For more information on the FCA and avoiding whistleblower claims, contact experienced Los Angeles business lawyer Drew E. Pomerance today.