Whistleblowers in the Age of Stimulus Chapter 9 ! Whistleblowers in the Age of Stimulus Dan Hargrove Hargrove & Rea, P.C. Historic One Ten Broadway 110 Broadway, Suite 550 San Antonio, Texas 78205 (210) 223-9700 [email protected]www.Govtfraudlawyer.com State Bar of Texas Advanced Employment Law Course 2011 January 13-14, 2011 Austin, Texas CHAPTER 9
Hargrove's State Bar of Texas article for the 2011 Advanced Labor and Employment Law Course
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Mr. Hargrove represents businesses and individuals in matters involving federal government contracts, the FALSE CLAIMS ACT (qui tam), whistleblower actions, and health care fraud. Mr. Hargrove was named The 2004 San Antonio Young Lawyer of the Year by the San Antonio Young Lawyers Association, a Rising Star for 2004 & 2005 by TEXAS MONTHLY, and has been named as one of San Antonio’s best employment attorneys by SCENE IN SA MONTHLY.
PROFESSIONAL AFFILIATIONS
Admitted:
Supreme Court of the United States
U.S. Court of Appeals, Fifth Circuit
All U.S. District Courts in Texas
Court of Federal Claims
Court of Appeals for the Armed Forces
All Texas courts
Organizations:
Taxpayers Against Fraud
Federal Bar Association (San Antonio chapter Board Member)
Society of American Military Engineers (Board Member)
Southwest Foundation for Biomedical Research, Founder’s Council
Reserve Officers Association
San Antonio Trial Lawyers Association
PRACTICE AREAS
! FALSE CLAIMS ACT (qui tam)
! Health Care Fraud ! Federal Government Contracts
! Whistleblower Actions
BACKGROUND
Mr. Hargrove focuses his practice on the FALSE CLAIMS ACT (whistleblower and qui tam litigation), federal government contracts, and health care fraud. Before forming Hargrove & Rea, P.C., Mr. Hargrove practiced with Jenkens & Gilchrist,
P.C. and served for six years on active duty with the U.S. Army JAG Corps (10th Mountain Division (Light Infantry) and the
82nd Airborne Division) and deployed to the Middle East. He continues to serve in the Army Reserves, with the rank of
Lieutenant Colonel, and is an Assistant Professor of Law at the U.S. Army JAG School.
EDUCATION
! U.S. Army JAG School, LL.M. (Federal Procurement Law) 2003
! St. Mary’s University School of Law, J.D. 1994
! Texas A&M University, B.S. 1991 (Honors Program; Corps of Cadets; ROTC Scholarship)
! Rotary International Exchange Student (Sweden) 1986
NOTABLE PUBLICATION
Daniel L. Hargrove, Soldiers of Qui Tam Fortune—Are Servicemembers Proper Plaintiffs Under the False Claims Act, 34
GEORGE WASH. U. SCHOOL OF LAW PUBLIC CONTRACT LAW JOURNAL 45 (2004)
I. INTRODUCTION ............................................................................................................................................1
II. THE DODD-FRANK ACT OF 2010 ..............................................................................................................2
A. Overview of the DODD-FRANK ACT’S Bounty Programs and Protections for
Whistleblowers Against Reprisal ..........................................................................................................2
B. The SEC Whistleblower (Bounty) Incentive Program ............................................................................2 1. Introduction to the SEC Incentive Program (Section 922) ...........................................................2
2. Who may File an SEC Bounty Claim...........................................................................................3
3. Who is Precluded from being Paid an Award...............................................................................4
4. Statute of Limitations to File a Bounty Claim..............................................................................4 5. The SEC’s Administrative Process...............................................................................................4
6. No Right to Judicially Appeal an SEC Bounty Determination ....................................................4
C. New Reprisal Cause of Action for SEC Whistleblowers that can be Filed in U.S. District Court (no exhaustion of administrative remedies required)...........................................5
D. Resources – DODD-FRANK ACT’S SEC Bounty Programs and Protections for
Whistleblowers Against Reprisal ............................................................................................................6 E. The Commodity Futures Trading Commission Whistleblower Bounty Program and
Anti-Reprisal Protections for Whistleblowers ........................................................................................6
1. Introduction to the CFTC Incentive (Bounty) Program (Section 748).........................................7
2. Who may File a CFTC Bounty Claim ..........................................................................................7 3. Who is Precluded from being Paid a CFTC Bounty Claim..........................................................8
4. Statute of Limitations....................................................................................................................8
5. The CFTC Administrative Process ...............................................................................................8 6. Whistleblower can Judicially Appeal the Commission’s Bounty Determination ........................9
F. New Reprisal Cause of Action for CFTC Whistleblowers ......................................................................9
1. Whistleblowers Protected Against Reprisal (no exhaustion of administrative remedies required) .......................................................................................................................9
G. Resources – DODD-FRANK ACT’S CFTC Bounty Programs and Protections for
Whistleblowers Against Reprisal ............................................................................................................9 H. New Reprisal Cause of Action for Whistleblowers in the “Financial Services Industry”
(Section 1059 of the Dodd-Frank Act)..................................................................................................10
1. Introduction to Section 1057 of the DODD-FRANK ACT.............................................................10 2. Who is Covered...........................................................................................................................10
a. Emlpoyee .........................................................................................................................10
b. Employer .........................................................................................................................10
3. What is Protected ........................................................................................................................10 4. The Process (employee must exhaust administrative remedies before filing lawsuit) ...............10
a. Administrative .................................................................................................................11
b. Judicial ............................................................................................................................11 c. Burden of Proof ...............................................................................................................11
III. THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2009 ..........................................12
A. Overview of the HEALTH CARE ACT ....................................................................................................12 B. Section 1558 – Protections for Whistleblowers ....................................................................................12
1. Introduction to Section 1558 - Scope of Coverage and Protections ...........................................12
2. Procedure and Limitations ..........................................................................................................13
IV. THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 (THE “RECOVERY ACT”) ........................................................................................................................14
A. Introduction ...........................................................................................................................................14 B. Retaliation Cause of Action for Whistleblowers ...................................................................................14
1. Who is Covered ..........................................................................................................................14
2. What is Protected ........................................................................................................................14 3. Administrative Process ...............................................................................................................15
6. Remedies.....................................................................................................................................15 7. Employee-Favorable Burden of Proof........................................................................................15
C. Additional Matters .................................................................................................................................15
V. THE CONSUMER PRODUCT SAFETY COMMISSION REFORM ACT OF 2008 ................................16
A. Protections for the Consumer Safety Whistleblower ............................................................................16 B. Who is Covered .....................................................................................................................................16
C. What is Protected...................................................................................................................................16
D. Statute of Limitations ............................................................................................................................16
E. Remedies................................................................................................................................................16 F. Process ...................................................................................................................................................16
G. Resources...............................................................................................................................................17
VI. AMENDMENTS TO THE FALSE CLAIMS ACT ...................................................................................17
A. THE FRAUD ENFORCEMENT AND RECOVERY ACT of 2009 ..................................................................17
1. Expanding protections to the retaliation cause of action (31 U.S.C. §3730(h)) .........................17 B. THE HEALTHCARE ACT .........................................................................................................................18
C. Section 1079A(b) of the DODD-FRANK ACT.........................................................................................19
VII. THE IRS WHISTLEBLOWER REWARD PROGRAM .......................................................................................19
A. Introduction to the IRS Whistleblower Reward Program .....................................................................19 B. Filing an IRS Informant Reward Claim ................................................................................................20
3. Full Disclosure............................................................................................................................20
4. Eligibility to File a Claim for Award..........................................................................................20 5. Identity of the Whistleblower .....................................................................................................21
C. Appealing to the U.S. Tax Court ...........................................................................................................21
D. Resources...............................................................................................................................................21
VIII. UNIQUE ISSUES FACING FEDERAL GOVERNMENT CONTRACTORS .......................................21
A. Introduction ..........................................................................................................................................21 B. Whistleblower Protections for Contractor Employees ..........................................................................22
1. Who and What is Protected ........................................................................................................22
2. Procedure ....................................................................................................................................22 3. Remedies, Enforcement, and Review .........................................................................................22
C. Recent Changes to the Federal Acquisition Regulation Require Contractors to Disclose ....................23
D. The Federal Awardee Performance and Integrity Information System ................................................23
IX. CONCLUSION ............................................................................................................................................24
A. Major False Claims Act cases settled in 2010........................................................................Appendix 2
B. New Anti-Retaliation Legislation that Voids Arbitration Agreements ..................................Appendix 4 C. IRS Form 211 .........................................................................................................................Appendix 5
D. Proposed SEC Form WB-APP ...............................................................................................Appendix 8
E. Proposed CFTC Form TCR, TIP, Complaint or Referral .....................................................Appendix 14
Whistleblowers in the Age of Stimulus Chapter 9
!
$"
"
Whistleblowers in the Age of
Stimulus
I. INTRODUCTION
While it may come as a surprise to many, the
Federal Government has insufficient legal and investigative resources to enforce the laws it passes
and protect programs such as Medicare. Given this
reality, Congress is increasingly turning to whistleblowers to root out and report fraud. The
FALSE CLAIMS ACT, originally enacted during the
Civil War,1 has proven to be the Government’s most
powerful and effective fraud-fighting tool. It has been hugely successful, recovering over $25 billion for the
Government since 1986. Some of the recoveries have
been astronomical. On September 2, 2009, the Department of Justice announced that Pfizer agreed to
settle a qui tam case for $2.3 billion, from which six
whistleblowers were awarded payments of more than $102 million. In October 2010, GlaxoSmithKline
settled with the Department of Justice for $750
million in a qui tam case, from which the
whistleblower will receive $96 million. The FALSE
CLAIMS ACT, which primarily relies upon
whistleblowers to bring evidence of fraud to the
Government,2 has two powerful weapons in its arsenal. First, the FALSE CLAIMS ACT allows a
private citizen, on behalf of the Government, to
prosecute a qui tam3 action against those who commit
""""""""""""""""""""""""""""""""""""""""""""""""""""""""1 For a history of the FALSE CLAIMS ACT, see Dan L.
Hargrove, Soldiers of Qui Tam Fortune: Do Military
Service Members Have Standing to File Qui Tam Actions
Under the False Claims Act?, 34 PUB. CONT. L.J. 45, 51-53
(2004). 2 For the purposes of this article, “Government” means the
United States Government, as opposed to other
governments such as the State of Texas. While many
states, Texas included, have qui tam statutes, this article
focuses on federal law. See, e.g., THE TEXAS MEDICAID
36.117 (providing for citizen qui tam actions as it relates to
fraud committed against the Texas Medicaid program). 3 “Qui tam is short for the Latin phrase “qui tam pro
domino rege quam pro se ipso in hac parte sequitur,”
which means ‘who pursues this action on our Lord the
King’s behalf as well as his own.’” Vermont Agency of
Natural Res. v. United States ex rel. Stevens, 529 U.S. 765,
769 n.1 (2000) (citing 3 W. BLACKSTONE, COMMENTARIES
ON THE LAW OF ENGLAND 160 (1768)). A “qui tam action”
is “an action brought under a statute that allows a private
fraud against the Government. 31 U.S.C. §§3729 et
seq. The whistleblower, called a relator, is entitled to
be rewarded a percentage of what the Government
recovers, ranging from ten to thirty percent, plus attorneys fees and costs. 31 U.S.C. §3730(d).
Second, the FALSE CLAIMS ACT protects
whistleblowers in their employment by providing a
cause of action for acts of reprisal by an employer. 31 U.S.C. §3730(h).
The success of the FALSE CLAIMS ACT has encouraged Congress to further rely upon
whistleblowers to ensure compliance with the law. A
number of statutes have recently been enacted that
allow the Government to pay a “bounty” to a whistleblower. Recognizing a whistleblower acts at
his peril, Congress has also cloaked whistleblowers
with protections by creating causes of action for reprisals committed against them by their employers.
This article surveys these new whistleblower laws that
have been enacted since 2007. These laws can be divided into two categories. On one side of the ledger
are those laws that protect whistleblowers from acts of
reprisal by employers. An example of such a law is
Section 1057 of the DODD-FRANK ACT, which
"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""person to sue for a penalty, part of which the government or
some specified public institution will receive—Also termed
popular action.—Often shortened to qui tam (Q.T.).”
BLACKS’S LAW DICTIONARY 1262 (7th ed. 1999).
Blackstone explained qui tam as follows:
More usually, these forfeitures created by
statute are given at large, to any common
informer; or, in other words, to any such person or persons as will sue for the same:
and hence such actions are called popular
actions, because they are given to the
people in general. Sometimes one part is
given to the king, to the poor, or to some
public use, and the other part to the
informer or prosecutor, and then the suit is
called a qui tam action, because it is
brought by a person, “qui tam pro domino
rege quam pro se ipso in hac parte
sequitur.” If the king therefore himself commences this suit, he shall have the
whole forfeiture. But if any one hath
begun a qui tam, or popular action, no
other person can pursue it; and the verdict
passed upon the defendant in the first suit
is a bar to all others, and conclusive even
to the king himself.
Whistleblowers in the Age of Stimulus Chapter 9
!
2
"
protects financial services industry employees who
report certain violations of the law against reprisal by their employers. On the other side of the ledger are
those laws that reward or give a bounty to an informer
who presents evidence of fraud to the Government, commonly called “bounty or informer” laws. The IRS
Whistleblower Reward Program and the DODD-
FRANK ACT Whistleblower Incentive Program are
examples of recently enacted bounty laws. Among all of the laws surveyed in this article, the FALSE CLAIMS
ACT is unique in that it is the only statute that has a
qui tam provision, which permits a whistleblower to sue for himself and the Government with the
entitlement to be awarded a percentage of what the
Government recovers.4
II. THE DODD-FRANK ACT OF 2010
A. Overview of the DODD-FRANK ACT’S
Bounty Programs and Protections for
Whistleblowers Against Reprisal
On July 21, 2010, President Obama signed into
law the DODD-FRANK WALL STREET REFORM AND
CONSUMER PROTECTION ACT (DODD-FRANK ACT or
ACT). H.R. 4173, Pub. L. No. 111-203, 124 Stat 1841, 111th Congress (July 21, 2010). The DODD-FRANK
ACT is massive in scope and significantly changes the
law. It strengthens existing whistleblower protections and attempts to close “loop-holes” for employees in
the financial services industry. Of significance is the
ACT’S creation of bounty programs, new anti-reprisal claims that can be filed against employers, and a new
administrative process for the adjudication of some of
those reprisal and bounty claims. The bounty
provisions are not qui tam actions, but rather allow the Government to pay an award to an informer who
""""""""""""""""""""""""""""""""""""""""""""""""""""""""4 Qui tam enlists the public in the recovery of civil
penalties and forfeitures. It rewards with a portion of the
recovered proceeds those who sue in the government’s
name. Qui tam lives on in federal law only in the FALSE
CLAIMS ACT and in two minor examples found in patent
and Indian protection laws. In Vermont Agency of Natural
Resources v. United States ex rel. Stevens, the Supreme Court identified four contemporary federal qui tam statutes:
the FALSE CLAIMS ACT, the PATENT ACT, and two Indian
protection laws. 529 U.S. 765, 768-69 n.1 (2000), referring
to 31 U.S.C. §§3729-3733; 35 U.S.C. §292; 25 U.S.C. §81;
and 25 U.S.C. §201, respectively. A fifth, not identified, 26
U.S.C. §7341 (sale of untaxed, taxable property), appears to
have been rarely used. One of the Indian protection
statutes, 25 U.S.C. §81, has since been amended so that it
no longer authorizes a qui tam action.
presents information that leads to a financial recovery
by the Government.
By April 21, 2011, the Securities and Exchange
Commission (SEC) is required to issue final regulations implementing the whistleblower
provisions of the DODD-FRANK ACT. On November
3, 2010, the SEC published its proposed
administrative rules for implementing the whistleblower provisions. See Proposed Rule, SEC
File Number S7-33-10 (“Proposed Rule 21F”)
(proposing to amend 17 C.F.R. Parts 240 and 249).5 Many believe that the real legislative fight will be
over the content of the regulations. Comments are
due by December 17, 2010.6 Further, the SEC’s
Division of Enforcement is in the process of establishing a Whistleblower Office. The SEC has
posted a vacancy announcement for a Senior Officer
to serve as head of the office and is in the process of evaluating applicants, with a selection expected in the
near future. Staffing of the Whistleblower Office will
proceed after the head is selected. Finally, the SEC’s Office of the Inspector General is required to issue a
report on the efficacy of the Act’s whistleblower
bounty program by December 2013 to evaluate the
merits of the program.
B. The SEC Whistleblower Incentive
(Bounty) Program
1. Introduction to the SEC
Whistleblower Incentive Program
(Section 922)
Section 922 of the DODD-FRANK ACT, entitled
“Whistleblower Protection,” amended the SECURITIES
EXCHANGE ACT of 19347 by creating a bounty
program for whistleblowers who provide “original
information” to the SEC about securities violations that result in the imposition of monetary sanctions
greater than $1 million. This new program is called
the “Securities Whistleblower Incentives and
Protection.” The SEC will award between ten to thirty percent of the money collected to a
whistleblower who voluntarily provides the SEC with
""""""""""""""""""""""""""""""""""""""""""""""""""""""""%" " Securities and Exchange Commission, Proposed Rules
for Implementing the Whistleblower Provisions of Section
21F of the Securities and Exchange Act of 1934, Proposed
may remove their claims to U.S. District Court and
have the right to a jury trial. Id. Finally, arbitration agreements are void and a court is not authorized to
enforce waivers of a whistleblower’s rights under
SOX. DODD-FRANK ACT §922(c), amending 18
U.S.C. §1514A(e) (providing that any “agreement,
""""""""""""""""""""""""""""""""""""""""""""""""""""""""21 Section 929A of the DODD-FRANK ACT provides:
Section 1514A of title 18, United States Code, is amended by inserting ‘‘including any subsidiary or
affiliate whose financial information is included in
the consolidated financial statements of such
company’’ after ‘‘the Securities Exchange Act of
1934 (15 U.S.C. 78o(d))’’.
"
policy form, or condition of employment, including a
predispute arbitration agreement” which waives the rights and remedies afforded to SOX whistleblowers
to be “nonenforceable”.)
III. THE PATIENT PROTECTION AND
AFFORDABLE CARE ACT OF 2009
A. Overview of the HEALTH CARE ACT
THE PATIENT PROTECTION AND AFFORDABLE
CARE ACT OF 2009 (HEALTH CARE ACT or ACT) is a massive piece of legislation. Pub. L. No. 111-148,
124 Stat. 119 (Mar. 21, 2010). Congress continued
its recent trend of relying upon whistleblowers to
enforce compliance of the laws it passes. Section 1558 creates a robust whistleblower cause of action
that protects employees against reprisal by employers.
Section 6703 is interesting in that it makes whistle blowing mandatory—that is, Section 6703 requires an
employee to report crimes committed against residents
of federally funded long-term care facilities. Unlike the DODD-FRANK ACT or the IRS Whistleblower
Program, however, Congress did not create a new
bounty program for whistleblowers. Such a new
bounty program was unnecessary most likely because the qui tam provisions of the FALSE CLAIMS ACT have
proven to be extremely effective in combating health
care fraud.
B. Section 1558 – Protections for
Whistleblowers
1. Introduction to Section 1558 - Scope
of Coverage and Protections
Section 1558 prohibits an employer from
retaliating against an employee who blows the whistle
about violations of Title I of the ACT. (Title I is expansive in its coverage, ranging from denial of
health care insurance due to pre-existing conditions to
failure to rebate excess premiums.) An employer may
not “discharge or in any manner discriminate against any employee with respect to his or her compensation,
terms, conditions, or other privileges of employment
because the employee . . . [makes a protected report].” HEATH CARE ACT. at §1558, amending §18C(a)(2) of
the FAIR LABOR STANDARDS ACT OF 1938. Protected
reports include internal reports to an employer, the Federal Government, or a state attorney general about
“any violation of, or any act or omission the employee
reasonably believes to be a violation of [Title I of the
Whistleblowers in the Age of Stimulus Chapter 9
!
13
"
ACT].” Id. In addition to these internal and external
reports, the ACT protects an employee who “testified or is about to testify in a proceeding” related to
violations of Title I of the ACT. Id. at §18C(a)(3).
The ACT also protects an employee who participates or assists another in a proceeding related to violations
of Title I of the ACT. Id. at §18C(a)(4). Finally, the
ACT protects an employee who objects or refuses to
participate in “any activity, policy, practice, or assigned task that the employee (or other such person)
reasonably believed to be in violation of [the ACT] or
any order, rule, regulation, standard, or ban under [the ACT]. Id. at §18C(a)(5). As it relates to this last
protected activity, an employee need only show that
he had a reasonable belief, even if mistaken, that a
violation of Title I of the Act and its subsequent regulations and policies occurred.
2. Procedure and Limitations
Section 1558 simply incorporates the procedures,
burden-shifting framework, remedies and statute of limitations set forth in the CONSUMER PRODUCT
SAFETY IMPROVEMENT ACT OF 2008. Pub. L. No.
110-314 (Aug. 14, 2008), codified at 15 U.S.C.
§2087(b). An employee must first exhaust his administrative remedies by filing a complaint with the
Occupational Safety and Health Administration
(OSHA) within 180 days of the employee becoming aware of the employer’s act of reprisal. OSHA is
required to investigate the complaint and has authority
to order preliminary relief, including reinstatement. Either party can appeal OSHA’s determination to the
Department of Labor (DoL) for a de novo review by a
DoL administrative law judge. A DoL judge does not
have the authority, however, to stay an OSHA order of reinstatement. Either side can appeal the DoL judge’s
decision to the DoL Administrative Review Board,
and either party can appeal that decision to the circuit court of appeals in which the adverse action took
place. In the alternative, if the DoL fails to issue a
final decision within 120 days of the filing of the
employee’s complaint, or within 90 days of receiving a written determination from OSHA, the employee
can remove the claim to U.S. district court for a de
novo review, and either party can request trial by jury. 15 U.S.C. §2087(b)(4).
3. Remedies
An employer can be ordered to reinstate the
employee. In addition, the employee can be awarded
back pay with interest, “special damages,” attorneys
fees, litigation costs, and expert witness fees. Front pay can be awarded where reinstatement is not
feasible. THE PATIENT PROTECTION AND
AFFORDABLE CARE ACT OF 2009 at §1558, incorporating 15 U.S.C. §2087(b)(4) (CONSUMER
PRODUCT SAFETY IMPROVEMENT ACT OF 2008).
4. Arbitration Agreements Void
Consistent with the recent trend of voiding
arbitration agreements, the HEALTH CARE ACT
explicitly makes void arbitration agreements.
HEALTH CARE ACT at §1558, amending §18C(b)(2) of
the FLSA (providing “[t]he rights and remedies in this
section may not be waived by agreement, policy, form, or condition of employment.”).
C. Reporting Requirements for Federally
Funded Long-Term Care Facilities – The ELDER
JUSTICE ACT
The ELDER JUSTICE ACT, set out in Section 6703
of the HEALTH CARE ACT, requires whistle blowing.22
See HEALTH CARE ACT at §6703, amending Part A of
title XI of the SOCIAL SECURITY ACT. First, a covered entity must educate its employees of their
whistle blowing duties. Specifically, an owner or
operator of a long-term care facility that receives at least $10,000 in federal funds per year must inform its
employees that they are required to report crimes
committed against the facility’s residents. In turn, the facility’s employees are required to report to the
Secretary of Health and Human Services and to local
law enforcement “any reasonable suspicion of a crime
(as defined by the law of the applicable political subdivision) against any individual who is a resident
of, or is receiving care from, the facility.” Id.
1. Timing
""""""""""""""""""""""""""""""""""""""""""""""""""""""""22 Such mandatory whistle blowing appears to be the trend. For example, the FEDERAL ACQUISITION REGULATION was
amended, effective December 12, 2008, to require federal
government contractors to disclose credible evidence of
certain criminal acts and violations of the False Claims Act
committed by its employees or subcontractors. See
FEDERAL ACQUISITION REGULATION at ¶3.1003(a)(2)
(mandating self-disclosure and providing for suspension
and debarment for failure to self-disclose). See Part VIII of
this article, supra.
Whistleblowers in the Age of Stimulus Chapter 9
!
14
"
If the events that raise suspicion result in serious
bodily injury, the suspected crime must be reported immediately and not more than “2 hours after forming
the suspicion.” All other suspected crimes must be
reported within 24 hours. Id. at § 1150B(b)(2).
2. Penalties
The failure to report a suspected crime can expose an employee, manager, or contractor to a civil
penalty of up to $300,000. Id. at § 1150B(c)(2)(A).
In addition, the ELDER JUSTICE ACT prohibits retaliation against an employee “because of lawful
acts done by the employee.” Id. at § 1150B(d)(1)(A).
If a long-term elderly care facility were to discharge,
threaten, harass, or otherwise retaliate against an employee for making or helping to make a report
about a crime being committed against residents of the
facility, the facility would face a civil monetary penalty of up to $200,000.00 or being excluded from
any federal healthcare program for two years. Id. at
§1150B(d)(2).
IV. THE AMERICAN RECOVERY AND
REINVESTMENT ACT OF 2009 (THE
“RECOVERY ACT”)
A. Introduction
The AMERICAN RECOVERY AND REINVESTMENT
ACT OF 2009 (the “RECOVERY ACT”)23 was an
amazing piece of legislation for many reasons. Pub. L 111-5, (February 17, 2009). In addition to the
hundreds of billions of dollars injected into the
economy, Congress also created perhaps the most
robust whistleblower protections ever enacted. Section 1553 of the RECOVERY ACT, called the
“McCaskill Amendment,” covers all who receive
funds under the RECOVERY ACT (to include state and local governmental entities), protects employee
internal disclosures, has a burden-shifting mechanism
favorable for employees, and allows for significant
remedies that can be prosecuted in federal court. But of course the McCaskill Amendment has a limited
shelf life because the RECOVERY ACT was a one-time
appropriation. Is should be noted that the RECOVERY
ACT has no qui tam or bounty provision; such an
incentive was unnecessary because the qui tam
provisions of the FALSE CLAIMS ACT can be used
""""""""""""""""""""""""""""""""""""""""""""""""""""""""23 Pub. L. 111-5.
when suing those who24 submit false claims as it
relates to RECOVERY ACT funds.
B. Retaliation Cause of Action for
Whistleblowers
1. Who is Covered
The McCaskill Amendment applies to any non-federal employer who receives funds under the
RECOVERY ACT. RECOVERY ACT at §1553(g)(4).
Covered employers include contractors, subcontractors, grantees, state and local governments,
and basically all other non–Federal employers who
receive a contract, grant, or other payment
appropriated or made available by the RECOVERY
ACT. A covered employee is “an individual
performing services on behalf of the employer” but
does not include any federal employee or military service member. RECOVERY ACT at §1553(g)(3). It
is not entirely clear whether contractors are covered.
2. What is Protected
Protected conduct includes a disclosure to a
person with supervisory authority over the employee (i.e., internal disclosures), a State or Federal
regulatory or law enforcement agency, a member of
Congress, a court or grand jury, the head of a Federal agency, or an inspector general about information that
the employee reasonably believes evidences:
• Gross mismanagement of an agency contract
or grant relating to stimulus funds;
• A gross waste of stimulus funds;
• A substantial and specific danger to public
health or safety related to the implementation
or use of stimulus funds;
• An abuse of authority related to the implementation or use of stimulus funds; or
• A violation of a law, rule, or regulation that
governs an agency contract or grant related to
stimulus funds.
""""""""""""""""""""""""""""""""""""""""""""""""""""""""24 States and their governmental subdivisions are immune
from the FALSE CLAIMS ACT. They are, however, subject to
the McCaskill Amendment and can be sued for acts of
reprisal taken against their employees.
Whistleblowers in the Age of Stimulus Chapter 9
!
15
"
RECOVERY ACT at §1553(a). The McCaskill
Amendment specifically protects so–called “duty speech” whistleblowing such as disclosures made by
employees in the ordinary course of performing their
job duties.
3. Administrative Process
The employee who believes he has been improperly retaliated against must file a complaint
with the inspector general (IG) for the agency that is
administering the stimulus funds. RECOVERY ACT at §1553(b)(1). For example, if the Department of
Transportation (DoT) is administering the funds, then
the employee would file his complaint with the DoT’s
IG. Unless the IG determines the action is frivolous, does not relate to covered funds, or has been resolved
in another Federal or State administrative proceeding,
the IG must conduct an investigation and make a determination on the merits of the whistleblower
retaliation claim no later than 180 days after receipt of
the complaint. RECOVERY ACT at §§1553(b)(1) and (2). Within 30 days of receiving an IG’s investigative
findings, the head of the agency shall determine
whether there has been a violation, in which event the
agency head can award the employee reinstatement, back pay, compensatory damages, and attorney fees.
RECOVERY ACT at §1553(c)(2).
4. Judicial Process
If an agency head has denied relief in whole or in part or has failed to issue a decision within 210 days
of the filing of a complaint, the employee can bring a
de novo action in federal court, which shall be tried by
a jury at the request of either party. RECOVERY ACT at §1553(c)(3).
5. Arbitration Agreements Void
The McCaskill Amendment explicitly states that
pre–dispute arbitration agreements do not apply to
RECOVERY ACT whistleblower claims, unless such waivers are part of a collective bargaining unit.
RECOVERY ACT at §§1553(d)(2) & (3). Moreover, an
employee may not waive his rights and remedies provided in the McCaskill Amendment, again, unless
such waivers are part of a collective bargaining unit.
RECOVERY ACT at §§1553(d)(1) & (3).
6. Remedies
At the administrative level, the agency head has
authority to order the employer to make whole the employee. Such an order can include: (1)
reinstatement; (2) back pay; (3) compensatory
damages; and (4) attorneys fees and litigation costs. RECOVERY ACT at §1553(c)(2). If the employee
prosecutes his action in federal court, then he can be
awarded the same remedies. RECOVERY ACT at
§1553(c)(3). Where an agency files an action in federal court to enforce an order of relief for a
prevailing employee, the court may also award
exemplary damages. RECOVERY ACT at §1553(c)(4).
7. Employee-Favorable Burden Of
Proof
To prevail in a whistleblower action under the
McCaskill Amendment, an employee need not show
that the protected conduct was a significant or motivating factor in the reprisal, but instead must
merely prove that the protected conduct was a
“contributing factor” to the reprisal. RECOVERY ACT at §1553(c)(1). An employee need not present direct
evidence of retaliatory motive by the employer, but
instead can establish the “contributing factor” element
through temporal proximity or by demonstrating that the decision maker knew of the protected disclosure.
RECOVERY ACT at §1553(c)(1)(A)(i) and (ii). An
employer can avoid liability by demonstrating by “clear and convincing evidence,” a high evidentiary
burden, that it would have taken the same action in the
absence of the employee engaging in protected conduct. RECOVERY ACT at §1553(c)(1)(B).
C. Additional Matters
1. Section 3.907 of the FEDERAL ACQUISITION
REGULATION was amended to incorporate the
McCaskill Amendment, and applies to all RECOVERY
ACT contracts funded in whole or in part by that Act.
Contracting officers are instructed to use and include clause 52.203-15, Whistleblower Protections Under
the American Recovery and Reinvestment Act of
2009, in all solicitations and contracts funded in whole
or in part with Recovery Act funds.
2. The RECOVERY ACT web page is at
http://www.recovery.gov/Pages/default.aspx.
3. The Federal Acquisition Regulation is at
https://www.acquisition.gov/Far/.
Whistleblowers in the Age of Stimulus Chapter 9
!
16
"
V. THE CONSUMER PRODUCT SAFETY
COMMISSION REFORM ACT OF 2008
A. Protections for the Consumer Safety
Whistleblower
Given the concerns about the safety of products intended for children, Congress enacted the
CONSUMER PRODUCT SAFETY COMMISSION REFORM
ACT (CPSC ACT). Pub. L. No. 110-314 (Aug. 14, 2008), codified at 15 U.S.C. § 2051 et seq. Congress
created new whistleblower protections for employees
of manufacturers, private labelers, distributors, or
retailers of consumer products. See 15 U.S.C. §2087. Covered employees are protected from discharge or
any other form of retaliation resulting from the
employee’s report to the employer, the Federal Government, or a state attorney general of information
relating to any violation of statutes or regulations
enforced by the U.S. Consumer Product Safety
Commission (CPSC).
B. Who is Covered
THE CPSC ACT covers employees of consumer product manufacturers, importers, private labelers
(owners of a brand or trademark on the private label of a consumer product), distributors, and retailers. 15
U.S.C. §2087(a). The CPSC regulates about 15,000
types of consumer products used in the home, schools and recreation. A "consumer product," as defined
under the CONSUMER PRODUCT SAFETY ACT,
generally means any article, or component part thereof, produced or distributed: (i) for sale to a
consumer for use in or around a permanent or
temporary household or residence, a school, in
recreation, or otherwise, or (ii) for the personal use, consumption or enjoyment of a consumer in or around
a permanent or temporary household or residence, a
school, in recreation, or otherwise. 15 U.S.C.
§2052(5).
C. What is Protected
An employer may not discharge or in any other manner retaliate against the employee because he
provided, caused to be provided or was about to
provide or cause to be provided to the employer, the federal government, or the attorney general of a state
information relating to any violation of, or any act or
omission that the employee reasonably believed to be
a violation of, the CPSC ACT or any other Act
enforced by the CPSC, or any order, rule, regulation,
standard or ban under any such Acts. 15 U.S.C. §2087(a)(1).
In addition, an employer may not discharge or in any manner retaliate against an employee because he
testified in, participated in or assisted in a proceeding
under the laws, orders, rules, regulations, standards or
bans enforced by the CPSC. Also, an employer may not discharge or in any manner retaliate against an
employee because he objected to, or refused to
participate in, any activity, policy, practice, or assigned task that he reasonably believed to be in
violation of any provision of the CPSC ACT or any
other Act enforced by the CPSC, or any order, rule,
regulation, standard or ban under any such Acts. 15 U.S.C. §2087(a)(2-4).
D. Statute of Limitations
A complaint setting forth the facts and
identifying the responsible party must be filed with the Secretary of Labor no later than 180 days after the
date on which the violation occurs. 15 U.S.C.
§2087(b)(1).
E. Remedies
A prevailing employee is entitled to: (1) reinstatement; (2) backpay; (3) compensatory
damages; and (4) attorney fees and litigation costs, to
include expert witness fees. 15 U.S.C. §2087(b)(3).
F. Process
The employee must file a complaint with the Department of Labor (DoL) within 180 days of the
employee first becoming aware of the retaliatory
adverse action. The Occupational Safety and Health Administration (OSHA) will investigate the claim and
can order preliminary relief, including reinstatement.
Either party can appeal OSHA’s determination by
requesting a de novo hearing before a DoL administrative law judge. Either party may seek
review of the administrative law judge’s decision
before the DoL’s Administrative Review Board. Either party can appeal the Board’s decision to the
appropriate circuit court of appeals. 15 US.C. §
2087(b)(5). If there is no final order issued by the Secretary of Labor within 210 days from the date the
complaint was filed, then the employee can remove
the case to U.S. District Court. 15 U.S.C. §
Whistleblowers in the Age of Stimulus Chapter 9
!
17
"
2087(b)(4).
The CPSC ACT whistleblower must prove, by a
preponderance of the evidence, that (1) he engaged in
protected conduct; (2) the employer knew that the employee had engaged in protected conduct; (3) the
employer took adverse action against the employee;
and (4) the protected conduct contributed to the
employer’s decision to take an adverse action. 15 U.S.C. § 2087(b)(2)(B).
G. Resources
• The CPSIA web page:
http://www.cpsc.gov/about/cpsia/cpsia.html
• The U.S. Department of Labor, OSHA, The
Whistleblower Protection Program web page, is at: https://iforms.osha-
slc.gov/dep/oia/whistleblower/consumer-
product-industry-employees.html
• The OSHA office for Texas is in Dallas,
phone number (972) 850-4145.
VI. RECENT AMENDMENTS TO THE FALSE
CLAIMS ACT
With its qui tam
25 provision,26 protections for
whistleblowers,27 and powerful investigative
""""""""""""""""""""""""""""""""""""""""""""""""""""""""25 See notes 3 and 4, supra. 26 31 U.S.C. §3730(b)-(e). 27 31 U.S.C. §3730(h) provides:
Any employee who is discharged, demoted,
suspended, threatened, harassed, or in any
other manner discriminated against in the
terms and conditions of employment by his or
her employer because of lawful acts done by
the employee on behalf of the employee or
others in furtherance of an action under this
section, including investigation for, initiation
of, testimony for, or assistance in an action filed or to be filed under this section, shall be
entitled to all relief necessary to make the
employee whole. Such relief shall include
reinstatement with the same seniority status
such employee would have had but for the
discrimination, 2 times the amount of back
pay, interest on the back pay, and
compensation for any special damages
sustained as a result of the discrimination,
discovery tools,28 the FALSE CLAIMS ACT is the
Federal Government’s most effective fraud fighting tool. Since 2009, Congress has amended the FALSE
CLAIMS ACT in three separate pieces of legislation.
The most significant change to the FALSE CLAIMS
ACT occurred in 2009 with the enactment of THE
FRAUD ENFORCEMENT AND RECOVERY ACT of 2009.
Then in 2010, using the HEALTH CARE ACT, Congress
modified the “public disclosure bar” which was causing many meritorious qui tam cases to be
dismissed on jurisdictional grounds. And, most
recently in October 2010, Congress used the DODD-FRANK ACT to provide for a three-year statute of
limitations for anti-retaliation claims.
A. THE FRAUD ENFORCEMENT AND
RECOVERY ACT of 2009
1. Expanding Protections to the Anti-
Retaliation Cause of Action (31
U.S.C. §3730(h))
THE FRAUD ENFORCEMENT AND RECOVERY ACT
OF 2009 (FERA) amended the retaliation cause of action of the FALSE CLAIMS ACT. S. Res. 386, 111th
Cong., Pub. L. No. 111-21, 123 Stat. 1620-25
(enacted), to be codified at 31 U.S.C. §3730(h). Most
importantly, the amendments to Section 3730(h) widen the scope of protected conduct and expand the
zone of protected individuals. Prior to FERA, in order
to prevail on a “Section 3730(h) claim,” an employee had to prove his employer retaliated against him
because he was taking steps in furtherance of a qui
tam action.29 Reporting fraud or violations of the FALSE CLAIMS ACT was insufficient to establish a
retaliation claim. Section 3730(h) now protects an
employee who is taking steps to stop fraud by, for
example, making internal reports or refusing to participate in the misconduct that leads to fraud, false
claims, or violations of the FALSE CLAIMS ACT. A
"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""including litigation costs and reasonable
attorneys’ fees. An employee may bring an
action in the appropriate district court of the United States for the relief provided in this
subsection.
28 31 U.S.C. §3733 (authorizing the Attorney General, or
his delegate [U.S. Attorney] to issue civil investigative
demands). 29 See, e.g., United States ex rel. Yesudian v. Howard
University, 153 F.3d 731 (D.C. 1998) (listing elements for a
retaliation claims)."
Whistleblowers in the Age of Stimulus Chapter 9
!
18
"
whistleblower is no longer required to prove he was
actually pursuing a qui tam action in order to
prosecute a relation claim.
Additionally, prior to FERA, Courts frequently concluded that the FALSE CLAIMS ACT did not cover
associational discrimination30 and retaliation against
subcontractors because they did not meet the technical definition of “employee.” FERA amended Section
3730(h) to explicitly protect the whistleblower’s
colleagues and family members. Contractors and
agents are also protected from retaliation.
Below is a redline version of the changes to
Section 3730(h) made by the FERA (the blue font is
new statutory language; the red font is the repealed
statutory language):
'h) Any employee whoRELIEF FROM
RETALIATORY ACTIONS.—
(1) IN GENERAL.—Any employee,
contractor, or agent shall be entitled to
all relief necessary to make that employee, contractor, or agent whole, if
that employee, contractor, or agent is
discharged, demoted, suspended,
threatened, harassed, or in any other manner discriminated against in the
terms and conditions of employment by
his or her employer because of lawful acts done by the employee, contractor, or
agent on behalf of the employee or,
contractor, or agent or associated others in furtherance of an action under this
section, including investigation for,
initiation of, testimony for, or assistance
in an action filed or to be filed under this section, shall be entitled to all relief
necessary to make the employee whole.
Such relief other efforts to stop 1 or more violations of this subchapter.
31 U.S.C. §3730(h).
B. THE HEALTH CARE ACT Amended the
“Original Source” Definition of the FALSE
CLAIMS ACT
""""""""""""""""""""""""""""""""""""""""""""""""""""""""30 For example, retaliation against the family members and
colleagues of those who have blown the whistle.
THE PATIENT PROTECTION AND AFFORDABLE
CARE ACT (HEALTH CARE ACT), amended the FALSE
CLAIMS ACT’S definition of “original source.” H.R.
3590, 111th Cong., Pub. L. 111–148, 124 Stat. 901-
902, §10104(j)(2) (amending 31 U.S.C. §3730(e)(4)) (enacted on Mar. 23, 2010).""This amendment expands
the scope of the “original source” exception to the
“public disclosure bar.” The amendment also shifts
the “public disclosure bar” from a jurisdictional prohibition to a more flexible standard, with
discretionary power held by the Department of
Justice. Under the former language, most courts held that a qui tam case had to be dismissed if the
allegations were based upon a “public disclosure”
because courts considered the public disclosure bar to
be jurisdictional.31 The sources of a public disclosure were many, ranging from records requests under the
FREEDOM OF INFORMATION ACT, to state criminal or
civil actions, and even to news media stories. Consequently, many meritorious qui tam actions were
dismissed because they were based on a “public
disclosure”, as that term had been construed by the courts. Congress, primarily Senator Charles Grassley
(a strong supporter of the FALSE CLAIMS ACT), sought
to amend the language of the public disclosure bar in
order to prevent courts from dismissing meritorious qui tam cases on the basis they were jurisdictionally
barred under the public disclosure bar.
The amendment to Section 3730(e)(4) also
narrows the definition of what constitutes publicly
disclosed information and expands the scope of the original source exception. The new language expands
the definition of “original source” by removing the
requirement that a qui tam relator have "direct"
knowledge of the facts underlying the allegations. It is now sufficient for a qui tam relator to simply have
"knowledge that is independent of and materially adds
to the publicly disclosed allegations . . . ." A qui tam relator's allegations can now be based on indirect or
secondhand information, provided those allegations
add to whatever information is already contained in
the public domain.
The amendment to Section 3730(e)(4) also means
that a “public disclosure” resulting from a government report, hearing, audit or investigation must be from a
federal government source in order to bar a qui tam
""""""""""""""""""""""""""""""""""""""""""""""""""""""""31 See, e.g., United States ex rel. Quinn v. Springfield
Terminal Ry., 14 F.3d 645 (D.C. Cir. 1994) (concluding a
court would not have jurisdiction over a qui tam case where
the allegations were based upon a public disclosure).
Whistleblowers in the Age of Stimulus Chapter 9
!
19
"
relator's claim. Public disclosures in state or local
government reports or proceedings will no longer trigger the jurisdictional bar. Finally, despite their
inclusion in a health care statute, the amendment to
the FALSE CLAIMS ACT is not limited to qui tam cases involving federal health care programs. Rather, the
amendment applies to every qui tam case.
Below is the new language of Section 3730(e)(4)
made by the HEALTH CARE ACT:
(A) The court shall dismiss an action or
claim under this section, unless opposed by the Government, if substantially the
same allegations or transactions as alleged
in the action or claim were publicly disclosed--(i) in a Federal criminal, civil,
or administrative hearing in which the
Government or its agent is a party; (ii) in a
congressional, Government Accountability Office, or other Federal
report, hearing, audit, or investigation; or
(iii) from the news media, unless the action is brought by the Attorney General
or the person bringing the action is an
original source of the information.
(B) For purposes of this paragraph,
“original source'” means an individual
who either (i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily
disclosed to the Government the
information on which allegations or transactions in a claim are based, or (2)
who has knowledge that is independent of
and materially adds to the publicly
disclosed allegations or transactions, and who has voluntarily provided the
information to the Government before
filing an action under this section.
C. Section 1079A(b) of the DODD-FRANK
ACT Amended the FALSE CLAIMS ACT by
Explicitly Providing a Three-year Statute of
Limitations to bring a Retaliation Claim
Section 1079A of the DODD-FRANK ACT established a three-year statute of limitations in which
to file retaliation lawsuit. Section 3730(h) of the
FALSE CLAIMS ACT now provides: “LIMITATION ON BRINGING CIVIL ACTION.—A civil action
under this subsection [3730(h)] may not be brought
more than 3 years after the date when the retaliation