The federal False Claims Act has been in effect since 1863, but employees have been using the act recently to recover large amounts of money from their employers, sometimes with the help of the federal government. Under this federal act, an employee may file suit against his or her employer for suspected fraud against the federal government. These lawsuits are called “qui tam” actions and the individual initiating the lawsuit is referred to as a “relator.”
The act permits an employee to receive from 15% to 30% of any monies collected by the government in settlement of the claim or as compensation for overcharges made by the employer to the government. The U.S. Department of Justice recovered more than $5.6 billion for qui tam plaintiffs under the False Claims Act in its 2021 fiscal year. The U.S. Attorney General’s office of the United States is authorized under the act to intervene on behalf of the government and then becomes primarily responsible for the prosecution of the case. However, even if the Attorney General intervenes, the employee is still entitled to recover a percentage of amounts received by the government in settlement or otherwise. Employers who do business with the federal government need to be aware that disgruntled employees have this additional option available to them.
The act also prohibits retaliation against an employee who has taken any lawful action in furtherance of bringing a claim under the act. A retaliation claim brought under this provision is not dependent on the outcome of the employee’s qui tam lawsuit.
Massachusetts has its own False Claims law that allows employees to bring qui tam actions against their employers and to recover a portion of the damages awarded in the suit. The mechanics of qui tam actions under the Massachusetts False Claims law are like those described previously. Under the Massachusetts law, employers are prohibited from discharging, demoting, suspending, threatening, harassing “or in any other manner” discriminating against an employee or contractor for pursuing such an action or for their “efforts to stop” the employer from violating the law.
False claims laws can impose serious penalties on employers who retaliate against employees or contractors for alleging, prosecuting or supporting whistleblower actions. Even if the employer is found to have done nothing illegal – to have made no false claims – an employer could still be liable for retaliating against an employee who made a good faith report of such a violation.
The Sarbanes-Oxley Act (SOX) applies generally to publicly traded companies and imposes a number of reporting and disclosure requirements that are designed to provide more transparency with respect to a company’s financial condition and strengthen corporate governance in the aftermath of Enron and its progeny.
Significantly, Section 806 of SOX prohibits a publicly traded company, as well as any officer, employee, contractor, subcontractor or agent or employee of the company (or of any private subsidiary or affiliate, if included on a consolidated financial report), from taking any adverse employment action or discriminating against an employee in the terms and conditions of employment because they “lawfully” provide information, cause information to be provided or otherwise assist in any investigation of conduct of the employer which the employee “reasonably believes” to constitute a violation of:
· the federal criminal statutes prohibiting mail, wire, bank or securities fraud
· any rule or regulation of the Securities and Exchange Commission (SEC)
· any provision of federal law relating to fraud against shareholders.
Employees are protected from such retaliation under SOX if they provide such information or assistance to:
· any federal regulatory or law enforcement agency
· any member of Congress or any Congressional committee
· any person with “supervisory authority” over the employee (or any other such person working for the employer who has authority to “investigate, discover or terminate misconduct”).
The U.S. Department of Labor delegated enforcement authority over the whistleblower provisions of SOX to the Occupational Safety and Health Administration (OSHA). The complaint, investigation and relief procedures as well as court review is beyond the scope of this book, however, an aggrieved employee must take action no later than 180 days after the date the alleged violation has occurred or after the date the employee became aware of the violation.
Section 1107 of SOX imposes criminal penalties, including possible imprisonment for up to 10 years, for retaliating against an employee for providing “truthful” information to a law enforcement officer relating to the commission or possible commission of any federal offense whether or not the offense is a violation of SOX. “Federal offense” is not defined anywhere in SOX or the federal criminal code. Although the term is usually used in reference to criminal violations, courts have used the term in both civil and criminal contexts.
A prevailing employee is entitled under SOX to “all relief necessary to make the employee whole,” specifically including reinstatement with seniority rights, back pay with interest and any “special damages” sustained “as a result of the discrimination,” to include litigation costs, expert witness fees and reasonable attorney fees. SOX specifically provides that nothing in it “shall be deemed to diminish the rights, privileges or remedies of any employee under Federal or State law or any collective bargaining agreement.” Thus, additional remedies beyond those provided for in SOX may be available under state law.
Unlike the False Claims Act, SOX does not allow an individual to bring a “qui tam” lawsuit or to recover a reward, even if the information provided by the employee is used successfully by the government. However, Dodd-Frank (the Wall Street Reform and Consumer Protection Act) amended SOX to create whistleblower protections for any employee providing the SEC with “original” information about and ongoing or imminent violation of securities law, participating in an SEC investigation or making required disclosures under SOX. A whistleblower under Dodd-Frank is protected from retaliation and may bring a cause of action for retaliatory discharge without first pursuing administrative remedies, as is required under SOX.
In addition, a Dodd-Frank whistleblower may recover 10-30% of any SEC penalties recovered as a result of the information provided (if the recovery exceeds a million dollars). The amount of the reward paid to the whistleblower is discretionary with the SEC, but this possibility is used as an incentive to encourage employees, including even compliance officers, to report wrongdoing to the SEC.
The SEC has awarded more than $1 billion to whistleblowers since the agency began its whistleblower program in 2011. In September 2021, the SEC awarded $114 million to a pair of whistleblowers.
An employer may be held liable under SOX even if the employee is incorrect in asserting that a violation of law has occurred, so long as the employee’s belief that a violation has occurred is reasonably held. Further, SOX protects any employee who brings such information to the attention of a supervisor or any other person within the company who has authority to remedy misconduct. Publicly traded employers will need to train managers and supervisors to ensure that they are aware that retaliation against employees who provide such protected information is unlawful.
Internal procedures should also be developed to ensure that protected information is properly reported to responsible officials of the company, including implementation of a Corporate Responsibility Policy as a part of the company’s overall efforts to ensure compliance with legal requirements, as well as to communicate to employees the company’s internal business ethics requirements.
The Criminal Antitrust Anti-Retaliation Act became law on December 23, 2020, and makes it unlawful for employers to take adverse action against employees covered by the act who provide information related to criminal antitrust violations to their employer or to the federal government. The act prohibits retaliation against individuals in participate in a federal investigation or a proceeding filed or about to be filed for criminal antitrust violations.
Covered individuals include:
Retaliating against a covered individual for internally reporting antitrust violations, or reporting the same violations to law enforcement, could expose an employer to significant liability, including the aggrieved employee’s back pay, litigation costs, witness fees and attorney’s fees.
Massachusetts law prohibits public employers, including the state and all political subdivisions (such as cities, counties and public schools) from retaliating against employees for disclosing:
to one of the following people or agencies:
To be protected by the law, the employee must have a good faith, reasonable belief that the disclosure falls into one of the listed categories of information. Retaliating against an employee for making such a disclosure may expose the employer to civil liability for the employee’s lost wages and attorney’s fees. In addition, Massachusetts law makes it a crime for any person (such as a supervisor or human resources professional) to retaliate against an employee for making such a disclosure.
Massachusetts’s at-will employment doctrine is discussed in depth elsewhere in this manual. See Chapter 03: Recruiting and hiring. Although Massachusetts employers are generally allowed to terminate an employee for any reason or no reason at all, they are not allowed to terminate an employee for:
Examples of employees exercising a statutory right include:
In all these examples, the employee has a legal right or duty to do something, so terminating the employee would compromise those right.
Employees engage in protected activity when they refuse to participate in a violation of law, whether it is a statute or a government agency’s administrative regulations. For example, the Massachusetts courts have recognized a wrongful termination claim based on a daycare center employee refusing to work in an understaffed room and another employee’s refusal to commit perjury for the employer. Employees also engage in protected activity when they report illegal conduct internally (to supervisors or human resources professionals) or externally (to law enforcement or other government agencies.)
This exception to the at-will employment doctrine only applies when the employee’s complaint is based on a violation of law or government regulations. If an employer is found to have terminated an employee for exercising a statutory right, refusing to participate in illegal activity or whistleblowing, the employer may be liable to the employee for damages.
This type of wrongful discharge claim can be complicated, so you should seek advice from legal counsel before taking any action against an employee who complains about allegedly illegal activity.
Policies and Forms
Whistleblower protections — Massachusetts
About the Firm
About the Editor
Features of the HR Library
Snapshot – An HR audit
Compliance thresholds — Massachusetts
Recruiting and hiring — Massachusetts
Background checks — Massachusetts
Immigration — Massachusetts
Temporary and leased employees, interns and volunteers — Massachusetts
Independent contractors — Massachusetts
Restrictive covenants and trade secrets — Massachusetts
Policies and procedures manuals — Massachusetts
Wages and hours — Massachusetts
Child labor — Massachusetts
Discrimination — Massachusetts
Disabilities and reasonable accommodation — Massachusetts
Workplace harassment — Massachusetts
Benefits — Massachusetts
Health insurance reform — Massachusetts
Family and medical leave — Massachusetts
Military leave — Massachusetts
Other types of leave — Massachusetts
Performance evaluations — Massachusetts
Personnel Files — Massachusetts
Workplace investigations — Massachusetts
Discipline — Massachusetts
Termination — Massachusetts
Plant closings and mass layoffs — Massachusetts
Health insurance continuation coverage — Massachusetts
Unemployment insurance — Massachusetts
Whistleblower protections — Massachusetts
Privacy rights — Massachusetts
Health insurance portability and privacy — Massachusetts
Protecting electronic information — Massachusetts
The Internet and social media — Massachusetts
Safety and Health — Massachusetts
Workplace violence — Massachusetts
Workers' compensation — Massachusetts
Politics in the workplace — Massachusetts
Celebrating in the workplace — Massachusetts
Federal contractors and affirmative action — Massachusetts
Public employers — Massachusetts
Unions — Massachusetts
Telecommuting — Massachusetts
Drugs alcohol and tobacco — Massachusetts
Diversity in the workplace — Massachusetts
Disaster planning — Massachusetts
Pandemic outbreaks — Massachusetts
Appendix A: Recordkeeping requirements
Appendix B: Posting requirements