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 the employee's 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 $2.2 billion for qui tam plaintiffs under the False Claims Act in its 2020 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.
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 to discriminate 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:
Employees are protected from such retaliation under SOX if they provide such information or assistance to:
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.
Nearly $15 million was awarded to whistleblowers under Dodd-Frank in 2013. In September 2014, the SEC authorized an award of more than $30 million to a whistleblowing employee, the largest award by the SEC to date.
Employers should be cautious and aware of changes to Dodd-Frank in the upcoming years. The last of Dodd-Frank supervisory regulations went into effect in 2018, however there may be changes under the new administration.
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 relation 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:
The burden of proof for covered individual seeking relief is that their protected activity was a contributing factor in the adverse action the employer took against them. If the employer demonstrates by clear and convincing evidence that it would have taken the same personnel action int he absence of the protected activity, the DOL cannot provide relief for the covered individual.
The act specifically includes that any relief shall include: