Whistleblower Retaliation Claims — Are You Prepared?

11 March 2013 Labor & Employment Law Perspectives Blog

Publicity about whistleblower claims and recoveries continues to grab headlines. The recent confession by Lance Armstrong highlighted the blood doping allegations behind his seven Tour de France titles and on the whistleblower claim by his former teammate, Floyd Landis, who initially made the allegations. The U.S. Postal Service has now joined Landis’s whistleblower case under the False Claims Act, seeking to recover more than $40 million that it paid to sponsor the Armstrong racing team for years.

Not all whistleblower claims have such a high profile; however, whistleblowers have brought claims alleging fraud and other misconduct in almost every industry. Many of the claims relate to alleged overbilling in government contracting, particularly in the defense industry and, in the health care industry, to accusations of Medicare fraud by, among other claims, billing Medicare for medical services that were not performed. The Dodd-Frank legislation in 2010 established the Office of the Whistleblower to accept tips about potential financial fraud at public companies and created the much-publicized bounty program to reward substantial recovery to whistleblowers. The SEC reported after the first year of OWB operations that it received over 3,000 tips of alleged financial misconduct and made its first bounty award under the program.

A recent report about the types of litigation anticipated by in-house general counsel in U.S. and European companies reflected that one-third of those companies responding expect whistleblower complaints to increase, with 25 percent noting that their companies had faced whistleblower allegations in the past three years.

The Department of Labor also issued an interim final rule late last month amending the FLSA to protect employee whistleblowers who give their employers, the government, or state attorneys general information that they reasonably believe may violate consumer protection provisions of the Affordable Care Act, such as about insurers who deny coverage based on pre-existing conditions. The new rule will provide, among other things, that a complaint covered by the whistleblower protections can be made orally and need not be made in English. As such, one can easily predict the disputes that will arise about whether a complaint was made, to whom it was made, and what conduct was allegedly complained about.

This continuous focus on whistleblowers and possible financial awards requires that employers remain vigilant about another potential risk of employee whistleblower activity — retaliation claims. Whether or not a whistleblower qualifies for a bounty payment under the SEC rules or has uncovered Medicare fraud, that employee can still assert and win a retaliation claim.

Unlike the rules that determine if a whistleblower may share in the recovery from a False Claims Act suit, employee protections against retaliation may apply if the employee merely had a reasonable belief that he or she reported illegal activity. The employee’s allegations about illegal conduct may, under certain statutes like Title VII, be wrong, but still be protected against retaliation as a whistleblower. Therefore, now is as good a time as ever to take a fresh look at your policies and practices concerning potential retaliation claims. For example, you should have a strong, written anti-retaliation policy. Even if you do, you should ensure that your managers are trained to recognize conduct that could constitute retaliation and to appreciate that adverse action far less than termination or demotion can be considered retaliatory. For example, the Supreme Court has said that changing an employee’s schedule or excluding her from an important business activity could constitute retaliation depending on the circumstances.

Your training program should also include advising your supervisors that adverse action against someone who is not a whistleblower, but who has a close relationship with a whistleblower, can be considered retaliation against the whistleblower. For example, if a co-worker has a close personal relationship with a whistleblower, terminating, demoting, or taking other action against the co-worker could form the basis for an associational retaliation claim by the whistleblower even if the co-worker is not a family member. Finally, as with all discrimination or retaliation complaints, make sure that you have a full understanding of the conduct complained of and that you perform a thorough investigation that includes interviews of the whistleblower and the person(s) identified in the complaint Taking steps like these will help to position your company more favorably if you find yourself on the wrong end of a whistleblower claim.

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