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False Claims Act Amendments Expand Anti-Retaliation Protections for Whistleblowers and Potential Liability for Government Contractors and Health Care Providers

11/5/2009 1:52:27 PM

by Kevin J, Darken,

The False Claims Act (FCA), a key source of protection for government contractor whistleblowers, was amended by the Fraud Enforcement and Recovery Act of 2009. This article summarizes major changes made to the False Claims Act to expand both its anti-retaliation provisions and the potential liability of government contractors and health care providers.

Changes to Anti-Retaliation Provisions of 31 U.S.C. § 3730(h)

The anti-retaliation provisions of 31 U.S.C. § 3730(h) have been broadened to protect not only employees, but also contractors and agents of federal contractors. Congressman Howard Berman, the House sponsor of the False Claims Act Amendments, explained that “this amendment will ensure that Section 3730(h) protects physicians from discrimination by health care providers that employ them as independent contractors, and government subcontractors from discrimination and other retaliation by government prime contractors.”

As amended, Section 3730(h) now protects against retaliation for “lawful acts done by the employee, contractor, or agent on behalf of the employee, contractor or agent or associated others in furtherance of other efforts to stop one or more [FCA] violations ....” 31 U.S.C. § 3730(h). Congressman Berman explained that the purpose of this amendment was to make it clear that the FCA covers the following types of retaliation that whistleblowers commonly have faced over the course of the last 20 years: (i) retaliation against not only those who actually file a qui tam action, but also against those who plan to file a qui tam that never gets filed, who blow the whistle internally or externally without the filing of a qui tam action, or who refuse to participate in the wrongdoing; (ii) retaliation against the family members and colleagues of those who have blown the whistle; and (iii) retaliation against contractors and agents of the discriminating party who have been denied relief by some courts because they are not technically “employees.”

Congressman Berman added:

[t]his language is intended to make clear that this subsection protects not only steps taken in furtherance of a potential or actual qui tam action, but also steps taken to remedy the misconduct through methods such as internal reporting to a supervisor or company compliance department and refusals to participate in the misconduct that leads to the false claims, whether or not such steps are clearly in furtherance of a potential or actual qui tam action.

Congressman Berman explained that the language protecting individuals from employment retaliation when “associated others” attempted to stop FCA violations “is intended to deter and penalize indirect retaliation by, for example, firing a spouse or child of the person who blew the whistle.”

Congressman Berman specified that the amended Section 3730(h) “does not in any way require that a qui tam plaintiff must have refused to engage in the misconduct or tried to stop the fraud internally before he or she may avail themselves of the incentives and protections of the False Claims Act.” The False Claims Act Amendments do not change existing law that “[a]n individual who participates in the fraud, and who for whatever reason does not challenge the misconduct within his or her organization, is still entitled to a relator’s award and the protections of Section 3730(h) unless he or she is otherwise barred by a specific provision in the law.”

Expansion of “Claim” to Include Claims Made to Contractors and Grantees

In recent decisions, the Supreme Court held that liability under the FCA for knowing false statements was limited to false statements made to get false claims paid directly by the federal government, Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008), and the District of Columbia Circuit held that FCA liability for submitting false claims was limited to claims presented directly to the federal government. U. S. ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2005). The FCA amendments were specifically designed to reverse these decisions. Accordingly, the FCA no longer requires the direct presentment of a claim for payment. Instead, claims made to contractors, grantees, and other recipients can form the basis for FCA violations “if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest, and if the United States Government (I) provides or has provided any portion of the money or property requested or demanded, or (II) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded ....” 31 U.S.C. § 3729(b)(2)(A). Demands for payment as compensation for federal employment and as an income subsidy without use restrictions are excluded from this definition. 31 U.S.C. § 3729(2)(B).

The Senate report specifies that the FCA Amendments “clarif[y] the position taken by the Committee in 1986 that the FCA reaches all false claims submitted to State administered Medicaid programs.”

Liability for Knowing Retention of Any Overpayment

The False Claims Act now contains language making it an FCA violation to knowingly conceal or knowingly and improperly avoid or decrease an “obligation” to pay or transmit money or property to the Government. 31 U.S.C. § 3729(a)(1)(G). The definition of “obligation” has been expanded greatly to include “the retention of any overpayment.” 31 U.S.C. § 3729(b)(3). The Senate report states that “the violation of the FCA for receiving an overpayment may occur once an overpayment is knowingly and improperly retained, without notice to the Government about the overpayment.”

Congressman Berman explained that if a corporation learns after-the-fact that it has been violating a billing rule or a contract requirement in its billing, and it nonetheless fails to comply with a legal obligation to disclose the resulting overpayments, this amendment renders the corporation liable under the Act for all overpayments resulting from the violation of the billing rule or contract requirement, even those not specifically identified or quantified.

Materiality Requirement for False Records or Statements

The False Claims Act now clearly requires that false records or statements must be material to getting a false or fraudulent claim paid in order to be actionable. However, “material” is broadly defined as “a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” 31 U.S.C. § 3729(b)(4).

Effective Date of Amendments

The FCA amendments generally are effective “on the date of enactment” and apply “to conduct on or after the date of enactment,” which was May 20, 2009. One exception is that the provision reversing the Allison Engine decision is made retroactive to June 7, 2008, and applies to all FCA claims pending on or after that date.

Conclusion

The False Claims Act Amendments should be of interest to employment litigators, as well as to health care lawyers and qui tam practitioners. The amendments provide whistleblowers with expanded protections against retaliation and broaden the ability of whistleblowers to bring False Claims Act cases.

Kevin J. Darken brings False Claims Act qui tam cases for relators at the Tampa law firm of Cohen, Foster & Romine. He is a former Assistant United States Attorney and Health Care Fraud Coordinator for the United States Attorney’s Office for the Middle District of Florida. Mr. Darken is the author of a health care fraud treatise (Defending and Preventing Health Care Fraud Cases: An Attorney’s Guide: CCH/Aspen, 10th ed. 2008).

Kevin J. Darken

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