How to Manage a Potential Whistleblower

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Dominique L. Casimir, Jennifer A. Short, and Michael Joseph Montalbano 

Jennifer A. Short headshot image

The federal False Claims Act (“FCA”) is one of the United States’ most effective tools to detect and prevent fraud against the Government. One reason the FCA is so effective is that it encourages the employees of an organization to come forward as claimants and receive a share of any financial recovery to the Government. Recognizing the central role of these whistleblowers in the FCA’s enforcement scheme, Congress included an anti-retaliation provision in the statute that protects them when they report suspected fraudulent conduct. Under the FCA’s anti-retaliation provision, employees, contractors, or agents can sue for damages on their own behalf if they are “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done” in connection with a reported FCA violation. 31 U.S.C. § 3730(h)(1). Likewise, nearly every state also affords some degree of whistleblower protection, either statutorily or in the common law.

Despite the potential financial incentives, in most cases, employees are reluctant to become whistleblowers. Often, they first raise their concerns internally with management, and turn to the Government only after reaching the difficult conclusion that their employer is not taking their concerns seriously. Employers that respond appropriately to their employees’ complaints can reduce the likelihood that an internal complaint becomes a costly FCA matter. The following strategies can be successful in managing employees who have raised concerns about potential FCA or other legal violations:

      • Don’t panic that an employee has come forward to make a report. The fact that your employees are aware of and willing to utilize existing reporting channels is a good thing.
      • Assume that the reporting employee has good faith motivation for coming forward and treat the employee accordingly. Treating a reporting employee poorly can work to the detriment of the employer. Rather than taking a defensive posture, acknowledge the employee’s contribution. An effective compliance program encourages employees to speak up when they notice something amiss. Recognizing the employee for utilizing the company’s reporting channels, whether done informally or through the evaluation process, helps convey that the company takes compliance matters seriously.
      • Assure the employee that the issue will be investigated and resolved. Give the employee some idea of what to expect. For instance, let them know that the investigation may take some time to complete, and whether information about the investigation will or will not be made available, consistent with existing company policy. Where possible, offering the employee a point of contact can demonstrate that the employer values the employee’s report and reduce the likelihood that the employee feels ignored.
      • Take seriously all employee complaints and concerns, including those that are not specifically directed at potential noncompliance or fraud. Sometimes employees complain about issues unrelated to fraud, including inequitable compensation, being overworked, or difficult supervisors. Addressing these issues effectively can instill confidence in the company’s reporting channels and in the competence of management and create a culture that supports ethical conduct and reporting of concerns.
      • Document the basis for any negative employment actions taken against the reporting employee. Reporting a potential legal violation is not a “get out of jail free” card. If an employee is underperforming or otherwise violates company rules, the employer may still react as appropriate toward the employee, particularly where such actions are based on objective metrics such as sales numbers, revenue targets, and hours. There is currently a circuit split as to whether the FCA’s anti-retaliation provision applies to former employees (with the Tenth Circuit holding that the FCA does not apply to post-termination retaliatory conduct and the Sixth Circuit holding the opposite), and Congress is considering amendments to the FCA to make the application to former employees express. While the law is in flux, companies are advised to document any decisions not to rehire former employees who have previously raised concerns regarding potential FCA violations.

In short, an employee making a report can be a good thing, if handled correctly. Mistakes in this area can be costly. Leveraging the strategies outlined above can better ensure that a potential whistleblower elects to work with the company and its established processes.

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