On March 31, 2021, in United States ex rel. Felten v. William Beaumont Hospital, No. 20-1002, 2021 WL 1204981 (6th Cir. Mar. 31, 2021), the U.S. Court of Appeals for the Sixth Circuit held that the False Claims Act’s (FCA) anti-retaliation provision protects former employees alleging post-termination retaliation. The decision creates a split with the Tenth Circuit, which held in 2018 in Potts v. Center for Excellence in Higher Education, Inc., 908 F.3d 610 (10th Cir. 2018), that former employees are excluded from the scope of the FCA’s anti-retaliation provision. While current employees are undoubtedly protected under the provision, Felten ultimately leaves the question of whether former employees may recover for post-termination retaliation under the FCA unsettled across all circuits.
In Felten, David Felten filed a qui tam complaint alleging that his then-employer, William Beaumont Hospital, was violating the FCA and the Michigan Medicaid False Claims Act by paying kickbacks to various physicians and physicians’ groups in exchange for referrals of Medicare, Medicaid, and TRICARE patients. Mr. Felten also alleged that Beaumont had retaliated against him by threatening and marginalizing him for insisting on compliance with the law.
After the United States and Michigan intervened and settled the qui tam claim, Mr. Felten amended his federal complaint to add allegations of retaliation that took place after he filed his initial lawsuit. He alleged that he was terminated and had been unable to obtain a comparable position because Beaumont had intentionally maligned him in retaliation for his reports of unlawful conduct, undermining his employment applications to almost forty institutions.
The Sixth Circuit found that the term “employee,” as it appears in the FCA’s anti-retaliation provision, includes both current and former employees. In reaching this conclusion, the Sixth Circuit adopted the approach used by the Supreme Court in Robinson v. Shell Oil Co., 519 U.S. 337 (1997). In Robinson, the Supreme Court held that the term “employees” in § 704(a) of Title VII of the Civil Rights Act of 1964 is ambiguous and could be read to refer to both current and former employees.
Because it ultimately found that the meaning of the term “employee” is ambiguous, the Sixth Circuit conducted a subsequent analysis of the broader context and purpose of the FCA. Relying once again on the approach used in Robinson, the court explained that the purpose of the FCA’s anti-retaliation provision is to encourage the reporting of fraud and to facilitate the federal government’s ability to stymie crime by protecting individuals who assist in its discovery and prosecution. According to the court, excluding former employees from the FCA’s anti-retaliation protections would ultimately frustrate the purpose of this provision by allowing employers to threaten, harass, and discriminate against employees without repercussions so long as they fire them first. For this reason, the Sixth Circuit concluded that the anti-retaliation provisions of the FCA may be invoked by a former employee for post-termination retaliation by a former employer.
The Sixth Circuit’s decision expands FCA anti-retaliation provisions to former employees. Because two different federal appellate courts have interpreted the FCA’s coverage of former employees in two different ways, this is the kind of issue that could be appealed to the U.S. Supreme Court. Until the Supreme Court has the opportunity to definitively resolve the issue, the question of whether former employees are covered by the anti-retaliation provisions of the FCA is unsettled and it remains to be seen whether other federal appellate courts adopt the Sixth or Tenth Circuit’s approach to this issue. Out of an abundance of caution, federal contractors should generally assume that the Sixth Circuit’s broader definition of “employee” will apply, until more clarity is provided by the U.S. Supreme Court or until the federal Circuit Courts reach a consensus on this issue.