FCA does not protect whistleblowers from retaliation if they are no longer employees: US Appeals Court

On November 6, dismissing a whistleblower lawsuit, the United States Court of Appeals for the Tenth Circuit ruled that the False Claims Act (FCA) does not protect whistleblowers from retaliation once they are no longer employees.

The False Claims Act Retaliation Provision states:

The anti-retaliation provision of the False Claims Act protects employees, contractors or other agents of a company from being "discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer" because the employee, contractor, or agent investigated, reported or sought to stop a company from engaging in practices which defraud the United States government.

To prove that a company retaliated against an employee, contractor, or other agent in violation of 31 U.S.C. §3730(h), an individual must demonstrate that: 1) she engaged in protected activity under [Title VII], (2) the employer was aware of this activity, (3) the employer took adverse action against the plaintiff, and (4) a causal connection exists between the protected activity and the adverse action, i.e., that a retaliatory motive played a part in the adverse employment action.

This ruling stems from a case wherein a campus director, Debbi Potts, at “CollegeAmerica Denver, Inc.

(CollegeAmerica), a predecessor of the Center for Excellence in Higher Education, Inc,” resigned when she learned that CollegeAmerica was violating accreditation standards.

However, CollegeAmerica filed a lawsuit after Debbi breached her contract not to discuss the accreditation violations upon her resignation.

On the other hand, responding to the lawsuit, Debbi submitted a whistleblower complaint to the Accrediting Commission of Career Schools and Colleges against CollegeAmerica and a lawsuit alleging that CollegeAmerica violated the anti-retaliation provision of the FCA.

Observing that “a former employee—one whose allegedly protected acts had occurred exclusively after employment ended—could not rely on the FCA’s anti-retaliation provision”, the district court therefore dismissed Debbi’s complaint.

The court noted that “employee” under the FCA does not include former employees, stating that “what matters is the employee’s employment status when the employer retaliates.”

The court concluded, “The retaliatory acts stated in the FCA can only occur when the employed is still employed; thus, the FCA could not be read to include former employees.”