Washington Whistleblower Uses State Supreme Court Ruling to Restore Retaliation Claims

October 30, 2015

On September 29, 2015, a federal judge in Washington revived a state retaliation claim against a contractor accused of False Claims Act (FCA) violations, citing a recent Washington State Supreme Court ruling that overturned a previous decision that would have made the FCA retaliation provision the plaintiff’s sole avenue for relief.

Maxmillian Salazar III had sued federal fire-safety contractor Monaco Enterprises, Inc. under the federal False Claims Act based on allegations that the company overbilled the U.S. Government.  Salazar also alleged that Monaco fired him, in violation of Washington state common law, for reporting the overbilling.  In October 2011, the company had fired Salazar, its former Director of Application Engineering, after he reported overbilling he witnessed while performing work related to Monaco’s procurement process.

Under Washington state precedent in place since the decision in Cudney v. Alsco, Inc., 259 P.3d 244 (Wash. 2011), Salazar was barred from bringing the state retaliation claim because the FCA includes its own anti-retaliation provision (31 U.S.C. § 3730(h)).  Cudney held that a plaintiff could not bring a claim of wrongful discharge in violation of public policy under Washington state common law if an alternate remedy for the retaliatory filing existed under any state or federal statute.

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Circuits Split on Dodd-Frank’s Whistleblower Protections

October 14, 2015

In Berman v. Neo@ogilvy LLC, the Second Circuit held that there was enough ambiguity between the Dodd-Frank Act’s definition of “whistleblower” and its anti-retaliation provisions to trigger Chevron deference to the SEC’s interpretation of the statute.  The Second Circuit thus accepted the SEC’s interpretation that Dodd-Frank does not require whistleblowers to report wrongdoing to the SEC to invoke the Act’s employee protection provisions.  This is the opposite conclusion reached by the Fifth Circuit in Asadi v. G.E. Energy (USA), L.L.C., setting the stage for the Supreme Court to resolve the conflict among the Circuits.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. § 78u–6, was passed in 2010 in response to the 2008 economic crash.  Section 922 of Dodd-Frank contains two courses of relief for whistleblowers: a whistleblower can provide information to the SEC and the SEC may provide that whistleblower with a monetary award; or a whistleblower may file a private cause of action against an employer who retaliates because of the whistleblower’s protected disclosures (this latter section is often referred to as the “anti-retaliation provision”).

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MSPB Holds that Hostile Work Environment is an Adverse Action under the Whistleblower Protection Act

October 13, 2015

On September 3, 2015, in Savage v. Dep’t of the Army, the Merit Systems Protection Board held that the creation of a hostile work environment is a prohibited personnel action under the Whistleblower Protection Act.  The Board, in Savage, remanded an initial decision in part because the administrative judge did not consider creation of a hostile work environment a prohibited action under the WPA.

The Whistleblower Protection Act provides relief to federal whistleblowers who 1) disclose activity they reasonably believe is a violation of law, rule, or regulation, and 2) experience a prohibited personnel action as a result.  The WPA defines twelve prohibited personnel actions, including termination, demotion, and transfer.  The twelfth is a catchall for “any other significant change in duties, responsibilities, or working conditions.”  The Savage decision placed hostile work environment claims within this category of prohibited personnel actions.

Tommie Savage was a supervisory Contract Specialist with the U.S. Army Engineer and Support Center in Huntsville, Alabama who received excellent performance ratings throughout her time in the job.  Savage reported activities she believed to be illegal, and her disclosures led to a May 24, 2007 internal audit that the MSPB found validated her concerns.

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OSHA Encourages Nationwide Adoption of “Early Resolution” ADR in Whistleblower Cases

October 07, 2015

On August 18, 2015, the Occupational Safety and Health Administration released a directive to its regional offices to adopt “early resolution” alternative dispute resolution in whistleblower cases.  The directive follows a successful pilot program by OSHA in its Chicago and San Francisco regions.

From October 1, 2012, to September 30, 2013, OSHA ran a pilot ADR program in regions V (Chicago) and IX (San Francisco).  The program provided two options for settling disputes: (1) an “early resolution” process offering parties the assistance of a “neutral, non-decision-making OSHA whistleblower expert;” and (2) a one-day, in-person mediation with a “professional third-party mediator.”

OSHA found the early resolution process a “very effective and viable alternative” to the normal OSHA investigative process.  As a result, OSHA is expanding the pilot program to all of its regional offices, though OSHA did leave regional offices the choice to offer parties additional ADR options.
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Recent Decisions Bring Focus to The Seaman’s Protection Act

September 25, 2015

Currently, 25 federal laws protect whistleblowers in the workplace.  The Seaman’s Protection Act (SPA), enacted by Congress in 2010, ensures that seamen (and women) on vessels are protected from retaliation for disclosing safety violations in the work place.

While a lesser known that other whistleblower statues, the SPA prohibits retaliation against mariners for engaging in protected activities.  These protected activities include disclosures related to failure to comply with maritime safety laws and regulations, reporting maritime safety issues to the U.S. Coast Guard, and disclosing violations to any other federal agency.

Recent decisions highlight the protections and the limitations of the SPA.  In Joseph Dady v. Harley Marine Services, Dady, a marine pilot, reported to the U.S. Coast Guard Harley Marine Service’s practice of dumping raw sewage into the ocean.  He also reported repeated rudder failure and improper manning.  The illegal sewage spills sickened crew members.  Harley terminated Dady shortly after his internal disclosures and reports to the U.S. Coast Guard. While the Administrative Judge held that Dady had engaged in protected activity, he also held that Dady was unable to prove that his disclosures caused his termination.

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August Whistleblower Rewards Include $2.2 Million in Medical Fraud Case

September 21, 2015

The U.S. Department of Justice announced settlements in six large qui tam cases during August – including a medical fraud case where the whistleblower earned over a two million dollar reward.

The False Claims Act (FCA) penalizes fraud against the U.S. government.  Its qui tam provision allows whistleblowers to sue on behalf of the government, and to get up to 30% of recovered funds as a reward.

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Recent Actions Highlight OSHA’s Role in Enforcing Whistleblower Anti-Retaliation Laws

September 21, 2015

The Department of Labor’s Occupational Safety and Health Administration is known for its role in implementing and enforcing safety standards in workplaces across the United States. But another main role played by OSHA is its enforcement of the whistleblower anti-retaliation provisions of a number of statutes, including but not limited to: The Occupational Safety and Health Act, the Sarbanes-Oxley Act, the Clean Air Act, the Surface Transportation Safety Act, and the Federal Railroad Safety Act. Several recent actions by OSHA demonstrate the seriousness with which OSHA enforces these statutes.

On August 4, 2015, OSHA announced that it filed suit against Continental Alloys and Services, Inc., a Houston-based company which provides steel for oil and gas companies, for violations of the Occupational Safety and Health Act’s whistleblower provision. In this case, a former employee filed a complaint for wrongful termination after Continental fired her, allegedly because she complained that the company failed to log workplace injuries in violation of OSHA regulations.  The whistleblower reported several instances when the company failed to log injuries, and even recorded a meeting with the company official who failed to record the injuries in order to gather evidence for an internal investigation. Continental fired her as a result of her actions. In its suit, OSHA seeks an injunction barring further retaliation, and reinstatement, back pay, and any other damages suffered by the whistleblower.
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Government seeks $3.35 billion from Novartis for violations of AKS and FCA

August 30, 2015

In late June 2015, the U.S. government filed papers in United States v. Novartis Pharmaceuticals Corp. notifying the court that it seeks $3.35 billion from Novartis in damages and civil fines. This amount roughly consists of $1.52 billion in treble damages and $1.83 billion in fines for the over 160,000 alleged false claims that Novartis submitted to the government.

Though news of the large potential damages is recent, the government has been investigating and litigating this case in the Southern District of New York for several years. In April 2013, the government filed its complaint and intervention against Novartis, alleging that Novartis violated both the False Claims Act and the Anti-Kickback Statute. The government contends that Novartis gave kickbacks, in the form of rebates and discounts, to twenty or more pharmacies in exchange for their switching kidney transplant patients from competitor drugs to Novartis’s drug. The government noted that Novartis is a repeat offender, referencing the government’s multi-million dollar settlement with the company less than three years ago for kickbacks.

Because this is a qui tam case, the whistleblower stands to receive a large award –between 15 to 25 percent of the ultimate settlement.

Grassley Urges Stronger Policing of Medicare Advantage

August 25, 2015

On May 21, 2015, Senator Chuck Grassley urged tighter policing of the Medicare Advantage program by the Department of Justice. Grassley relied on an investigative report by the Center for Public Integrity, which found that between 2008 and 2013, the Center for Medicare and Medicaid Services has paid more than $70 billion in improper payments to Medicare Advantage plans. Medicare Advantage plans are offered by private insurance companies that contract with Medicare to provide Part A and Part B benefits to beneficiaries.

According to a recent GAO report, the government “could save billions of dollars” by reducing abuse of Medicare Advantage’s payment system. Whistleblower lawsuits are one of the least costly and most effective tools for the government in fighting fraud. Through qui tam actions, whistleblowers are able to bring suit under seal and on behalf of the government to help the government recover funds it paid out as a result of false statements submitted for payment. Whistleblowers in qui tam actions are entitled to 15-25% of the government’s recovery.

Third Circuit District Courts Split on Kick-Out Actions Brought After Final Agency Decisions

August 14, 2015

The U.S. District Court for the Western District of Pennsylvania ruled that plaintiffs claiming retaliation under Federal Railroad Safety Act (FRSA) lose their right to sue in federal court when the Department of Labor (DOL) reaches a final decision in their action, even if that decision is reached more than 210 days after the DOL administrative complaint was filed.

This ruling creates a split among the Third Circuit’s district courts. Just last year, the U.S. District Court for the Eastern District of Pennsylvania found that the right to file a so-called “kick-out” action in federal court is triggered when a final administrative decision isn’t reached within 210 days, and that FRSA contains nothing that extinguishes that right if the DOL subsequently issues a final decision.

In Mullen v. Norfolk Southern, Harry Mullen alleged that the railroad wrongfully terminated his employment because he protested to his supervisors about violations of safety regulations. Mullen’s termination occurred on February 14, 2011. Mullen filed a whistleblower claim with the DOL’s Occupational Safety and Health Administration (OSHA) on April 28, 2011 under the FRSA, 49 U.S.C. § 20109.
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