The federal False Claims Act (“FCA”), 37 U.S.C. § 3729, the Civil False Claims Act, 37 U.S.C. § 3730, and the Illinois Whistleblower Reward and Protection Act (“IWRPA”), 740 Ill. Comp. Stat. 175, encourage employees to report fraud perpetrated against the government by their employers. Both the federal government and many states, including Illinois, have False Claims Acts, also known as qui tam statutes. Qui tam statutes encourage the reporting of fraud by offering the employee a percentage of the money recovered by the government. Additionally, the FCA makes it unlawful for an employer to take an adverse action against an employee for investigating potential fraud or filing a qui tam lawsuit.
The FCA and IWRPA make it unlawful to defraud the government by (1) mischarging for goods or services not provided, (2) lying to the government during the negotiation of a contract, (3) conspiring to defraud the government, (4) not giving the government its full share of money or property, (5) not checking the accuracy of a invoice or receipt given to the government, (6) buying government property from a government official who is not allowed to sell the property, and (6) making a fake invoice or receipt to give to the government in order to get money. An example of a qui tam case is a medical care provider overbilling the government for Medicare or Medicaid patient services. A federal qui tam action can arise from the defrauding of the federal government or an agency of the federal government. In Illinois, a qui tam action may also arise from the defrauding of the state, an agency, a county, a school district or community college district, a municipality, municipal corporation, or a unit of local government, like a park district.
Under the qui tam statutes employers cannot retaliate against an employee who investigates a potential false claim, supplies information to the government, or actually brings a qui tam action against their employer. However, an employee is only protected from retaliation if he or she had reasonable cause to believe that their employer had defrauded the government. Additionally, an employee may not actively assist in the unlawful activity and bring a qui tam action.
An organization found liable for defrauding the government may be forced to pay damages equal to triple the amount it wrongfully acquired through its fraudulent activities, in addition to penalties reaching $10,000. Additionally, the employee who reports the activity to the government may receive up to 25% of the awarded damages plus accrued attorneys’ fees. If the employer has retaliated, the employer may be liable to the employee for reinstatement, double back pay, interest on the back pay, special damages, and attorneys’ fees and costs.
The process for bringing a qui tam action is very complicated and requires close cooperation with the U.S. Department of Justice and the Office of the Attorney General. The procedure for filing a qui tam claim is unique and complex.
The Illinois Whistleblower Act, 740 Ill. Comp. Stat. §175 et seq., applies to employers of one or more employees, but does not include protection for governmental entities. Under the Act, employees in Illinois are afforded protection for engaging in activity as described below. The Act makes it unlawful for an employer to take adverse action against an employee for engaging in protected activity, and covers actions such as termination, demotion, wage reduction, failure to promote, and write-ups, to name a few.
The Act makes it unlawful for an employer to retaliate against an employee who “discloses information to a government or law enforcement agency, if the employee has reasonable cause to believe that the information discloses a violation of state or federal laws, rules, or regulations.” In addition, under the Act employers cannot retaliate against an employee who participates in an investigation of unlawful activity or refuses to participate in an activity that would result in a violation of state or federal laws, rules, or regulations.
An employee is only protected under the Whistleblowers Act if he or she had reasonable cause to believe that the information disclosed was, in fact, a violation of state or federal laws, rules, or regulations. Prior to reporting activity to law enforcement or the governments, employees should evaluate whether the reported conduct could be reasonably interpreted as a violation.
If an employer violates any portion of the Act as described above, the employer may be liable to the employee in a civil suit. Under the Act, a guilty employer may be liable to the employee for injunctive relief, twice the amount owed in back pay (in the case of a termination), actual damages, and special damages including mandatory attorney’s fees and costs. Punitive damages are not provided under the Act.
The Sarbanes-Oxley Act (“SOX”) is a federal law that was enacted in 2002, in response to a number of high-profile corporate and accounting scandals. SOX contains eleven sections, regulating and imposing new standards on public company boards, management, and public accounting firms.
SOX provides protection for employees who report fraudulent activity to, amongst others, their supervisors. Under Section 1514A of the Act, an employer may not discriminate against any employee in the terms and conditions of employment because of any lawful act done by the employee “to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes [fraudulent activity] … or any provision of Federal law relating to fraud against shareholders.”
Employees will be protected if “the information or assistance is provided to or the investigation is conducted by . . . a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct).” In addition, the employee will be protected if information is provided to a federal regulatory or law enforcement agency, or any member of congress or congressional committee.
The Northern District of Illinois has held that to succeed on a SOX claim under Section 1514A, the claimant must establish that “(1) he engaged in protected activity; (2) the employer knew of the protected activity; (3) he suffered an unfavorable personnel action; and (4) circumstances exist to suggest that the protected activity was a contributing factor to the unfavorable action.” Bishop v. PCS Admin. (USA), Inc., No. 05-C-5683, 2006 WL 1460032 at *1 (N.D. Ill., May 23, 2006) (citations omitted).