Sixth Circuit Creates Circuit Split, Allows Former Employee’s FCA Retaliation Claim

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The U.S. Court of Appeals for the Sixth Circuit held, in connection with an interlocutory appeal, that the False Claims Act (FCA) anti-retaliation provisions protect relators from post-employment retaliatory conduct.  In United States ex rel. Felten v. William Beaumont Hosp., 993 F.3d 428 (6th Cir. 2021), the Sixth Circuit reversed the district court’s dismissal of relator, David Felten’s complaint involving allegations that he was “blacklisted” by Beaumont Hospital post-employment when seeking other employment, reasoning that the FCA’s anti-retaliation provisions cover actions taken after the course of employment concludes. The opinion diverges from both a 2018 Tenth Circuit opinion and a strong dissent from Judge Griffin.

For context, the relevant language of the FCA’s anti-retaliation language at 31 U.S.C. § 3730(h)(1) reads:

Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.

(Emphasis added.)

The ultimate question before the circuit court was whether the statute means that the employee, contractor, or agent has to be currently employed when subjected to the italicized language in order to bring a retaliation claim. In a matter of first impression for the Sixth Circuit, the court answered this in the negative holding that former employees can bring retaliation claims when facing post-employment harm.

The opinion follows Beaumont Hospital settling with both the U.S. and the State of Michigan, both of whom had intervened in the case, which concerned an illegal kickback scheme.  With the settlement, the district court dismissed all claims other than Felten’s allegations involving employment discrimination.

Subsequently to the settlements, Felten amended his complaint to raise both employment discrimination and post-termination retaliation by his former employer. Felten alleged his termination occurred after he filed the qui tam complaint based on a false pretense that his position was subject to mandatory retirement. Further, post-termination, Felten alleged that he was unable to find a comparable position in academic medicine because Beaumont Hospital “intentionally maligned him in retaliation for his reports of its unlawful conduct.” (Internal punctuation removed.)  Specifically, Felten alleged that his employment applications to nearly 40 institutions were undermined by the hospital. The district court dismissed claims related to post-employment discrimination, reasoning the FCA’s anti-retaliation provisions do not extend beyond employment.

[T]he court held that the anti-retaliation provisions of the FCA may be invoked for post-termination retaliatory conduct by a former employer.

On appeal, the court reasoned that the term “employee” in the FCA has ambiguous meaning and could be interpreted to apply to former employees under rules of statutory interpretation. The court looked at the broader context of the FCA and utilized previous opinions under Title VII to determine that restricting the definition of “employee” to current employees would create a perverse incentive for employers to fire employees who might bring claims of fraud and abuse against their employer. Further, the court worried that within the broader FCA-landscape that post-employment retaliation could chill or “dissuade” “potential whistleblowers … from reporting fraud against the government.” Accordingly, the court held that the anti-retaliation provisions of the FCA may be invoked for post-termination retaliatory conduct by a former employer.

Judge Griffin’s dissenting opinion stated that the Sixth Circuit majority “rush[ed] to find ambiguity” where none exists.  He cited ten lower court opinions holding that the FCA anti-retaliation provision did not extend to post-employment conduct (compared with two opinions ruling similar to the majority), as well as an opinion from the Tenth Circuit, noting that “[n]early every federal court that has considered whether the FCA’s anti-retaliation provision [applies, has found it] is temporally limited to current employees.” The dissent suggested the opinion could have unintended impact on claims against former employees of the federal government under the FCA. Finally, responding to the majority, the dissent made clear that former employees can obviously bring post-termination claims but the allegations should relate to the temporal period of employment.

This opinion will obviously have impacts on cases arising out of the Sixth Circuit (cases filed in Kentucky, Michigan, Ohio, and Tennessee) but could also have a domino effect in other jurisdictions, as well. Going forward, healthcare employers should consider how conduct may be interpreted as retaliatory against former employees. Companies may want to revisit policies with former employees to avoid making statements in response to reference questions that could lead to a post-employment retaliation claim, particularly those that raised compliance complaints, whether warranted or not. Further, further development of the emerging circuit split will be interesting to monitor to predict whether such a case could reach the Supreme Court in the future.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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