Tenth Circuit Confirms that Compliance Employees Must Satisfy Heavier Burden to Obtain FCA Whistleblower Protection



             On April 30, 2019, the U.S. Court of Appeals for the Tenth Circuit in United State ex rel. Reed v. KeyPoint Government Solutions affirmed the dismissal of an employee’s False Claims Act (FCA) whistleblower retaliation claim.  In its ruling, the Tenth Circuit confirmed that employees with compliance responsibilities bear a heightened burden to show that their alleged protected activities were not simply the performance of their assigned job responsibilities. 

            Ms. Reed, the plaintiff, worked as a Senior Quality Control Analyst for KeyPoint Government Solutions, a company that conducted federal background check investigations.  Amid a series of scandals that rocked the broader background investigation industry, Ms. Reed claimed that she observed systemic violations of KeyPoint’s federal government contract as investigators allegedly made false background check reports, omitted information from reports, and failed to follow proper background check procedures.  Ms. Reed alleged that these violations formed the basis of fraudulent requests for payment from the government.  Ms. Reed claimed that she discussed the issues with several people within the company, but ultimately her efforts were unsuccessful and KeyPoint terminated her employment.

            The Tenth Circuit affirmed the dismissal of Ms. Reed’s FCA whistleblower retaliation claim.  The court noted that to face FCA whistleblower liability, an employer must know that the relator-employee’s actions were connected to a claimed FCA violation.  Where the employee’s job involves compliance and fraud investigations, it must be clear that the employee is engaging in FCA protected activity and “not just doing her job” to report suspected fraud internally.  Critically, the court found that the requirement for this heightened showing from compliance employees was not affected by the 2009 and 2010 amendments to FCA that expanded whistleblower protections.  Because Ms. Reed’s allegations did not show that she went outside of the established chain of command or beyond the scope of KeyPoint’s ordinary reporting procedures, the court held that she could not establish KeyPoint’s knowledge of her claimed FCA protected activity.

            Compliance employees are in a prime position to report corporate activities that may trigger whistleblower protection under FCA or other statutes.  However, their internal reports of fraudulent activities should not be protected under the FCA whistleblower protections unless they go beyond their job duties and either report the alleged violation outside of her ordinary chain or tie their concerns to violations of the FCA.  Employers should exercise caution when taking adverse action against employees in their compliance, HR, legal, contracting and finance departments to ensure that (1) the action is justified, well-documented, consistent with policy and prior actions against employees; and (2) the employee did not “blow the whistle” through means or mechanisms outside of their normal job duties.

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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