Don t Get Mad, Don t Get Even, Don t Cover it Up: Protecting Your Company in Whistleblowing and Retaliation Litigation. Wednesday, April 23, 2014

Transcription

1 Don t Get Mad, Don t Get Even, Don t Cover it Up: Protecting Your Company in Whistleblowing and Retaliation Litigation Wednesday, April 23, 2014

2 Speakers Jeff Layne Partner, Fulbright & Jaworski LLP (Norton Rose Fulbright) Practice focuses on federal and state regulatory, administrative, and litigation-related health law matters, including Medicare and Medicaid fraud and abuse and research compliance issues Health-related litigation experience includes criminal, False Claims Act and administrative litigation related to a wide variety of Medicare and Medicaid fraud and abuse, reimbursement, and compliance issues Shafeeqa Giarratani Sr. Associate, Fulbright & Jaworski LLP (Norton Rose Fulbright) Practice areas include: employment and labor, litigation, government contracts and appellate Named Texas Rising Star Thomson Reuters; Associate to Watch Chambers USA Guide 2

3 Agenda Overview Legal Trend: Expansion of Retaliation and Whistleblower Claims Recent Developments in Key Retaliation Laws Recommendations 3

4 Overview 4

5 Trends Employee Litigation Top Concern Among General Counsel; most common type of lawsuit faced by GCs in 2013 Retaliation/Whistleblower actions on the rise SEC whistleblower actions increased drastically since 2010 More False Claims Act (FCA) claims filed in 2013 than in any year of the FCA s history (relators collected more than $387 million) IRS has an informant program providing whistleblowers 15 to 30% of taxes, penalties, and other amounts it collects 2009: IRS paid whistleblowers almost $6 million 2012: IRS paid whistleblowers over $125 million 5

6 Why Whistleblower/Retaliation Claims are Increasing Relative ease in making claims Protected Activity + Close in Time Adverse Employment Action = Jury Ever expanding view of what constitutes adverse employment action and protected activity Over 40 Federal Anti-Retaliation and Whistleblower Laws for plaintiffs to invoke The government finds whistleblowers credible, and believes whistleblowers make investigations more efficient and focused Because enforcement is retrospective, the government views whistleblowers as providing insight on bad practices currently ongoing at a company 6

7 Anti-Retaliation and Whistleblower Laws Age Discrimination in Employment Act (ADEA), 29 U.S.C. 623 American Recovery and Reinvestment Act of 2009 (ARRA), P.L , 1553(a), 123 Stat. 297 (2009) Americans with Disabilities Act (ADA), 42 U.S.C (a) Asbestos Hazard Emergency Response Act (AHERA), 15 U.S.C Clean Air Act (CAA), 42 U.S.C Commercial Motor Vehicle Safety Act (CMVSA), 49 U.S.C Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund Act), 42 U.S.C Consumer Financial Protection Act (CFPA), 12 U.S.C Consumer Product Safety Improvement Act (CPSIA), 15 U.S.C Department of Defense Authorization Act of 1987 (DDAA), 10 U.S.C Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd- Frank Act), 748, 922, 1057 Employee Polygraph Protection Act (EPPA), 29 U.S.C. 2002(4). Employee Retirement Income Security Act (ERISA), 29 U.S.C Energy Reorganization Act of 1974 (ERA), 42 U.S.C Fair Labor Standards Act (FLSA), 29 U.S.C. 215(a)(3) False Claims Act (FCA), 31 U.S.C Family and Medical Leave Act (FMLA), 29 U.S.C FBI Employee Whistleblower Protections, 5 U.S.C. 2303(a) FDA Food Safety Modernization Act, 21 U.S.C. 399d Federal Mine Safety and Health Act (FMSHA), 30 U.S.C. 815 Federal Railroad Safety Act (FRSA), 49 U.S.C Federal Water Pollution Control Act (FWPCA), 33 U.S.C International Safe Container Act (ISCA), 46 U.S.C (a) Longshore and Harbor Workers Compensation Act (LHWCA), 33 U.S.C. 948a Migrant and Seasonal Agricultural Worker Protection Act (MSAWPA), 29 U.S.C. 1855(a) Moving Ahead for Progress in the 21st Century Act (MAP-21), 49 U.S.C National Labor Relations Act (NLRA), 29 U.S.C. 158(a)(4) National Transit Systems Security Act (NTSSA), 6 U.S.C Occupational Health and Safety Standards Act (OSHA), 29 U.S.C. 660 Patient Protection and Affordable Care Act (ACA), 29 U.S.C. 218c Pipeline Safety Improvement Act (PSIA), 49 U.S.C Safe Drinking Water Act (SDWA), 42 U.S.C. 300j-9(i) Sarbanes-Oxley Act of 2002 (SOX), 18 U.S.C. 1514A Seaman s Protection Act (SPA), 46 U.S.C Solid Waste Disposal Act (SWDA), 42 U.S.C Surface Mining Control and Reclamation Act (SMCRA), 30 U.S.C Title VII of the Civil Rights Act of 1964 (Title VII), 42 U.S.C. 2000e-3(a) Toxic Substances Control Act (TSCA), 15 U.S.C. 262 Uniformed Services Employment and Reemployment Rights Act (USERRA), 38 U.S.C. 4311(b) Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR21), 49 U.S.C Whistleblower Protection Act of 1989 (WPA), 5 U.S.C. 1221, 1213,

8 Key Laws False Claims Act The whistleblower s share can be up to 30%, with 17% being typical Employers by law are kept in the dark until the Justice Department decides whether to step in Dodd-Frank & Sarbanes-Oxley Protects employees who report violations of: The Securities Exchange Act The Commodity Exchange Act The Consumer Financial Protection Act SEC rules & regulations Any other federal statutes protecting shareholders Affordable Care Act Protects employees who report violations of the Affordable Care Act Forbids retaliation against employees who benefit from the Act 8

9 Key Laws Title VII of the Civil Rights Act of 1964 Anti-retaliation provision protects employees who: Oppose any unlawful discrimination under Title VII Make an EEOC or other charge Assist, testify, or participate in any Title VII investigation, proceeding, or hearing Fair Labor Standards Act Anti-retaliation provision applies to any employee who: Files a complaint, or institutes a proceeding Testifies or is about to testify Serves on, or is about to serve on, an industry committee Occupational Safety and Health Act Similar protections for employees who report violations of the Act, or who exercise rights under the Act 9

10 Legal Trend: Expansion of Whistleblower and Retaliation Claims 10

11 Legal Trends Less Restrictive View of Protected Activity Wiest v. Lynch, 710 F.3d 121 (3d Cir. 2013). Facts: Tyco accountant questioned two extravagant events He asserted one was improperly treated as expenses, and would amount to a fraudulent tax deduction He argued the second had not been approved by the CEO per internal policies Issue: Were these protected acts under SOX Section 806, even though the whistleblower (1) did not identify a violation of a particular law, (2) was unaware of any fraudulent intent, and (3) objected to potential, not existing violations? Holding: Yes. A whistleblower need only identify[] conduct that falls within the ample bounds of the anti-fraud laws 11

12 Legal Trends Expanding View of Adverse Action Menendez v. Halliburton, Inc., 2013 WL (U.S. Dep t of Labor SAROX 2013). Facts: Whistleblower revealed alleged violations of Generally Accepted Accounting Principles to the SEC This was a protected disclosure under Sarbanes-Oxley Issue: Halliburton did not fire or demote Menedez, but did reveal his identity to other employees was this an adverse employment action? Holding: Yes. SOX specifically requires that publicly traded companies establish procedures to keep disclosure confidential 12

13 Legal Trends Expanded View of Required Retaliatory Animus Travers v. Flight Servs. & Sys., Inc., 737 F.3d 144 (1st Cir. 2013). Facts: Skycap was lead plaintiff in collective action. CEO allegedly said he wanted to get rid of the lead plaintiff and talk him into dropping the lawsuit. Skycap was terminated for documented violation of policy against soliciting tips Holding: Summary judgment for the employer was reversed. Evidence of retaliatory animus created a fact issue Takeaway: Even if reason for termination is valid, employee can get to the jury by showing some evidence of a desire to retaliate 13

14 Legal Trends Chilling of Speech Restrictions On Confidentiality EEOC v. CVS Pharmacy, Inc., No. 1:14-cv-863 (N.D Ill. Feb. 7, 2014), ECF No. 1; Quicken Loans, Inc., 359 NLRB No. 141 (June 21, 2013) (slip op.) Both the NLRB and the EEOC are taking aim at employment and separation contracts that limit employee speech In Quicken Loan, the NLRB held a non-disparagement clause was an unenforceable restraint on collective action In EEOC v. CVS Pharmacy, Inc. a case filed just two months ago the EEOC argues confidentiality and non-disparagement provisions in standard separation agreements constitute a pattern or practice of resistance to Title VII 14

15 Recent Developments 15

16 Recent Developments Dodd-Frank Asadi v. G.E. Energy, 720 F.3d 620 (5th Cir. 2013). Facts: Executive reported possible violation of Foreign Corrupt Practices Act to his supervisor, and a company ombudsman Holding: Distinguishing from the broader protections of SOX, the Fifth Circuit held employees must report alleged violations to the SEC, to qualify as whistleblowers under Dodd-Frank Takeaway: Whether other circuits will interpret Dodd-Frank so narrowly remains to be seen, but this opinion is a favorable development in terms of limiting Dodd-Frank whistleblower claims 16

17 Recent Developments Affordable Care Act Rosenfield v. Globaltranz Enters., Inc., 2012 WL (S.D. Tex. July 2, 2012). Facts: Female employee reported alleged FLSA violations, and was terminated Issue: Plaintiff sought leave to amend to allege the termination not only constituted retaliation under the FLSA itself, but also under the ACA s provision protecting resistance to violations of any provision of this title Holding: Rejecting creative reading of the Act, the court found the ACA s anti-retaliation provision applies to requirements of the Act, not to Title 29 (which includes the FLSA) generally Takeaway: Although the ACA contains its own anti-retaliation provision, it remains untested, and its reach is therefore uncertain 17

18 False Claims Act What is it? Prohibits knowingly making or causing the submission of false claims for payment to the federal government Prohibits knowingly retaining money owed to the government Provides for treble (3x) damages and per claim penalty of between $5,500 and $11,000 Allows for private parties (qui tam relators) to bring suit on behalf of the government and participate in % of any recovery 18

19 False Claims Act FCA Relator Recoveries FY (in Millions) Source: Fraud Statistics Overview, Civil Division, U.S. DOJ (Dec. 23, 2013) 19

20 False Claims Act Enforcement Priorities Gov t and relators pursuing civil FCA claims are focusing on: Anti-Kickback Statute Johnson & Johnson Agreed to 5 year CIA and $2.2 billion to resolve criminal and civil liability arising from allegations of payments of kickbacks to physicians and long-term care pharmacy provider regarding drug Risperdal (Nov. 2013) Off-label promotion and use of drugs Wyeth Pharmaceuticals Agreed to pay $490.9 million to resolve criminal and civil liability arising from allegations that it unlawfully marketed its immunosuppressive drug Rapamune (July 2013) Adulterated or Defective Products Ranbaxy USA Inc. Agreed to pay $500 million to resolve criminal and civil liability arising from allegations that it introduced adulterated drugs into interstate commerce, failed to maintain testing records, and made false statements to the FDA (May 2013) 20

21 False Claims Act Government Investigations Initiated by Whistleblowers Whistleblower initiation of government investigations Tools available to the government to investigate whistleblower allegations Effectively responding to whistleblower-initiated government investigations 21

22 False Claims Act Whistleblower Protection: FCA Anti-Retaliation Provisions Provides protection for employee, contractor, or agent Prohibited actions include: Discharge Demotion or suspension Threats or harassment Other discrimination in terms or conditions of employment 22

23 False Claims Act Whistleblower Protection: FCA Anti-Retaliation Provisions Requirements for FCA Retaliation Claim: Whistleblower must be engaging in lawful protected activity by acting in furtherance of a qui tam suit Employer must know about the lawful acts Employer must take adverse action as a result of the lawful acts Employee need not file suit to be protected Relief includes: Reinstatement with same seniority 2x back pay, interest, compensation for special damages Emotional distress damages have been allowed, but not punitive damages Attorney s fees 23

24 Recent Developments False Claims Act and Anti-Kickback Statute U.S. ex rel. Vavra v. Kellogg Brown & Root, Inc., 727 F.3d 343 (5th Cir. 2013). Facts: employees brought qui tam action, alleging KBR decisionmakers accepted kick-backs from subcontractors Holding: The government can attribute vicarious liability to corporate defendant under the AKS U.S. ex rel. Saunders v. Unisys Corp., 2014 WL (E.D. Va. Mar. 21, 2014). Facts: Qui tam defendant argued relator s claims were jurisdictionally deficient under the public disclosure bar, due to a prior disclosure to the government Holding: Because the disclosure occurred after the effective date of the Affordable Care Act s amendment to the public disclosure bar, any deficiency was non-jurisdictional 24

25 Recommendations 25

26 Recommendations Handling Complaints Effectively Lessons from Healthcare Industry Written policies, procedures and standards of conduct Compliance officer and committee Effective training and education Effective lines of communication Internal monitoring and auditing Well-publicized disciplinary guidelines Responding promptly to detected offenses and undertaking corrective action Creating a culture of compliance Issues of privilege 26

27 Recommendations Three Lines of Defense in Employment to Reduce Whistleblower Claims Pre-Employment During Employment Ending Employment 27

28 Recommendations Hiring Practices Scrutinize applicants with unexplained gaps in resumes The most potentially damaging whistleblower is the repeat player Background checks are of limited utility, and may not reveal claims history Employers generally cannot ask about prior claims Employers generally cannot retaliate based on prior claims Watch for personal characteristics associated with whistleblowing: Altruistically motivated Utilitarian Uninterested in altering their behavior 28

29 Recommendations Hiring Practices Set a policy of asking applicants about contacting prior employers Request that applicants sign a release permitting such contact In consideration for being allowed to participate in the application process, I hereby grant you full authority to contact my prior employers and further waive any claims whatsoever resulting from such contact. Any such contact will be limited to lawful inquiries, and information gained thereby will only be used for lawful purposes. I recognize this authorization does not constitute an employment agreement, and that my assent herein creates no right or expectancy of employment. 29

30 Recommendations During Employment: Training and Management Train Management to: Listen to employees Encourage employees to come forward Investigate any allegations Instruct Management to Avoid: Hostility Complacence Defensiveness Arrogance While money is a strong incentive, most whistleblowers feel management did not take their internal reports seriously 30

31 Recommendations During Employment: Employee Management Maintain and enforce a progressive discipline policy Ensure employees receive notice of any performance or disciplinary problems Provide an opportunity to correct the problem Set a deadline to improve Warn the employee of consequences for failing to improve Document all of the foregoing, and the result 31

32 Recommendations Ending Employment: Termination Best Practices Review the documentation underlying the reasons to terminate Is there a smoking gun that will undermine the documentation? Review s and other documentation that is not in the personnel file Create and follow a standard termination checklist Perform a cost/benefit analysis, particularly as to timing: consider keeping an employee on if he has recently made a protected disclosure or complaint 32

33 Recommendations Ending Employment Avoid giving detailed reasons Have a witness for key interviews Listen to the exiting employee, do not debate them When possible, obtain a signed release, including certification or representation that employee knows of no claims Key positions only? Include a release for FCA claims? Include a release for personal recovery for whistleblower/retaliation claims? 33

34 Questions? Jeff Layne Partner (512) Shafeeqa W. Giarratani Senior Associate (512)

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