Court Rules FCA Anti-Retaliation Provision Does Not Cover Post-Employment Retaliation

The court’s decision provides an important defense to companies sued for retaliation by purported whistleblowers based on post-employment allegations.

The plaintiff in Potts was a campus director for defendant Center for Excellence in Higher Education, Inc, formerly known as CollegeAmerica Denver, Inc. The plaintiff allegedly resigned from the Center because she thought that the Center had deceived its accreditor in order to maintain its accreditation. She entered into an agreement with the Center, however, providing that she would not disparage or file complaints against the Center in the future. When she nevertheless reported the Center to its accreditor, the Center sued her for breach of contract.

In response to the Center’s suit, the plaintiff filed a complaint in federal district court under the anti-retaliation provision of the FCA, 31 U.S.C. § 3730(h). That provision creates a cause of action for employees who are retaliated against by an employer “because of lawful acts done by the employee … in furtherance of an action under [the FCA] or other efforts to stop 1 or more violations of [the FCA.]” The plaintiff alleged that her complaint to the Center’s accreditor constituted protected activity under the FCA because the Center’s alleged violation of its accreditation standards would have disqualified it from receiving federal student financial aid.

In early 2017, the district court dismissed the plaintiff’s anti-retaliation complaint, holding that a former employee whose allegedly protected acts occurred exclusively after her employment ended could not seek relief under the FCA’s anti-retaliation provision. See Potts v. Ctr. For Excellence in Higher Educ., Inc., 244 F. Supp. 3d 1138, 1144 (D. Colo. 2017).

The Tenth Circuit affirmed, explaining that the term “employee” in § 3730(h)(1) “includes only persons who were current employees when their employers retaliated against them.” The court added that, “[i]f that condition is met, it doesn’t matter whether the employee remains a current employee of the employer when suing.”

In reaching this decision, the court examined the text of § 3730(h). The court noted that four of the six examples of retaliatory acts expressly provided in § 3730(h)(1) of the statute—discharge, demotion, suspension, threatening, harassment, and discrimination in the terms and conditions of employment—must occur during employment. Only threatening and harassment could occur outside of employment, the court explained. But applying the noscitur a sociis canon of construction, whereby words grouped together in a list should be interpreted to have similar meanings, the court held that threatening and harassment should also be construed to refer to acts taken during employment. The court added that the remedies provided in § 3730(h)(2) also “relate to an employment relationship,” and thus confirm this reading.

The ruling in Potts provides an important defense to companies who take action against a former employee to protect their rights—such as the breach-of-contract suit in Potts—only to be met with an FCA anti-retaliation suit by the former employee. In these circumstances, even if the former employee has a colorable FCA claim against the company, the court should dismiss the former employee’s anti-retaliation complaint based on Potts.