TOP WHISTLEBLOWER PROTECTIONS AND THEIR IMPACT ON CALIFORNIA’S EMPLOYMENT LANDSCAPE

Whistleblowing continues to be one of the fastest growing, and grossing, areas of law due to the public’s frustrations with corporate greed, expanding protections to individual whistleblowers, and the cases’ high monetary rewards.  In addition to the financial incentive for whistleblowers, laws are constantly added to fuel the field’s meteoric growth.  In this article, we explore how whistleblower retaliation protection is influencing whistleblowing activity.

In 2015, the U.S. Justice Department reported that it settled False Claims Act (FCA) cases with over 450 hospitals for more than $250 million related to improper billing of Medicare.  This area was a significant component in its 2015 total FCA recovery which amounted to $3.5 billion.  Even the IRS has been getting in on the action and recently reported that in Fiscal Year 2015 it paid out more than $103 million to whistleblowers resulting from settlements in successful lawsuits.  As the nation’s most employee-friendly state relating to employee-rights, it is no wonder that California’s whistleblower protections remain the most extensive in the country.  It follows suit, therefore, that some of the biggest FCA settlements involve California companies.

For instance, at the end of February, San Francisco-based Dignity Health settled with the U.S. Justice Department for $5.9 million to avoid litigating a lawsuit alleging Medicare overbilling at its 18 affiliated hospitals.  The claims were brought by a cardiac nurse and reimbursement consultant who alleged that the hospitals improperly billed Medicare when recipients received implantable cardiac devices without the hospitals complying with the required waiting period.  The recipients’ Medicare coverage required that certain devices not be implanted before the requisite time following a heart attack or if the patient recently had heart bypass surgery or angioplasty.  Dignity’s settlement was only a portion of more than 50 hospitals involved that settled for more than $23 million.

Top 3 Types of Whistleblower Protection

(1) Anti-Retaliation Protections (Labor Code Section 1102.5); California Whistleblower Protection Act (Gov. Code Section 8547 et seq.)

California boasts a multitude of laws that protect whistleblowers.  In general, the Labor Code Section 1102.5 prohibits retaliation against employees who “blow the whistle” by notifying a government agency on, or refuse to participate in, activity that would violate any laws or regulations in the workplace.  Also, Labor Code Section 98.6 prohibits retaliation against employees who file a complaint for labor code violations with the Labor Commissioner or the Department of Fair Employment and Housing, and Labor Code 6399.7 prohibits retaliation against employees for filing a complaint or testifying on occupational safety and health issues. In regard to reporting illegitimate billing, Government Code Section 12653 prohibits retaliation against employees who report to a government entity any fraudulent billing that were improperly submitted for payment. Moreover, Government Code Section 12940(h) prohibits retaliation against employees who oppose discrimination or harassment based on race, religion, color, national origin, ancestry, physical or mental disability, medical condition, marital status, sex, age, or sexual orientation.

Since 1984, California has been on the cutting-edge of whistleblower laws protecting any employee, private or public, who reported violations to government or law enforcement. 2014 ushered in the expansion of protections for whistleblowers via the modification of Labor Code Section 1102.5.  Although the statute already prohibited employers from retaliating against employees who reported to the government violations of state or federal laws, it now also protected those employees who reported suspected unlawful conduct both externally (e.g. an investigation arm of a public entity) and internally (e.g. any person with authority over the employee or one who has the authority to investigate the reported violation).

In late 2014, a California appellate court interpreted these anti-retaliation protections broadly when it expanded whistleblower protections to employees who were terminated due to their employer’s mistaken belief that they engaged in protected activity of reporting the employer violations.  Further, in 2016, new laws expand whistleblower protections to family members of whistleblowers, prohibiting employers from discharging, discriminating, retaliating or taking any adverse action against an employee who is the family member of a perceived or actual whistleblower. (Labor Code Sections 98.6 and 1102.5.)

California has its own Whistleblower Protection Act which specifically protects state employees against retribution from reporting waste, fraud, abuse of authority, violation of law or threat to public health. (Government Code Sections 8547 et seq.)  In addition, a government employee may not use official authority to influence employees with the intent to intimidate, threat, or coerce someone from his or her protected activity right.

(2) California Corporate Securities Law, Federal Securities Acts, and Dodd-Frank Act 

As a sign of things to come in 2016, lawmakers closed some of the 2010 Dodd-Frank Act’s anti-retaliation loopholes by introducing the Whistleblower Augmented Reward and Non-Retaliation (WARN Act).  The proposed Act increases the maximum cap placed on those who successfully bring federal securities fraud lawsuits to 30% of the settlement amount. It also expands protections afforded to whistleblowers against retaliation by preventing companies from requiring whistleblowers to waive their rights or reveal their communications with the government.  An example of this occurred late last year when the Securities and Exchange Commission fined a business $130,000 for requiring workers to sign confidentiality agreements that forbade them from discussing potential securities law violations with anyone external to the company before obtaining permission from the company’s attorneys.  Another groundbreaking feature of the WARN Act is the introduction of civil remedies and punitive damages to whistleblowers that are discriminated against after reporting their employer’s violations.  California’s anti-securities fraud protections were bolstered at the end of 2013.  This brought California’s Securities Law of 1968 to more closely align with the federal securities laws.  Consequently, California whistleblowers receive similar or greater protections against retaliation when reporting securities fraud.

(2) California False Claims Act and Medicare/Medicaid Healthcare Fraud Retaliation Protection

The California FCA is modeled after the federal FCA.  In general, the FCA includes anti-retaliation language where the employee must establish that there was a causal connection between the employee’s participation in “protected activity” and the employer’s retaliation because of that activity. (31 USC 3730(h).)  Protected activity includes instances where the employee opposed the employer’s attempt to obtain false or fraudulent payment from the government.

Most often, the FCA is used within the healthcare industry to stem out fraud related to billing, staffing, and kickbacks.  Examples of these are when a provider of health care services such as a doctor or hospital bills for services that were not provided or the bill was submitted at an improperly higher rate of reimbursement for the services.  Additionally, health care companies illegally bill the government for such instances as substandard services by fraudulently using higher diagnostic codes or by falsely certifying the medical necessity of medical procedures. Alternatively, these companies may realize that they have credit from their services that they have to repay to the government but the companies do not reimburse the government within the 60 day time frame.  At that point, the nonpayment becomes a false claim.  To combat retribution, the Health and Safety Code Section 1278.5 prohibits retaliation against patients, physicians, nurses and medical staff who whistleblow to the government or its agencies on patient care issues at a healthcare facility.