Government Settlement Waivers for Employees – and When to Ask for Them

Imagine the frustration you might feel if, after you negotiate a settlement, under which you are paying a departing employee a respectable sum of money, that same employee brings a False Claims Act case that may get them still more money.

That risk is very real, but the good news is that there is an easy way to lower it.

I’ve been asked many times whether you can request that an employee promise not to file a qui tam False Claims Act lawsuit. For reasons I will explain, I think it’s very unwise to even try it. But there is something you can do to lower the risk that you get double-crossed.

There are three reasons I strongly discourage requiring or even asking every employee to promise not to bring a False Claims Act suit.

First, preventing an employee from contacting the government can be characterized as obstruction of justice.

Having an employee promise not to bring a qui tam suit isn’t the same as prohibiting them from contacting the government. You can call the government without filing a qui tam suit, so it’s possible that the request is legal, but that brings me to my second rationale:

it sounds absolutely awful.

In an investigation, you’re trying to convince the government or a jury that your conduct was legal and your motives were pure. It’s difficult to think of anything that would more effectively undercut your efforts than their discovering that you were trying to prevent people from turning you in.

Making everyone promise not to sue you will seem to the average observer like an admission that you have something to hide.

Finally, courts have suggested that because qui tam claims are filed in the name of the government, only the government has the right to waive the ability to bring one. Promises not to file a qui tam action have been deemed void as a matter of public policy. So, asking for that wavier is possibly illegal, almost certainly ineffective, and definitely embarrassing.

That said, there is one time where I do recommend asking for a waiver. If you’re parting ways with an employee and offering a severance deal, I think it’s both wise and defensible to include language under which the individual promises to forego any financial recovery for which they could be eligible under the False Claims Act.

The language can be easily incorporated into the severance agreement; I’ve done this many times. The text makes it quite clear that the employee is absolutely free to go to the government to report any compliance concerns. They’re even still permitted to file a qui tam suit.

However, if they become eligible for any money under that suit, they’re promising not to accept it. Because the agreement is part of a plan to pay the employee severance, and because it explicitly permits the person to go to the government, this language should be enforceable.

And when you’re entering into a release of claims with an employee, it’s reasonable to ask them to promise that all of their disputes with you have been resolved. I often also include language confirming that they have reported any compliance concerns to you. 

The bottom line is that every severance agreement should include a promise from the employee to waive recovery from qui tam actions. This language lowers the likelihood that after reaching an agreement about a contested departure, you will feel frustration as the former employee tries to claim more money from your organization. But use it only for folks with a severance agreement, not for all employees.