Provider Protection from the Double Jeopardy of Severance/FCA Payouts

Imagine the frustration if, after you enter into a separation agreement with a departing employee, whereby they promise to release all claims against you, you learn that they have filed a qui tam whistleblower suit under the False Claims Act (FCA).

Fortunately, you can lower the risk that you wind up feeling double-crossed in this manner.

What I’m about to describe can have such a giant financial impact on your organization that if you are not in human resources (HR), I’m hoping you’ll spread the word to people who need to know – be it HR or your legal team.

When an employee enters into a severance agreement with their former employer, the document typically includes a release of claims. In exchange for some sort of severance payment, the employee promises not to sue their former employer under a wide range of laws. These agreements are quite common.

The releases exist because no one wants to pay someone money as a settlement, only to have them seek more money later. 

If an organization pays an employee for a release, but the former employee becomes a relator under the FCA, there will be a lot of understandable griping. But again, it’s possible to lower the likelihood that a former employee can double-dip in this way.

Many releases don’t include releases under the FCA. The reason is that many people think it is not legal to release these claims. While that is partially accurate, it is also partially wrong. 

FCA cases are brought in the name of the United States government. When a relator brings the case, they file it under seal and the government decides whether to intervene. Because the claim actually belongs to the federal government, courts have consistently said that no individual can waive the right to filing of a FCA case by the government.

That makes sense; it is the government’s claim. If a severance agreement includes a promise by the employee not to bring a qui tam suit, that promise is likely void for public policy reasons. In fact, the government might even argue that it’s an attempt to obstruct justice.

It’s impermissible for an employer to tell its employees that they can’t contact the government. So the decision to omit a complete release is wise. 

But while it’s improper to forbid an employee from going to the government, it is permissible to have an employee waive the economic benefit that they would receive for a successful qui tam suit. In essence, the employee could still go to the government and express their concerns about any allegedly improper act, and they could even bring an FCA action, but the employee won’t make any money from doing so.

For this reason, well-drafted severance agreements include a provision indicating that the employee waives their share of any FCA recovery. It will note that they are free to communicate with the government; they just are not free to profit from it.

That can greatly lower the risk that you pay a departing employee twice.