Ever witnessed something going on at work that you suspected was fraudulent or illegal? Public policy encourages people in your position to speak up and the law comports with public policy by attempting to protect those who do from retaliation in employment.
We commonly refer to these insiders with information as whistleblowers. The term is pretty self-explanatory – it describes persons who blow the whistle on bad actors and fraudulent or illegal activity in which their employer is knowingly engaging.
Federal and North Carolina laws protect whistleblowers by permitting them to recover a portion of the damages recovered by or on behalf of the government by way of what’s called a qui tam action. Qui tam suits involve a private citizen, most often an employee, bringing a lawsuit against an individual or business that is defrauding the government in order to recover funds on the government’s behalf. Because the government has an interest in encouraging people to snitch on bad actors, under these laws, successful plaintiffs become entitled to anywhere between 15 and 30% of the total recovery.
The lawsuit is filed “under seal,” which means that the courts keep the suit a secret from everyone but the government to allow the Department of Justice time to investigate the allegations.
North Carolina’s False Claims Act, codified at N.C. Gen. Stat. §1-605, et seq., imposes liability on persons who knowingly present false or fraudulent claims to the State of North Carolina for payment. The North Carolina False Claims Act also prohibits misappropriation of state property and deceptively avoiding obligations to pay the State of North Carolina. A defendant found liable for defrauding the State of North Carolina, may be required to pay damages of up to three times the actual harm to the State, plus a fine of between $5,500 and $11,000 for each violation of the Act. Similar to the federal law, plaintiffs may recover between 15% and 30% of any total recovery depending on the circumstances in the case.
Both the North Carolina and federal law protect employees who blow the whistle from retaliation by making it an illegal act to fire, demote, or otherwise take an adverse employment action against a person because of her involvement in calling out fraud.
Whistleblowers act in other circumstances as well and may be protected by other federal or state laws. For example, in North Carolina, the Retaliation in Employment Discrimination Act forbids an employer from taking an adverse action against an employee for filing or threatening to file a complaint with certain state agencies such as OSHA. Retaliation provisions in anti-discrimination statutes also protect those who refuse to participate in discriminatory acts and those who cooperate with EEOC investigations.
Some twenty-two (22) other federal statutes include components to protect whistleblowers. The most common among these are the Occupational Safety and Health Act, which protects those asserting workplace safety concerns, and the Sarbanes-Oxley Act, also known as “SOX,” which protects employees of public companies who call out financial reporting fraud.
It is a costly mistake to defraud the public or the government, but it can be even more costly to defraud an employee of her job for doing the right thing by speaking up. Employers should establish clear internal procedures for handling potential whistleblower claims and should seek legal counsel before taking any adverse action against an employee for perceived involvement as a whistleblower. Employees should remember that only good-faith assertions of fraud or illegal activity may form the basis for a lawsuit or complaint. An employee who has experienced discrimination or retaliation for complaining about safety, fraud, or other unlawful activity should contact a knowledgeable attorney immediately.
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