Monthly Archives: June 2013

The Severance Agreement: Money That May Cost You Dearly

Many potential whistleblowers are legitimately concerned that complaining about illegal conduct at work will get them fired. The False Claims Act gives honest whistleblowers that are fired a way to sue their employers and obtain compensation and maybe even reinstatement at their job if they can prove they were wrongfully fired.

Severance Agreeement

Employers know that these lawsuits can take years before they are resolved. This leaves the whistleblower without a job and in a difficult financial situation. Employers try to take advantage of this by offering the fired employee a cash payment in exchange for signing a severance agreement. The agreement commonly requires confidentiality and a promise that the employee will not file any complaint against the employer.

Clients often ask if they should take the money and sign the severance agreement. Each case is unique and the facts and law must be analyzed carefully, but we generally discourage signing the agreement.

Here is a very simple hypothetical that illustrates the point:

Jane has worked for a community hospital for 12 years as an RN. She knows that the hospital bills Medicare and Medicaid patients for items they do not need and will never use. For example, each patient is given a cane when they arrive at the hospital and the government is billed for the cost of the cane.

Many of the patients never used the cane and left it in their room when they were discharged. The hospital then gave the cane to a new patient and billed the government for the cane a second time.

Jane complained to her supervisor who did nothing. She also complained to upper management with no results. Instead, for the first time, Jane began to get bad performance reviews. A few months later she was put on temporary position status and was only allowed to work 10-12 hours per week. After a few months Jane was told that her position was being downsized and she was no longer needed.

After being fired, Jane was offered a confidential “severance package” which required her to sign a document giving up all her rights to make a claim against the hospital in exchange for a payment of $15,000.

Unemployment has hit Jane and her family hard and she needs the money. She wants to know if she should take the money and sign the document.

We would advise Jane not to sign the agreement, particularly if the release must be signed  before Jane has filed her Qui Tam action or brought the claim to the government’s attention. In most cases we discourage signing any waiver/severance agreement even after the False Claim Act is filed.

Although Jane may be able to “take the money” and still bring a Qui Tam (Federal False Claims Act) case against the hospital, U.S. v. Northrop Corp., 59 F.3d 953 (9th Cir. 1995), many courts have upheld broadly drafted releases and waivers finding that the whistleblower gave up her right to bring or prosecute a Qui Tam action. U.S. ex rel. Ritchie v. Lockheed Martin Corp., 558 F.3d 1161 (10th Cir. 2009); U.S. v. Purdue Pharma L.P., 600 F.3d 319 (4th Cir. 2010).  In other cases it has been argued that the whistleblower is not entitled to the relator’s share of the qui tam fees and sanctions the government recovers.

Even if she can bring her Qui Tam case in federal court after signing a release and waiver of claims, the hospital could sue Jane for violating the confidentiality agreement. While Jane would likely prevail, she would have to deal with the attorney fees, time and aggravation of a law suit.

Please remember to always consult an experienced Qui Tam attorney if you believe your employer is cheating the government and before signing any legal document or release.