The California False Claims Act & Qui Tam Whistleblower Retaliation

The California False Claims Act (CFCA) protects California workers with:

1. the right to file a “qui tam” lawsuit against an employer who is committing fraud, theft or embezzlement with respect to government funds,¹ and
2. whistleblower protection if an employee reports or tries to stop the theft of government funds by their employer.²

Qui tam suits

A “qui tam” lawsuit is a suit filed by a private citizen on behalf of a government entity, against someone who sought to obtain government money by fraud.³

Under the California False Claims Act, Government Code 12652 GC, employees – like any other private citizens – may file qui tam suits against their employers. This is especially common with employers that perform work under government contracts.

False Claims Act whistleblower protections

Employees who experience workplace retaliation after opposing violations of the California False Claims Act may successfully bring a whistleblower lawsuit against their employers for California wrongful termination.

The whistleblower retaliation sections of the CFCA are set forth in Government Code 12653 GC.⁴

Examples

The following are examples of employees exercising their rights under the California False Claims Act:

• A manager for a construction firm working on a government contract learns that his employer has been overbilling the state government. He files a “qui tam” lawsuit in the name of the state to get this money back.
• A teacher at a charter school that operates with state funds suspects that the school is collecting more funds from the government than it should by over-reporting its enrollment. She discusses this issue with a supervisor. When nothing is done, she suggests that she might report her suspicions to law enforcement. Two weeks later she is placed on unpaid leave. She then sues the school for wrongful whistleblower termination.

Qui tam lawsuits for California employees

If you believe that your employer has participated in presenting false or fraudulent claims for payment to the state or local government, or has misappropriated government funds, then you may file a “qui tam” suit under the California False Claims Act.

When you file a qui tam lawsuit, you are filing on behalf of the government entity. The California Attorney General or a local district attorney may then choose to take over your role as a plaintiff in the suit or allow you to continue with the suit.⁵

In either event, however, you will be entitled to a share of the damages (anywhere from 15% to 50%) if the lawsuit is successful.⁶

Wrongful termination/retaliation lawsuits under the California False Claims Act

If you suspect that you have been a victim of the California False Claims Act whistleblower retaliation, then you have the right to sue your employer under GC 12653. The statute of limitations for a CFCA retaliation lawsuit is three (3) years after you are terminated or retaliated against.⁷

Damages that you may receive in a successful CFCA wrongful termination suit include:

• Reinstatement in your former job;
• Twice the amount of lost back pay, plus interest on the back pay;
• Compensation for special damages (emotional suffering, reputational damage, etc.); and/or
• Reimbursement for litigation costs and/or reasonable attorneys’ fees.⁸

Below, our California employment and labor law attorneys answer the following frequently asked questions about employees’ rights under the California False Claims Act:

• 1. What is the California False Claims Act?
• 2. What is a qui tam lawsuit?
  • 2.1. How can a California employee file a “qui tam” suit?
  • 2.2. What damages can I expect to get from a successful California “qui tam” lawsuit?
• 3. What protections does the California False Claims Act provide?
  • 3.1. What are the procedures for a whistleblower retaliation lawsuit?
  • 3.2. What damages can I receive?
• 4. What is the difference between the California False Claims Act and the Federal False Claims Act?

If you have further questions after reading this article, we invite you to contact us at Shouse Law Group.

1. What is the California False Claims Act?

The California False Claims Act, also known as the “CFCA,” is a law that provides for civil (financial) penalties for individuals or entities who commit certain forms of

• theft,
• fraud or
• embezzlement with respect to state or local government funds.

For purposes of the California False Claims Act, a “claim” means a request for

• money,
• property or
• services that will be provided directly or indirectly by the California state government or a local government.⁹

The specific activities that are prohibited under the CFCA include:

• Knowingly presenting or causing to be presented a false or fraudulent claim for payment or approval;
• Knowingly making, using or causing to be made or used a false record or false statement material to a false or fraudulent claim;
• Engaging in a conspiracy to commit any other act forbidden by the CFCA;
• Delivering less than all of any government property or money over which they have custody or control;
• Knowingly making or delivering a receipt that falsely represents property used by state or local government;
• Knowingly buying public property from someone without the right to sell the property;
• Knowingly making, using or causing to be made or used false records or statements material to an obligation to pay money or property to the government, or knowingly concealing, avoiding or decreasing an obligation to pay money to the government; and
• Failing to disclose a false claim to the government after benefiting from that claim.

For there to be a viable false claims action under state law, the defendant must have acted with

• actual knowledge,
• deliberate ignorance, or with
• reckless disregard of the truth.

Prosecutors do not have to prove that the defendant had a specific intent to defraud.¹⁰

The California False Claims Act is primarily a law protecting government property. But it is relevant to California employment law for two reasons:

1. qui tam lawsuits, and
2. whistleblower protections.

2. What is a qui tam lawsuit?

A “qui tam” suit under the CFCA is a lawsuit filed by a private citizen who discovers a violation of the False Claims Act. A plaintiff in a “qui tam” suit sues the defendant on behalf of or in the name of the state or local government entity whose property was misappropriated.¹¹

California employment lawyers often assist employees who bring qui tam suits against current or former employers. In a typical employee qui tam lawsuit, the employer is a private party/company that did business with the government, such as a charter school or construction company.

Example: Mary is an accountant for a landscaping company that maintains the outdoor areas of multiple local government buildings.

After several years of working for the company, Mary has developed a reasonable suspicion that the company has been systematically overbilling the local government for years, by billing for more plants and supplies than it has actually been using. The total amount of overbilling may amount to several hundred thousand dollars of overpayments by the government.

After talking to an employment attorney, Mary decides to file a qui tam lawsuit against the company. If this whistleblower claim is successful, the company will be forced to pay damages to the government for its fraudulent activity, and Mary will receive a share of those damages.

2.1. How can a California employee file a “qui tam” suit?

Any California employee can file a suit as a qui tam plaintiff against a current or former employer in California Superior Court.

The only exception is current or former employees who discovered the California False Claims Act violations during the course of their employment with a state or local government agency. In those cases, the employee is required to exhaust their employer’s internal procedures for reporting and seeking recovery of the false claims before a court will hear his/her qui tam lawsuit.¹²

California qui tam suits under the California False Claims Act must be brought before the later of the following two dates:

1. Six (6) years after the California False Claims Act violation occurs; or
2. Three (3) years after the qui tam plaintiff first learned or reasonably should have known about the violation (but in no event more than ten (10) years after it occurred).¹³

When a California employee brings a qui tam lawsuit, s/he is required to show by a preponderance of the evidence that a violation of the CFCA occurred.¹⁴

If you file a qui tam lawsuit, you are required to serve a copy of the complaint and all material evidence you have on the California Attorney General.

The Attorney General (or the prosecuting attorney of the local government involved in the false claims) then has a set amount of time to decide whether

1. to take over the lawsuit itself or
2. to let you proceed as plaintiff.

You will be entitled to a share of damages from the qui tam suit regardless of the AG’s decision. But the amount will vary depending on whether you or the prosecutor ultimately sees the qui tam suit through to completion.¹⁵

2.2. What damages can I expect to get from a successful California “qui tam” lawsuit?

The amount of damages at stake in a qui tam lawsuit under the California False Claims Act is keyed to the amount of the financial loss that the state or local government suffered because of the false claims.

A defendant who is found to have violated the CFCA will be required to pay the total of:

• three (3) times the amount of loss that his/her actions caused the government (“treble damages”),
• the cost of the litigation to enforce the California State False Claims Act, and
• a civil penalty of between five thousand dollars ($5,000) and eleven thousand dollars ($11,000) for each violation.¹⁶

As a qui tam plaintiff, you are entitled to a portion of the damages that the defendant pays.

If the state or local prosecuting attorney takes over the qui tam suit after you file it, then you may receive between fifteen percent (15%) and thirty-three percent (33%) of the proceeds, depending on the magnitude of your contribution to the suit.

If the attorney general or district attorney did NOT take over the qui tam suit, and you remained the plaintiff, then you are entitled to between

• twenty-five percent (25%) and
• fifty percent (50%) of the proceeds.¹⁷

(There is an exception if you learned about the false claims as a current or former employee of a government entity. In that case, you are not necessarily entitled to a share of the proceeds. But you may be awarded up to 33% or 50% of the proceeds at the discretion of the court.¹⁸

3. What protections does the California False Claims Act provide?

The other section of the California False Claims Act that is relevant to California labor and employment law is the “whistleblower retaliation” section found in Government Code 12653 GC.

A whistleblower retaliation/whistleblower protection law is a statute that carves out an exception to the general rule of at-will employment in California. Whistleblower laws like GC 12653 protect employees who report violations of law from

• wrongful termination,
• wrongful constructive termination and
• other forms of workplace retaliation.

Under the California False Claims Act, employers may not retaliate against employees who either

• bring or assist in a qui tam lawsuit or an attorney general’s suit alleging a CFCA violation, or
• make an effort to stop a violation of the CFCA.¹⁹

Specifically, employers may not

• discharge (fire),
• demote,
• suspend,
• threaten,
• harass, or
• discriminate against in the terms or conditions of employment,

any employee who engages in these California False Claims Act protected activities.²⁰

Example: Enrique works for a recycling company that collects recyclables under a city contract.

Enrique believes that the company is falsifying its claims for reimbursement from the city–that is, claiming to be submitting more recyclables than it actually is and therefore defrauding the city. He tells a supervisor about this, but nothing changes.

So he files a qui tam suit. The city attorney chooses to take over the suit against the company.

While the California False Claims Act suit is pending, Enrique is demoted, and his pay is cut.

Enrique may have a cause of action against his employer for whistleblower retaliation under the California False Claims Act.

3.1. What are the procedures for a whistleblower retaliation lawsuit?

A lawsuit under the whistleblower protection provisions of the California False Claims Act must be filed within three (3) years of the date when the retaliation occurred.²¹

In order to prevail in a California False Claims Act whistleblower retaliation suit, you and your employment attorney need to be able to prove that:

1. You engaged in protected activity under Government Code 12653;
2. Your employer knew you engaged in protected activity; and
3. Your employer discriminated against you because you engaged in protected activity.²²

It is common for California employees to sue their employers not only under the whistleblower provision of the CFCA, but under additionally related causes of action as well. These include public policy wrongful termination and the general whistleblower law of Labor Code 1102.5 LC.

3.2. What damages can I receive?

The California False Claims Act, GC 12653, specifies that employees who successfully sue their employers for CFCA whistleblower termination or retaliation can win the following damages:

1. Reinstatement in your former position with the same seniority status you would have had without the retaliation;
2. Two times the amount of back pay you would have earned had you not been terminated, demoted, etc.;
3. Interest on the back pay;
4. Compensation for special damages such as emotional distress or damage to your reputation resulting from the retaliation;
5. Litigation costs and reasonable attorneys’ fees; and
6. Punitive damages designed to punish the employer, in cases where the employer’s behavior was particularly egregious.²³

However, as is the case with damages in most California wrongful termination cases, the total amount of damages will be reduced by the amount that you earned (or your employer can show that you could have earned) in substantially similar employment after you were terminated.²⁴

4. What is the difference between the California False Claims Act and the Federal False Claims Act?

The federal False Claims Act (the federal FCA) is very similar to the California False Claims Act. It just applies instead to false claims for money or property of the United States government.²⁵

A California employee who suspects that his/her employer has made false claims against the federal government can file a “qui tam” lawsuit in federal court with the help of a California employment lawyer.²⁶

The federal False Claims Act also provides whistleblower protections similar to those provided by the CFCA.²⁷

One major difference between the federal and California False Claims Acts is the share of damages that a qui tam plaintiff can receive.

Under the federal False Claims Act, a qui tam plaintiff can receive only 15% – 25% of the damages if a federal prosecutor takes over the lawsuit, and 25% – 30% if a prosecutor does not.²⁸ (The comparable figures under the California False Claims Act are 15% – 33%, and 25% – 50%.)

Learn more at the Department of Justice FCA page at justice.gov.

Call our California law firm for help…

For questions about the qui tam whistleblower protections of the California False Claims Act or to discuss your case confidentially with one of our skilled California labor and employment attorneys, do not hesitate to contact us at Shouse Law Group. We offer free legal advice.

We have local employment law offices in and around Los Angeles, San Diego, Orange County, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities. Disclaimer: Results cannot be guaranteed.

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