Arbitration Clauses and Whistleblower Claims

Under the False Claims Act (FCA), private individuals who uncover fraud against the government may file a lawsuit on behalf of the government and share in any recovery.  When whistleblowers uncover fraud by their employer, arbitration clauses in their employment contract can raise important legal issues.  This area of law varies widely across lower federal courts.

Today, many employees—whether they know it or not—agree to arbitration when signing employment contracts.  Arbitration is an out-of-court forum for resolving disputes.  Although it is not an official court proceeding, the decision rendered in arbitration may bind the parties in the same way as a court ruling.

The prevailing view across lower federal courts is that the primary FCA action is not restricted by an arbitration clause because the government—the party that was actually defrauded—did not sign the arbitration agreement.  See, e.g., Mikes v. Strauss, 889 F. Supp. 746, 755 (S.D.N.Y. 1995); see also Morgan v. Sci. Applications Int’l Corp., 612 F. Supp. 2d 81, 84 (D.D.C. 2009); but see Deck v. Miami Jacobs Bus. Coll. Co., 2013 WL 394875, at *6-7 (S.D. Ohio Jan. 31, 2013) (ordering arbitration and reasoning that the whistleblower, as assignee, is also a party in interest and is bound by the arbitration clause).

Relatedly, the FCA allows whistleblowers certain protections, including a private right of action if their employer retaliates against them. This private claim—unlike the main FCA claim—may be subject to a mandatory arbitration clause between the whistleblower and his employer.  See United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 381–82 (4th Cir. 2008); but see Nguyen v. City of Cleveland, 121 F. Supp. 2d 643, 647 (N.D. Ohio 2000) (finding that FCA retaliation actions were not arbitrable because of a conflict between “arbitration and the underlying purposes of the FCA”).

If you have uncovered fraud against the government, contact the whistleblower attorneys at Miller Law Group today for a free consultation.  Our team can help you navigate the complexities of whistleblower law.

Additional Resources: 

Whistleblowers Recover $40 Billion During the Last 30 Years

Do Whistleblowers Need to Hire an Attorney?

Whistleblower Law: Seven Factors to Avoid Government Dismissal