August 26, 2016 - Posts

Does a Severance Agreement Prevent Someone from Filing a Qui Tam? The Second Circuit of Appeals Says Not So Fast.

In an important win for whistleblowers and potential whistleblowers bringing claims under the federal False Claims Act, the Second Circuit Court of Appeals (which has jurisdiction over federal courts in New York, Connecticut, and Vermont) recently held that an employer could not use the broad release language from a separation agreement to prevent a former employee from pursuing a lawsuit under the qui tam provisions of that statute.


In that case, United States ex rel. Ladas v. Exelis, Inc., No. 14-4155 (2d Cir. May 25, 2016), the whistleblower had signed a separation agreement after his employment ended and before filing his qui tam lawsuit.  As part of that agreement, the whistleblower agreed to waive “any rights or claims” that he might have under federal law. His employer argued to the court that by signing that release, the employee gave up any right that he had right to bring a False Claims Act case on behalf of the United States. The Second Circuit disagreed.


In its opinion, the court emphasized that there is a strong public interest in having individuals with knowledge of fraud come forward with evidence of that fraud to the government, and that broadly worded separation agreements that waive “all claims” against an employer are therefore unenforceable against False Claims Act whistleblowers in cases where the United States is otherwise unaware of the potential fraud. Of course, every separation agreement is different, and potential whistleblowers should consult with an attorney if they have any questions about how a potential separation agreement may affect their right to blow the whistle. However, the Ladas case is an important victory for whistleblowers and the strong public policy of encouraging those whistleblowers to come forward with evidence of fraud.


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