Health Law Daily 'But-for' standard applies to FCA adverse employment actions
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Monday, December 14, 2020

'But-for' standard applies to FCA adverse employment actions

By Jeffrey H. Brochin, J.D.

Although a customer affected by a qui tam filing requested that the company remove a key salesperson from a lucrative account, the employer’s action nevertheless amounted to retaliation for the employee’s FCA lawsuit.

In a case of first impression, the First Circuit Court of Appeals affirmed the judgment of a district court that found an employer, Coloplast Corp. (Coloplast), liable for damages under the anti-retaliation provision of the False Claims Act (FCA) (31 U.S.C. §3729 et seq.). Coloplast had they placed an employee on administrative leave following her filing of an FCA lawsuit against Coloplast and one of its largest customers. Although the leave was justified as being at the request of the customer, the jury reasonably found that the adverse employment action would not have occurred "but for" the filing of the FCA lawsuit (Lestage v. Coloplast Corp., December 9, 2020, Lynch, S.).

High-performing account manager. The employee began working as a salesperson for Coloplast, a medical device company, in 2004. By 2010, she became Coloplast's first key account manager (KAM). In 2013 and 2014, she was the highest-performing KAM at Coloplast, and among her accounts was Byram Health Care (Byram), one of Coloplast's largest accounts. Byram made up approximately 80% of her sales portfolio by volume. In December 2011, she and others filed a qui tam action under the FCA against Coloplast and several Coloplast competitors and clients, including Byram. The qui tam complaint alleged that Coloplast had paid kickbacks to clients, including Byram.

In 2014 the FCA complaint was unsealed, and the employer and Byram became aware of it. Byram requested that the employee be removed from handling their account, and she was then placed on an indefinite administrative leave—but was paid her full salary and 100% bonus under the company’s sales performance incentive bonus system. The employee was returned to work after the claim was settled, however, she was assigned different accounts that were less lucrative. She filed suit alleging retaliatory conduct by Coloplast under the FCA. A jury awarded her $762,525 in damages and Coloplast filed the instant appeal.

‘Because of’ causation language. The FCA forbids employers from discriminating against an employee "because of" his or her protected conduct. However, the parties disputed the proper meaning of "because of." In 2004, the 1st Circuit said in passing (and not in a holding) that an employee making a retaliation claim under the FCA must show that the retaliation was motivated, at least in part, by the employee's engaging in protected activity. A subsequent age discrimination retaliation case interpreted the "because of" language to mean that "but-for" the challenge by the employee, the employer would not have retaliated.

Several circuits have applied the but-for standard in retaliation claims under the FCA, reasoning that the statutory language is materially identical to that in the age discrimination cases.

Objection to jury instruction. Coloplast argued that the jury instruction of "substantial motivating factor" as to the adverse employment actions was error and should have been a "but-for" instruction. However, the court noted that at the time of the charge conference at the trial level, Coloplast had agreed with the jury instructions. The appeals court agreed that the but-for standard was the correct one to be applied in the instant FCA retaliation claim, and proceeded to evaluate the retaliation claim pursuant to that standard.

Proof of non-retaliatory reason. Under the FCA anti-retaliation framework, to establish a prima facie case of retaliation, the employee needed to show: (1) that she engaged in protected conduct under the FCA; (2) that Coloplast knew she engaged in such conduct; and (3) that Coloplast retaliated against her "because of" this conduct. Once such a prima facie case was made, the burden shifted to the employer to articulate a non-retaliatory reason for the adverse employment action. The first two factors were met because the filing of the qui tam action was protected conduct under the FCA and because Coloplast knew of the conduct. Applying the but-for meaning to the because of language, the court needed to weigh whether the protected conduct was in fact the but-for cause of the adverse employment action.

Customer request not causative. The appeals court rejected Coloplast’s argument that it was Byram’s request letter to have the employee removed from their account rather than her qui tam filing that was the but-for cause of her being put on administrative leave. The court found meritless the contention that Coloplast placed the employee on a leave in response to Byram's request to have her removed from its accounts, and found that the letter only established that Byram's letter set off the chain of events resulting in the administrative leave, but the letter was hardly a concession that there was no retaliation.

A jury could—and in this case did—conclude that Coloplast knew Byram's request was in retaliation for her qui tam suit and that the two companies' lawyers discussed it. Coloplast could have simply removed her from the Byram account but chose not to do so. Instead, it put her on leave, removing her from the premises and eliminating her physical and online presence, not even telling one of her accounts that she was gone.

For the foregoing reasons, the appeals court ruled that the jury reasonably concluded that the but-for causation for the adverse employment action was in fact her filing of the qui tam lawsuit and affirmed accordingly.

The case is No.: 19-2037.

Attorneys: Elisabeth S. Theodore (Arnold & Porter Kaye Scholer LLP) for Coloplast Corp. Rachel M. Wertheimer (Verrill Dana LLP) for Amy Lestage.

Companies: Coloplast Corp.

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