Can you be forced to arbitrate your FCA claims?

Image from Public Citizen

Image from Public Citizen

The answer, unfortunately, is “maybe.”

Modern employment contracts almost always contain some kind of arbitration provision whereby you and your company agree to resolve disputes through arbitration.

Companies prefer arbitration over going to court for several reasons:

  1. the discovery rules limit what information you can get from them;
  2. the company can prevent negative publicity by resolving the matter in a secret proceeding;
  3. arbitrators tend to rule in favor of the companies that ultimately pay the arbitrators’ bills; and
  4. it’s almost impossible to appeal an arbitrator’s ruling.

Illustrating how company-slanted the process can be, the Los Angeles Times reported that arbitrators in California ruled in favor of credit card companies in 94% of cases during a four year study.  The Arbitration Fairness Act is attempting to level the playing field by barring forced arbitration in employment, antitrust and civil rights cases as well as consumer disputes, but it has a paltry 6% chance of becoming law at the time of this writing.

So what does this all mean for your False Claims Act case?

Well, your underlying FCA fraud case will certainly go to court because that claim belongs to the government and is therefore beyond the scope of any employment agreement you might sign.

It gets a little murkier when discussing your FCA retaliation claims.  You should be able to bring the retaliation case to court because it is statutory in nature — meaning that the cause of action exists independent of any employment agreement and is therefore beyond the contract’s scope.

In May 2014, the Sixth Circuit Court of Appeals refused to force two relators to arbitrate their FCA retaliation claims based on this concept.  Unfortunately, the court did not stop there and went on to point out that the arbitration agreement in that case specifically did not mention the FCA and that it was much more narrow than other provisions that courts have seen.

This second half of the opinion may cause relators trouble down the road as companies will undoubtedly argue that FCA-tailored arbitration clauses can force FCA retaliation claims into arbitration.  In fact, at least one attorney is already advising companies to specifically mention FCA claims in their arbitration agreement based on the Sixth Circuit case.

So while you should be able to avoid arbitration as to all your FCA claims, there is the chance that a court could go the other way on your retaliation claims depending on the terms of your company’s agreement.  If you have any questions about these issues, please contact us electronically, or call us at 813-397-2300.

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