In two recent decisions, the First Circuit answered questions of first impression concerning whistleblower claims under the Sarbanes-Oxley Act (“SOX”) and the False Claims Act (“FCA”). The SOX case, Lawson v. FMR LLC
, held that the SOX whistleblower protection provision does not cover employees of private companies that contract with public companies. The FCA case, Harrington v. Aggregate Industries-Northeast Region
, held that the McDonnell Douglas
burden-shifting framework applies to claims under the FCA’s anti-retaliation provision..
Lawson involved claims by plaintiffs alleging that their former employers, private companies that contracted with public companies, had retaliated against them for raising concerns about potential federal securities laws violations. The district court denied the defendants’ motions to dismiss, holding that the SOX whistleblower protection provision applies not only to employees of public companies, but also to employees of private companies that contract or subcontract with public companies. In an interlocutory appeal, a divided panel of the First Circuit reversed. Becoming the first federal court of appeals to address the issue, the First Circuit held in a lengthy opinion that the SOX whistleblower protection provision applies only to employees of public companies, not to employees of private companies that contract with public companies.
In Harrington, the plaintiff alleged that his former employer retaliated against him by terminating his employment several days after the parties had settled a qui tam action under the FCA. The qui tam action was based on the plaintiff’s allegation that his employer, Aggregate, was substituting substandard materials for its work in connection with the “Big Dig” in Boston. Following his termination, Harrington sued under the FCA’s anti-retaliation provision. Aggregate contended that Harrington’s refusal to take a drug test, not his role in the FCA lawsuit, was the reason for his termination.
On appeal, the First Circuit vacated the district court’s award of summary judgment to the employer. Resolving an issue that no published federal appellate decision had addressed, the First Circuit held that the McDonnell Douglas burden-shifting framework applies to claims under the FCA’s anti-retaliation provision. That framework functions as follows: first the plaintiff must set forth a prima facie case of retaliation; then the burden shifts to the defendant to articulate a legitimate, nonretaliatory reason for the adverse employment action; then the plaintiff must show that the defendant’s proffered reason is a pretext for retaliation.
Applying the McDonnell Douglas framework, the First Circuit concluded that Harrington had produced sufficient evidence to withstand summary judgment. The court held that the short period of time (three days) between the plaintiff’s signing the settlement agreement and the defendant’s termination of his employment was enough to permit an inference of retaliation. The court also noted the defendant’s failure to follow its own procedures regarding the drug test, which made the circumstances surrounding the plaintiff’s termination suspicious.
The prevalence of whistleblower retaliation claims is a reminder for employers to avoid not only unlawful retaliation, but the appearance of retaliation.