Are Whistleblowers Protected From Blacklisting?

The use of blacklisting to punish former employees or individuals who found themselves on the losing side of political power has a long history in American industry. “Blacklisting,” is the act of interfering with an individual’s opportunities as punishment for his or her acts or beliefs.[1]

Blacklisting and employment law in the United States have a long relationship. In the early 1900s, blacklists were often used to punish workers who attempted to engage in labor organizing. In the 1950s, blacklists were used to punish and boycott supposed communist sympathizers, particularly in the Hollywood film industry, the media, and government agencies, by excluding them from potential employment opportunities. Notable examples of the blacklist are depicted in movies such as Trumbo and Good Night, and Good Luck.

While these are historical examples, blacklisting still happens today. Corporations often “blacklist” former employees as retaliation for whistleblowing regarding illegal activity. As many whistleblowers know, once an employee internally or externally reports their employer’s illegal conduct, that employee often suffers significant retaliation – including efforts to interfere with their future employment.

Recent Court Decisions Protecting Whistleblowers from Blacklisting Under the False Claims Act

Whether whistleblowers are protected from blacklisting depends on how legislatures craft anti-retaliation laws and how courts interpret such laws. By its nature, blacklisting does not occur during a whistleblower’s employment. Rather, blacklisting occurs after a whistleblower has been terminated or resigns, and thus the question becomes whether such post-termination acts are prohibited by anti-retaliation laws.

As described in previous posts, the False Claims Act (FCA) provides whistleblowers protection from retaliation for actions in furtherance of qui tam claims or for efforts to stop violations of the False Claims Act. The FCA protects individuals who internally or externally blow the whistle on the fraudulent conduct of their employers from being fired or harassed, and provides a remedy if that occurs. Historically, courts have held that the False Claims Act’s anti-retaliation provision does not protect whistleblowers from post-termination actions.

However, in a recent case, U.S. ex rel. Felten v. William Beaumont Hosp., which was the subject of a previous post, the Sixth Circuit Court of Appeals, which covers Kentucky, Michigan, Ohio, and Tennessee, held that the False Claims Act’s anti-retaliation provision precluded post-termination retaliation that would dissuade a reasonable person from reporting fraud. The Sixth Circuit reasoned that the False Claims Act’s protections were similar to the anti-retaliation protections of Title VII of the Civil Rights Act, which bars multiple types of employment discrimination, and the U.S. Supreme Court previously found that Title VII protected individuals from post-termination retaliation by their former employers for protected conduct.[2]

Since our previous post on the Felten case, the defendant hospital employer has asked the U.S. Supreme Court to review the Sixth Circuit’s decision and resolve the question of whether the False Claims Act protects whistleblowers from post-termination retaliation.[3] As of this post, the Supreme Court has asked for the plaintiff whistleblower in Felten to weigh in on the request for review, but has not yet agreed to take the case.

How Blacklisting of Whistleblowers Is Treated Under Other Statutes

While the question of whether a whistleblower is protected from blacklisting under the False Claims Act remains undecided on a national level, with the answer depending on where the whistleblower is located, courts have found that other statutes protect individuals from post-termination retaliation, such as blacklisting, for engaging in protected activity. The U.S. Supreme Court and the Seventh, Third, and Second Circuits have all found protections against blacklisting under Title VII’s anti-retaliation provisions. Courts have also held that the Federal Labor Standards Act (FLSA), which sets the minimum wage and other employment term protections, also protects employees from blacklisting as retaliation for demanding proper compensation for work.[4]

Importantly, other anti-retaliation statutes either explicitly or through court interpretation protect whistleblowers from blacklisting as retribution for exposing their former employer’s illegal conduct. The U.S. Department of Labor has tasked the Occupational Safety and Health Administration (OSHA) with investigation authority for over two dozen anti-retaliation statutes. Many of these statutes offer whistleblowers protection from post-termination reprisals, such as blacklisting. For instance, courts have found that the Sarbanes-Oxley Act, which protects whistleblowers who report securities law violations and other fraud, applies to post-termination retaliatory conduct.[5] Similarly, administrative courts have found that the STAA, a law that protects whistleblowers who report safety violations in relation to interstate trucking, also protects against post-termination blacklisting.

Some of the statutes administered by OSHA, including the Consumer Financial Protection Act, explicitly protect whistleblowers from blacklisting in the text or in the regulations implementing them. Similarly, the text of one of the most recent whistleblower protection statutes, the Anti-Money Laundering statute, also explicitly protects whistleblowers from blacklisting. Such broad protection from both pre and post termination retaliation is important to properly protect whistleblowers when they do come forward.

Proposed Amendments to the False Claims Act Would Clarify Its Protections and Bring them In Line With Those of Other Whistleblower Laws

Earlier this year, Sen. Chuck Grassley (R-Iowa), introduced a bill called the “False Claims Amendments Act of 2021” aimed at “beef[ing[ up the government’s most potent tool to fight fraud.” This bill, which just recently passed out of the Senate Judiciary Committee, would substantially strengthen the False Claims Act. Significantly, the bill would amend the False Claims Act’s anti-retaliation provision to explicitly cover “post-employment whistleblower retaliation,” such as blacklisting, by making the provision apply to “[a]ny current or former employee…” (emphasis added).

The Sixth Circuit’s recent decision in Felten, Congress’ recent enactments of legislation, and the proposed amendments to the False Claims Act are all evidence of a modern trend towards broadening whistleblower protections and remedies to preclude interference with future employment. Blowing the whistle on illegal conduct is a selfless act that our society should encourage. However, mere encouragement is not enough if whistleblowers are not protected or offered a remedy when the target of their reporting is able to interfere with future employment opportunities without penalty or recourse from the whistleblower. Whistleblowers deserve protection from blacklisting, and a remedy if it occurs – the recent cases, laws, and bills discussed above are steps in the right direction.

Written by Clayton Wire of Ogborn Mihm LLP

[1] Merriam-Webster defines the word “blacklist” as “a list of persons who are disapproved of or are to be punished or boycotted.”

[2] See Robinson v. Shell Oil Co., 519 U.S. 337, 340–41, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997). [3] Other trial level courts have found that the False Claims Act protects whistleblowers from post-termination retaliation, such as blacklisting, but the Felten and Potts decisions are the only Circuit Court level cases to address the issues. See Fitzsimmons v. Cardiology Associates of Fredericksburg, Ltd., 2015 WL 4937461 (E.D. Va. Aug. 18, 2015); Ortino v. Sch. Bd. Of Collier County, 2015 WL 1579460 (M.D. Fla. Apr. 9, 2015) (former teacher stated a 3730(h) claim against school district for blacklisting her as ineligible for re-hire in retaliation for whistleblowing about fraud in state and federal funding); Haka v. Lincoln County, 533 F. Supp. 2d 895 (W.D. Wisc. 2008) (former employee stated 3730(h) claim that the defendant former employer was refusing to rehire him in retaliation for whistleblowing; the court held that a reasonable interpretation of “in the terms and conditions of employment” would include a decision to rehire); Nguyen v. City of Cleveland, 121 F. Supp. 2d 643 (N.D. Ohio, 2000) (former city employee stated claim against city for blacklisting him from work on city contracts in retaliation for his filing of a qui tam action against the city and thereby causing his new employer, a city contractor, to fire him); and U.S. ex rel. Kent v. Aiello, 836 F. Supp. 720 (E.D. Ca. 1993) (former employee of subsidized housing company stated claim against his former employer for causing the new manager of the housing project to fire him in retaliation for his acts in furtherance of a qui tam action against his former employer). [4] See Dunlop v. Carriage Carpet Co., 548 F.2d 139, 147 (6th Cir. 1977) (“We cannot read into the broad language and purposes of the Act an exception which would allow an employer to discriminate against and ‘black list’ a former employee.”).

[5] See Kshetrapal v. Dish Network, LLC, 90 F. Supp. 3d 108, 112 (S.D.N.Y. 2015) (“Defendants argue that Plaintiff’s SOX claim is limited to his pre-termination protected activities. The Court disagrees”).