We have frequently written about the increasing likelihood that courts will enforce arbitration agreements to resolve a broad range of issues arising out of the employment relationship. (See here, for example.) Recently, a federal court provided another example it compelled the arbitration of three nurses’ False Claims Act (FCA) retaliation claims against the hospital that employed them. But, the court went a step further by also requiring that the nurses arbitrate their underlying claim that the hospital had defrauded Medicare, thereby providing an important precedent for healthcare companies, government contractors and other employers who do business with the federal government and, therefore, can be targets of FCA claims. The case was brought by three nurses who had worked at Evercare Hospital in Ohio and alleged that the hospital had engaged in Medicare fraud in violation of the FCA. They sued the hospital as “relators” seeking to recover damages on behalf of the U.S. government (a so-called “qui tam” claim.) In addition, the nurses claimed that the hospital had retaliated against them for being whistleblowers, thereby violating the anti-retaliation provisions of the FCA. However, the nurses were parties to arbitration agreements with the hospital that required them to arbitrate “any dispute …which arises or relates to employment” including “whistleblower and retaliation claims.” Relying on this agreement, the hospital moved to compel arbitration of the nurses’ retaliation claims and their qui tam claims.
Requiring the nurses to arbitrate the retaliation claims was a no-brainer. After all, the arbitration agreement clearly required arbitration, and the Federal Arbitration Act and established case law generally require that valid arbitration agreements be enforced. Much trickier, however, was the nurses’ qui tam claim, since that claim really “belongs” to the government and was being pursued by the nurses on the government’s behalf in the nurses' capacity as “relators.” Importantly, the Court ruled that the arbitration agreement required arbitration of the qui tam claims since the agreement clearly applied to whistleblower claims. But, arbitration won't necessarily end the qui tam aspect of the case. Since the government has a stake in the outcome and is not bound by the arbitration agreement between the hospital and the nurses, the Court ruled that following the arbitration award the parties must either request that the government consent to the arbitrator’s award or resume litigation of the qui tam claims. So, time will tell whether the arbitration achieves a final resolution of the qui tam claims.
For employers, this case is another reminder of the important role arbitration agreements and policies can play as part of a broader dispute resolution strategy for employee claims, and underscores the importance of thinking through the scope and pros and cons of a well-drafted arbitration agreement or policy. This is especially so for companies who deal with the federal government and have an opportunity to force employees to arbitrate FCA whistleblower claims.