If I Blow the Whistle on My Employer, Can My Employer Sue Me For Breach of My Nondisclosure Agreement?

When weighing whether to blow the whistle on an employer engaging in fraud upon the Government, an employee or former employee (“Employee”) must consider if doing so would violate the Employee’s nondisclosure agreement. In particular, the Employee must weigh whether providing company documents to the Government will expose the Employee to liability.

The short answer is that a whistleblower is not guaranteed immunity from liability under these circumstances. Indeed, a defendant in a False Claims Act (“FCA”) case can, and sometimes does, bring a counterclaim against the whistleblower for breaching his or her employment agreement where the alleged breach was reporting fraud to the Government.

As background, FCA (also referred to as qui tam) cases are filed under seal and remain under seal during the pendency of the Government’s investigation of the alleged fraud. Once the Government makes its intervention decision—i.e., decides to intervene in the case and take over the litigation on behalf of the United States or to decline intervention and allow the whistleblower to litigate the case—the case becomes unsealed, and the defendant learns about the allegations of fraud and the identity of the whistleblower.

Defendants in FCA cases will almost always move to dismiss instead of answering the complaint. If the court denies the defendant’s motion to dismiss, the defendant will have to answer the complaint, at which time the defendant can assert counterclaims against the whistleblower. This includes claims for breach of the Employee’s nondisclosure agreement based upon sharing the employer’s documents with the Government.

So how have courts viewed the propriety of such counterclaims? Courts have taken three approaches to this type of counterclaim. First, many courts have dismissed such counterclaims on public policy grounds under the rationale that if whistleblowers could be liable for breach of their employment agreements for disclosing fraud to the government, this would create a major chilling effect on reporting fraud.[1] Second, a minority of courts have determined that the FCA does not excuse a party’s contractual duties and breaches of those duties and have allowed such counterclaims to proceed beyond a motion to dismiss.[2]  Third, the federal Ninth Circuit Court of Appeals has taken yet another approach: While recognizing the public policy implications at stake, it allowed a defendant’s counterclaim for breach of confidentiality agreement to proceed where the whistleblower indiscriminately amassed vast amounts of information belonging to the employer, resulting in taking and sharing with the Government more information than was necessary to disclose the fraud.[3]

Given these different approaches across the federal courts, and that each nondisclosure agreement must be evaluated on a case-by-case basis, it is important for potential whistleblowers to consult a qui tam attorney regarding the terms of their agreement, the law in the jurisdiction in which they may file suit, and the risks of counterclaim liability.

If you are considering blowing the whistle on your employer, contact the experienced lawyers at Rabin Kammerer Johnson at 561-659-7878.

[1] See, e.g., United States ex rel. Singbush v. Fla. Neurological Ctr., LLC, Case No. 5:19-cv-603, 2021 WL 3082750 (M.D. Fla. June 7, 2021).

[2] See, e.g., United States ex rel. Bahnsen v. Boston Sci. Neuromodulation Corp., Civil Action No. 2:11-cv-1210, 2014 WL 4402118 (D. N.J. Sept. 4, 2014).

[3] See United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047 (9th Cir. 2011).