The False Claims Act, 31 U.S.C. Sec. 3729 et. seq. ("FCA") makes it a violation of federal law for any person (or entity) to submit a false claim for payment to the federal government. Government contracts and especially defense and health care sub-contracts generally require, as a condition of payment, certification that the prime- or sub-contractor has complied with all contract requirements. Submission of a false claim or certification is a federal crime; the statute also provides for civil damages and other penalties.

More and more agreements with the federal government for goods and services are requiring contractors and sub-contractors to certify that their systems and operations are "Year 2000 ("Y2K") compliant." Companies that do so falsely may be submitting false claims under the Act. These corporations, their officers, directors and employees could thus be held criminally and civilly liable for knowingly and falsely promising that they know their operations will not "crash" at the start of the new millennium because of a Y2K bug.

While most corporations have by now considered how problems with their "legacy" computers and in their "embedded chips" will affect business operations, and some have already made repairs or replacements to avoid Y2K failure, few companies have considered that they may soon be required to certify their business operations as "Y2K compliant." Companies should develop a strategy to ensure that any certification, especially those involving government payments, is true and correct.

Execution of such government-required certifications require careful consideration by qualified legal staff. Certification regarding Y2K compliance is no different. The FCA provides for treble fines for any actual damages incurred, in addition to monetary penalties of $5,000 to $10,000 for each false claim. More importantly, the statute also provides for potential criminal liability for the company and its involved officers, directors and employees. Companies may further be administratively barred from doing any business whatsoever with the federal government for a period of years, a sanction which could be fatal to many corporations. Under the Statute’s "bounty hunter" provisions, any individual – including the employee most responsible for the false claim – may also bring suit on behalf of the federal government under qui tam provisions of the Act, share in a reward paid from the company’s civil fines, and earn immunity from prosecution in the process. Other statutes in force in specific industries, especially health care, carry their own "bounty hunter" provisions.

Human Resource professionals and Contract Compliance officers must also realize that employees who reveal company secrets involving false claims may be protected by federal law. The False Claims Act provides that an employer may be held liable to "any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment…in furtherance of an action…" under the FCA. This includes damages for twice the employee’s back pay, litigation costs, and attorneys’ fees the employee may incur in opposing such workplace sanctions.

Courts have held that the definition of what constitutes an employee’s "protected activity" under the Act "should be interpreted broadly." Other federal laws carry additional "whistleblower" protections prohibiting retaliatory discharge of employees in specific industries, especially in heavily-regulated ones (such as health care, government and defense contracting, banking and energy).

Employers also need to be aware that they risk liability for taking action against workers who merely reveal otherwise-private, corporate information to the government deemed to be "in the public interest." Such as information that an employee could disclose would include that a company’s computers might fail on .January 1, 2000 (in operating, say, generators supplying power to air traffic control, or ventilation pumps necessary to circulate breathable air to underground tunnels). Even if they are not sued, employers who sanction employees for revealing such information which is arguably perceived as "in the public interest" risk wide-spread criticism from the media and the public.

Individual states have also enacted statutes protecting employee "whistleblowers." These serve as exceptions to the traditional employment-at-will doctrine, which is the general legal provision providing that an employee may otherwise be discharged for "good reason, bad reason, or no reason at all." For example, New Jersey’s Conscientious Employee Protection Act ("CEPA"), N.J.S.A. Secs. 34:19-1 et seq., forbids an employer from taking any "retaliatory action" against an employee who discloses "an activity, policy, or practice of the employer or another employer, with whom there is a business relationship, that the employee reasonably believes is in violation of a law, or a rule or regulation…or, in the case of an employee who is a licensed or certified health care professional, reasonably believes constitutes improper quality of patient care…" In some states, such as Pennsylvania, the whistleblower protection statute applies only to public employees. 43 Pa.C.S.A. Sec. 1423(a) (Providing for claims against an employer for taking any action against an employee, including with respect to compensation, terms, conditions, location or privileges of employment, because the employee or her representative "makes a good faith report or is about to report, verbally or in writing, to the employer or appropriate authority an instance of wrongdoing…") Other states have broader statutory protections.

Even in the absence of statute, the common law in most states includes a public policy exception to the employment-at-will doctrine. This may protect employees who refuse to participate in illegal acts, or who actively object to their employer’s unlawful acts or practices, by complaining inside and outside of the workplace. Courts have most readily protected employees who have refused to commit, or have objected to committing, violations of criminal law (as the clearest expression of a state’s public policy). Various courts have also extended such protections to employees who refuse to violate, or who publicize such violations, of civil regulations and laws as well.

Employers risk enormous negative publicity, even for acting lawfully and within their rights, against an employee who may do nothing more than publicize to the media (as opposed to simply notifying the employer itself, or the government) of a serious problem, such as the potential for widespread Y2K systems’ failure. The employer would almost certainly be sued. Where the employee not only publicizes such a problem in the press, but also reports the problem internally to the company and/or externally to law enforcement or regulatory officials, an employer defending against a wrongful discharge claim may have difficulty proving its actions against the employee did not result from otherwise protected "whistleblowing" activities.

Making claims for payment on government prime- and sub-contracts, executing such contract certifications (of all types, not just as to Y2K compliance), and dealing with employee whistleblowers takes careful planning to develop sound, legal strategy.