Private employers with operations in Pennsylvania should be mindful that if they receive funds from the Commonwealth, they may be subject to the Pennsylvania Whistleblower Law (PWL), according to a recent ruling by the U.S. District Court for the Western District of Pennsylvania.

 

In Davis v. Point Park University, the plaintiff alleged that the university had violated the PWL and the federal False Claims Act (FCA) when it terminated her employment after she notified her supervisor of suspected accounting improprieties. The university sought to have both claims dismissed. The Court declined to dismiss the FCA claim. And, although it did dismiss the PWL claim, it gave the plaintiff leave to amend her complaint after finding, notably, that a private employer that receives funds from the Commonwealth may be subject to the PWL.

 

The claims of accounting improprieties related to the university's receipt of federal funding, certification of compliance with federal regulations, and assignment of federal student financial aid. According to the plaintiff, an independent audit conducted at her urging had confirmed her concerns. However, she stated that days before a federal audit, during which she would have been compelled to share the information she had gathered, the university terminated her employment, citing restructuring.

 

The FCA's anti-retaliation provisions recently were amended to expand the protections they provide, but the framework of a retaliation claim has remained the same: to establish a claim of retaliation under the FCA, an employee must show that he/she engaged in protected activity and he/she was discriminated against because of engaging in protected activity. The Court found that the plaintiff's allegations showed that she engaged in protected activity and that her potential participation in a federal audit could have been sufficient to put the university on notice that litigation might arise pursuant to the FCA. Consequently, the Court found that her allegations of retaliation were sufficient to survive a motion to dismiss.

 

Regarding the PWL claim, the university argued that it did not qualify as a "public body," as defined by the PWL and, therefore, was not subject to the PWL. The Court’s analysis centered on whether a private entity that receives funds from the Commonwealth could fall within the definition of public body, an issue that has not been addressed by the Pennsylvania Supreme Court. After reviewing the cases cited by the parties, the Court declined to follow two decisions by the U.S. District Court for the Eastern District of Pennsylvania and instead followed two Pennsylvania Superior Court cases, which held that if an entity receives funds from the Commonwealth, whether through a direct appropriation from the legislature or indirectly through Medicaid funding, the entity would be considered a public body under the PWL. Applying that standard to the plaintiff's allegations, the Court concluded that the plaintiff did not allege sufficient facts regarding the sources of funding the university received from the Commonwealth. It therefore dismissed the PWL claim, but provided the plaintiff the opportunity to amend her complaint.

 

If you have questions about how this ruling might affect your operations, please call David S. Fryman, 215.864.8105 or fryman@ballardspahr.com; John C. Grugan, 215.864.8226 or gruganj@ballardspahr.com; or any member of Ballard Spahr's White Collar/Investigations or Labor and Employment Groups.


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