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From Health Law Daily, March 6, 2018

Nursing director convinces court of constructive discharge in FCA action

By Lindsey Firnbach, J.D.

An employee does not need to demonstrate an employer’s specific intention to force an employee out in order to prevail in a False Claims Act (FCA) (31 U.S.C. §3729 et seq.) constructive discharge cause of action. The unpublished decision by the Sixth Circuit Court of Appeals declared that intent for constructive discharge is satisfied as long as the resignation of the employee was a "reasonable foreseeable consequence" of the actions of the employer, and therefore, the lower court was incorrect by stating that an employee must have acted with the specific intention to force the employee to quit. Additionally, the employer’s knowledge of the fraud and failure to prevent the employee from having to choose violating law or resigning, constituted a violation of the wrongful discharge law in Kentucky (Smith v. LHC Group, Inc., March 2, 2018, Merritt, M).

Factual Background. The employee worked for home health care providers, LHC Group, Inc. and Kentucky LV, LLC (LHC) as a nursing director and was responsible for reviewing new patient referrals to determine whether LHC could care for the patient and fulfill the orders from the patient’s doctor. After a patient was accepted, an assessment of the needs of the patient was to be completed, and if different services than what were in the referral were necessary to treat the patient, the doctor had the opportunity to make the final decision regarding these changes. After the acceptance of the referral, the nursing director would then complete all the paperwork to secure payment.

During the time of her employment, the nursing director noticed that some employees were admitting patients without performing the assessments and/or obtaining the required documentation. She alleged that staff would admit patients and would change the doctors’ orders to match what they had available at LHC, when LHC was not able to accommodate the medical needs. She informed the management of LHC numerous times, but was ignored, and was even told that LHC profited from these practices. Her job required that she fill out the necessary paperwork for reimbursement from federal health care programs and private insurance. Faced with the possibility of being implicated for fraud and the possibility of violating Kentucky licensing requirements for nurses through the execution of her duties, she resigned.

Procedural Background. The nursing director filed a claim against LHC alleging that it violated the FCA by constructively discharging her as retaliation for reporting the alleged fraud, and that LHC’s actions constituted wrongful discharge under Kentucky law. LHC filed a motion to dismiss, which was granted by the lower district court. The lower court believed that in order to prove the intent necessary for a constructive discharge claim, the employer must have committed the fraud with the "specific intention" of forcing the employee to quit. The nursing director did not demonstrate this specific intent, and so the court believed she failed to state a claim.

False Claims Act. Constructive discharge occurs when conditions at a workplace would cause a reasonable person in the same position as the employee to resign. Although the lower court declared that the nursing director did not demonstrate that these type of working conditions existed, the appeals court rejected that decision. The Sixth Circuit believed that a jury could reasonably conclude LHC’s disregard of the complaints of fraud caused working conditions that were unbearable, because it forced the Nursing Director to perform functions that could lead to criminal prosecution and/or the loss of her nursing license.

The court further rejected the intent requirement held by the lower court, and stated that constructive discharge does not require subjective intention, but only a demonstration that the resignation was a "reasonable foreseeable consequence" of the actions from the employer. In this case, the Nursing Director had informed the management of LHC about the alleged illegal activity, and LHC should have realized that if they did not take action, she would resign.

Concurrence. One judge concurred in the judgement, but separately addressed the requirements of constructive discharge and causation under the FCA. The concurrence emphasized that the employee must demonstrate that the employer deliberately created working conditions that were intolerable with the intent of forcing the resignation of the employee. Additionally, the concurrence noted that proof of the employer’s intent, as well as the employees objective feelings, need to be demonstrated in order to prevail.

The case is No. 17-5850.

Attorneys: Robert L. Abell (Robert Abell Law) for Sue Smith. Keith Moorman (Frost Brown Todd LLC) and Glenn Garrison Patton (Alston & Bird LLP) for LHC Group, Inc. and Kentucky LV, LLC.

Companies: LHC Group, Inc.; Kentucky LV, LLC

MainStory: TopStory CaseDecisions CMSNews FCANews EmploymentNews QuiTamNews KentuckyNews MichiganNews OhioNews TennesseeNews

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