In 1920, U. S. Supreme Court Justice Oliver Wendell Holmes wrote that contractors "must turn square corners when they deal with the Government." That remains true today, and allegations in a recently-settled False Claims Act case illustrate the point.
The allegations were made in United States ex rel. Webb v. The Boeing Co. in the U.S. District Court for the Central District of California. A former Boeing employee filed a whistleblower FCA suit – a qui tam suit – alleging that a Boeing facility in Long Beach, CA billed the Government for eight-hour days between 2006-2013, when Boeing allegedly knew that the employees worked less than eight hours as a result of taking lunch and other breaks. Boeing decided to settle the suit by making an $18 million payment, about $3 million of which reportedly went to the whistleblower.
The Importance of Accurate Recordkeeping
While the particular facts of the case have not been made publicly-available, we do know that the Government expects the contractor to keep accurate records of the costs incurred and the hours worked for contracts involving cost reimbursement, labor hour, and time and materials. The Government has the right to audit those records. If the contractor's records do not support the number of hours worked, the Government typically takes the position that the contractor is not entitled to payment for the unsupported hours. Where, as here, there are allegations that the contractor knowingly billed for hours its employees did not work, there may be a basis for an FCA suit.
What Can Contractors Do to Mitigate their FCA Exposure Risk?
- Keep accurate records, with awareness of what may be required should you ultimately be subject to audit.
- Consider executing an internal investigation. If the compliance review reveals a problem, your counsel will work with the government contractor to create a legal strategy.
- Appoint a designated compliance officer whose role is to vet concerns.
- Respect employees - most FCA cases begin with whistleblowers who believe their employer did not take their concerns seriously. Issues raised by employees should be investigated.
- Protect confidentiality - attorney investigations can be privileged from disclosure in the event of an eventual FCA suit.
- Understand the importance of disclosure - voluntary reporting of violations can protect against an FCA lawsuit.
For More Information
For more information on this matter or how Polsinelli can assist with your own FCA risk mitigation strategy, please contact the authors or your Polsinelli attorney.
- Lauren P. DeSantis-Then | 202.626.8323 | Email
- Daniel J. Donohue | 202.626.8395 | Email