ednyThe U.S. District Court for the Eastern District of New York recently found that two former employees of Eihab Human Services (Company) raised a genuine issue of material fact as to whether they were discharged in retaliation for reporting that an executive director ordered an employee to create fraudulent billing records in violation of the whistleblower protection provisions in the federal and state False Claims Acts (FCA).  Krause v. Eihab Human Servs., Inc., No. 10-cv-898, 2015 WL 4645210 (E.D.N.Y. Aug. 4, 2015).


After being approached by an employee who was allegedly ordered by the executive director to fabricate records being sent to Medicaid regarding services rendered, the Plaintiffs, a human resources director and an associate executive director, reported the alleged incident to state auditors.  As a result, the auditors rejected certain documents.  Plaintiffs further alleged that the executive director subsequently threatened to terminate their employment, offered raises in exchange for recanting their statements and deprived them of resources necessary to perform their job functions.  Plaintiffs refused and were later discharged.  The human resources director was purportedly discharged due to an alleged failure to comply with criminal background check procedures and the associate executive director was purportedly discharged for her alleged role in forging timesheets and falsely reporting a wage violation.  Plaintiffs denied the stated bases for their terminations.


The court rejected the Company’s argument in support of its motion for summary judgment that Plaintiffs did not engage in protected activity under the FCA, finding that Plaintiffs came forward with information about fraudulent documentation.  The court also considered the Company’s stated reasons for the terminations to be pretextual.  In particular, deposition testimony from other employees regarding the executive director’s alleged anger over the disclosure and board meeting minutes reflecting the executive director’s alleged statement that she should have fired the associate executive director over the disclosure were, in the court’s view, sufficient to support Plaintiffs’ allegations that the proffered reasons were a pretext.  The court also found it significant that the scrutiny of Plaintiffs’ conduct increased after their disclosure.


One key takeaway from this decision is that increases in surveillance or scrutiny of an employee’s conduct or performance after protected disclosures could be construed by plaintiffs in a manner that heightens the likelihood that a court may find termination decisions pretextual.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.