This page is a brief overview of the New Jersey False Claims Act (N.J. Stat. Ann. Sections 2A:32C-1) by Tony Munter. Tony Munter is not a New Jersey False Claims Act lawyer. He is not licensed to practice in New Jersey.
New Jersey enacted a False Claims Act in 2008 modeled on the federal law (31 U.S.C. Sections 3729-3733) with a few unusual provisions. The law is relatively new and there is not much history for us to examine on cases filed only in New Jersey regarding only New Jersey claims.
Of course, the New Jersey False Claims Act allows the State to collect in the event there is a nationwide scheme, which includes federal and New Jersey State funds. Therefore, the law will lead to immediate collections for New Jersey as part of such actions and will help fight fraud against the state specifically.
New Jersey False Claims Act Rewards
The unusually positive provisions of this law seem to outweigh any negative matters or limitations on whistleblower rights. Not least of these positive factors is the simple existence of a New Jersey False Claims Act, a law which—unlike so many other state laws—is not restricted to one sector of the government. Any kind of claim is potentially the subject of a case.
The rewards for whistleblowers are modeled on the Federal Law, providing 15 percent to 25 percent for a case which is taken over by the Attorney General, and 25 percent to 30 percent for a case in which the whistleblower had to go it alone. The state law also provides for specific direction as to how to distribute the proceeds within the government if an action is successful. The wronged agency apparently gets made whole and any additional proceeds, which may result from treble damages and/or civil fines, get deposited in the general fund.
New Jersey False Claims and the AG
That would seem to create an incentive for the wronged agency to cooperate with the Attorney General in working on these cases. The agency knows that they will have the money directly returned to it rather than simply put in the general fund. This is a provision the federal law or would do well to adopt, as it is hard to know absent an amendment whether the federal government could simply apply such a rule.
Here is another strongly pro-whistleblower provision in the New Jersey law: “No employer shall make, adopt, or enforce any rule, regulation, or policy preventing an employee from disclosing information to a State or law enforcement agency or from acting to further a false claims action, including investigating, initiating, testifying, or assisting in an action filed or to be filed under this act.” See N.J. Stat. Ann. Section 2A:32C-10(a)
That provision spells out specifically what some court cases have held under the federal law. Unfortunately, not every federal court has agreed with this reasoning.
Having a statute with such clear pro-whistleblower language—language that at least on its face would make it very difficult for an employer to enforce a limitation on the right of an employee to be a whistleblower—is a great thing to see. So many settlements of other claims attempt to limit the right of a whistleblower to either file a New Jersey false claims action or be a whistleblower. Here’s hoping this language will defeat the attempt to take away the rights of employee whistleblowers who want to settle their employment claims, at least in New Jersey.
Limitations for State Employees in NJ
The New Jersey FCA law is at least as expansive as the federal law in most respects, but it does put a limitation on state employee whistleblowers, while the federal statute includes no provision preventing a federal employee from being a whistleblower. Some federal courts have supported the view—not actually found in the statute—that federal employees cannot be whistleblowers and expect to get a share of a recovery when they discover information as part of their jobs.
Under the New Jersey False Claims Act, that viewpoint is specifically spelled out in the law itself. An employee of the state can’t file an action based upon information discovered in any civil criminal or administrative investigation or audit within the scope of that person’s employment.
That rule may seem fair enough on paper, and it is at least a rule the legislature had to vote to enact. However, what happens if the auditor finds something important and for whatever reason the higher-ups do not support doing anything at all about it? Of course, nothing prevents an employee of the state of New Jersey from bringing an action under the Federal False Claims Act if they happen to stumble across false claims which affect the federal government during their investigation on behalf of the State of New Jersey, at least not under the plain language of the federal law.
New Jersey is a large state, this provision is new, and it may take a while for lawyers and whistleblowers to use this law. But sooner or later, if there is fraud in New Jersey that affects the state government, it is inevitable that whistleblowers and the state government will find this law as helpful as the federal government finds the Federal False Claims Act.