Whistleblower Lawsuits and Qui Tam Rewards: How the False Claims Act Pays

A qui tam lawsuit is a case brought by a private person, called a relator, on behalf of the United States under the False Claims Act. The law targets anyone who knowingly submits false claims for payment to the government or knowingly keeps money it owes the government.

Common types of fraud

• Health care: billing for services never provided, upcoding, medically unnecessary procedures, and kickbacks for patient referrals. See Medicare fraud.
• Government contracts: overcharging, substituting cheaper parts, or delivering defective goods. The 3M earplug problem first surfaced this way; see our 3M earplug page.
• Pharmaceutical and device companies: off-label promotion and kickbacks that cause false claims to federal programs.
• Customs and tariffs: underpaying import duties.
• Grants and loans: lying to get federal grants or pandemic relief loans.

Most relators are insiders: billing staff, nurses, compliance officers, engineers, and sales representatives.

The Justice Department reported more than $6.8 billion in False Claims Act settlements and judgments in fiscal year 2025, the highest in the statute's history, and relators filed a record 1,297 new qui tam suits, up from 980 the year before.

The constitutional challenge

In 2024, a federal judge in the Middle District of Florida ruled in United States ex rel. Zafirov v. Florida Medical Associates that the qui tam provisions were unconstitutional because relators act like officers without a proper appointment. On September 1, 2026, the Eleventh Circuit reversed, holding that the qui tam provisions do not violate the Appointments Clause and joining every other federal appeals court to consider the issue. Other constitutional arguments were left for another day, and the question could reach the Supreme Court.

Penalty amounts

For penalties assessed after July 3, 2025, the per-claim civil penalty ranges from $14,308 to $28,619, adjusted for inflation.

You may qualify if:

• You have specific, firsthand knowledge of fraud against a federal program or agency.
• The fraud involves claims for federal money, including Medicare, Medicaid, TRICARE, VA, defense contracts, or federal grants.
• Your information is not already public, or you are an original source who has independent knowledge that adds to what is public.
• You are the first to file on that scheme.

Rules that knock out claims

• First-to-file rule: once a qui tam is pending, others generally cannot bring a related case based on the same facts.
• Public disclosure bar: cases based mainly on information already in the news, government reports, or court filings are dismissed unless you are an original source.
• You need a lawyer: courts generally do not allow relators to bring qui tam cases without an attorney, because the claim belongs to the government.

Other whistleblower programs

Securities fraud is reported to the SEC, which pays 10% to 30% of sanctions collected in actions over $1 million. Tax fraud goes to the IRS Whistleblower Office, which pays 15% to 30% of proceeds in larger cases. These are administrative programs, not lawsuits. State false claims acts cover fraud on state Medicaid and other state funds.

The recovery itself can be large. A company that violates the False Claims Act owes three times the government's damages, plus a civil penalty for each false claim. In health care cases with thousands of claims, penalties alone can be significant.

Example

If a hospital settles for $20 million after the government intervenes, a relator who substantially contributed could receive $3 million to $5 million, plus reasonable attorney fees and expenses paid by the defendant.

Most cases take years, and many end with no recovery. The government declines to intervene in most cases, and relators who go forward alone win less often. Awards are taxable income; see taxes on settlements.

• 31 U.S.C. 3729: defines false claims and sets liability at three times damages plus per-claim penalties.
• 31 U.S.C. 3730(b): the complaint is filed under seal and stays sealed for at least 60 days, often much longer, while the government investigates and decides whether to intervene.
• 31 U.S.C. 3730(d): the relator's share.
• 31 U.S.C. 3730(h): protects employees, contractors, and agents from retaliation, with reinstatement, two times back pay, interest, special damages, and attorney fees.

Because the case is sealed, you generally cannot tell coworkers or the company about it. The defendant usually learns of it only when the court lifts the seal. A whistleblower in a qui tam case is not a class representative: there is no class, and no one else needs to join. For how this differs from other group litigation, see types of class action lawsuits and class action vs. individual lawsuits.

A False Claims Act case must be filed within 6 years of the violation, or within 3 years after the responsible government official knew or should have known the facts, but never more than 10 years after the violation. Each false claim can have its own date, so older claims drop off over time.

Retaliation claims under section 3730(h) must be filed within 3 years of the retaliation. Because of the first-to-file rule, speed matters even more than the statute of limitations: if someone else files first on the same fraud, you may lose any share.

1. Attorney review. A qui tam lawyer evaluates whether the facts describe fraud on the government, whether the information is public, and whether anyone may have filed first.
2. Disclosure and sealed filing. The complaint is filed in federal court under seal, and the relator serves the government with a written disclosure of substantially all material evidence.
3. Government investigation. Justice Department attorneys and agency investigators interview the relator, subpoena records, and may interview company employees without revealing the case.
4. Intervention decision. The government either intervenes, declines, or settles. If it declines, the relator can continue alone, and the case is unsealed.
5. Litigation or settlement. Most resolved cases end in settlement. The relator's share is set by agreement with the government or by the court.

Many qui tam cases stay under seal for a year or more, and the whole process can take several years. During that time you usually cannot discuss the case publicly.

Internal reporting

You are not required to report internally before filing a qui tam, and reporting internally can alert the company. But internal complaints about fraud are protected activity for retaliation purposes, and compliance employees may have special duties. Discuss the timing with an attorney.

State false claims acts

Many states and some cities have their own false claims acts, which often cover fraud on state Medicaid programs and state contracts, with similar whistleblower shares. A single case often includes both federal and state claims.

Government employees

Federal employees can sometimes be relators, but courts treat information learned in the course of government duties differently. Get advice before filing.

Common reasons cases fail

• The fraud was already public or already being investigated.
• Another relator filed first on the same scheme.
• The facts show a billing mistake or contract dispute rather than knowing fraud.
• The whistleblower has suspicions but no specific examples of false claims.

Specific examples, such as particular claims, dates, and amounts, make the biggest difference in whether the government takes a case seriously.

Keeping your job while the case is sealed

Most relators keep working while the government investigates, because leaving suddenly can raise questions and cost them income. Your attorney will explain what you may and may not say at work, and whether you should keep gathering information. Do not record conversations or copy documents without first asking your lawyer, since the rules vary by state and by the type of information. If you are fired or demoted, section 3730(h) lets you sue for reinstatement, two times back pay, and fees, and that claim can proceed even if the government never joins the fraud case. Relators can also be protected as confidential sources during the investigation, although their identity usually becomes known once the complaint is unsealed.

Qui tam attorneys generally work on contingency, taking a percentage of the relator's share, and the defendant pays statutory attorney fees if the case succeeds.

1. Talk to a qui tam attorney before reporting outside the company or confronting anyone. Public statements can hurt your case and your eligibility.
2. Write down what you know with dates, names, and amounts, and keep it private.
3. Preserve evidence lawfully. Do not take documents you are not allowed to access, and be careful with patient and privileged information.
4. Keep doing your job and document any retaliation.
5. Do not sign a severance release without advice; it may affect your retaliation claim.

A free case review takes about two minutes and can connect you with independent attorneys who handle whistleblower cases. Related: unpaid overtime for workplace pay issues.