Federal Court Examines Fraud Allegations Under False Claims Act and Sovereign Immunity Protections

Federal courts have affirmed that federal employees cannot sue their government employers for retaliation under the False Claims Act (FCA), according to a recent ruling in a case involving the Veterans Affairs Maine Healthcare System.

The U.S. Court of Appeals upheld a lower court’s dismissal of a lawsuit filed by Erik K. Sargent, a federal employee who claimed he faced workplace retaliation after refusing to participate in fraudulent activities by his supervisors and subsequently reporting those actions.

Sargent had sued the Secretary of the Department of Veterans Affairs in his official capacity, alleging violations of the FCA’s anti-retaliation provisions under 31 U.S.C. §3730(h). This section of the law prohibits employers from retaliating against employees who take lawful actions to stop violations of the FCA, which primarily targets fraud against the government.

However, the district court determined on its own initiative that Congress has never explicitly waived the federal government’s sovereign immunity for retaliation claims under this section of the FCA. Sovereign immunity is a legal doctrine that prevents the government from being sued without its consent.

“The FCA does not authorize [Mr. Sargent] to pursue his FCA-derived retaliation claim against the United States,” the district court concluded in granting the motion to dismiss the case.

In its review, the appellate court affirmed this decision, agreeing that federal sovereign immunity bars Sargent’s retaliation claim. The court noted that the district court acted appropriately in assessing sovereign immunity on its own initiative, as this type of jurisdictional issue can be raised at any stage of legal proceedings.

The ruling highlights an important limitation in whistleblower protections for federal employees. While the False Claims Act provides robust protections against retaliation for employees in the private sector who report fraud against the government, those same protections do not extend to federal employees reporting fraud within their own agencies.

Legal experts point out that this creates a significant gap in whistleblower protections. Federal employees who witness fraud or misuse of government funds must rely on other whistleblower statutes specifically designed for federal workers, such as the Whistleblower Protection Act, which has different procedures and remedies than the FCA.

This distinction becomes particularly relevant in settings like the Department of Veterans Affairs, which has faced numerous whistleblower complaints in recent years related to patient care, resource allocation, and administrative practices.

For whistleblower advocates, the ruling underscores the need for Congress to explicitly address whether federal employees should have the same FCA retaliation protections as their private-sector counterparts. Some legal scholars argue that extending these protections would strengthen accountability within federal agencies and potentially prevent fraud against taxpayers.

The case, formally titled United States ex rel. Sargent v. Collins, was decided on January 22, 2026, with Judge Dunlap writing the opinion. The 24-page ruling carefully examines the statutory language of the FCA and relevant precedents concerning sovereign immunity waivers.

This decision aligns with rulings from other circuit courts that have consistently held that without an explicit congressional waiver, sovereign immunity prevents federal employees from bringing FCA retaliation claims against their government employers.

The implications extend beyond the Department of Veterans Affairs to all federal agencies, effectively establishing that federal employees seeking protection from retaliation for reporting fraud must utilize alternative legal frameworks specifically designed for the federal workforce.