HR Watchdog

California Whistle-blowers Share Part of $78.5 Million Settlement

In one of the largest settlements of its kind, the University of Phoenix agreed to pay $78.5 million to settle a whistle-blower lawsuit filed in Sacramento federal court under the False Claims Act, a federal statute that permits whistle-blowers to sue on behalf of the government for fraud committed against the government and to share in any recovery. The 2003 lawsuit claimed that the University had defrauded the U.S. Department of Education by obtaining federal student loan and Pell Grant funds from the federal government based on false statements of compliance with the Higher Education Act. That Act prohibits universities receiving federal student aid dollars from offering financial incentives to recruiters based “directly or indirectly” on the number of students they recruit or enroll.

This settlement comes in addition to $9.8 million the University previously paid to the Department of Education in 2004 to resolve administrative claims triggered by the whistle-blowers that it was improperly offering incentive payments to recruiters. In this latest settlement, $67.5 million will be paid to the United States Department of Education, with $19 million of that to be shared between the whistle-blowers. The attorneys for the whistle-blowers will receive $11 million in fees and costs. 

Although this case was filed pursuant to the False Claims Act, employers should keep in mind it is unlawful to retaliate against those who blow the whistle on unlawful activities, and employers who do so can face significant legal liability.

Laid Off Workers Receive $4 million Settlement

Last week, the California Labor Commissioner's office announced it had won a $4.29 million settlement for 633 California employees who were improperly laid off by title companies. "In this case a company closed without providing proper notification and without paying final wages as required by law and was found to owe over $4 million in back wages," Labor Commissioner Angela Bradstreet explained. The title companies failed to provide 60 days notice of business closures to the employees at large lenders' facilities in Rocklin and Simi, California as required by the California Worker Adjustment and Retraining Notification Act ("WARN" Act). The WARN Act requires such notice at facilities which have employed 75 or more workers in the prior year, with few exceptions.

IRS issues 2010 Standard Mileage Rates

The IRS has lowered the standard mileage rates for 2010. The following new rates will apply beginning January 1, 2010:

• 50 cents per mile for business miles driven
• 16.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The standard mileage rate is optional. Employers that use the IRS rate or lower may deduct that amount as a business expense. However, employees who are reimbursed at a higher rate may be required to pay taxes on the difference between their reimbursement rate and the IRS standard mileage deduction because the IRS considers that amount to be wages. California law requires that employers reimburse California employees for all their employment-related expenses.

COBRA Subsidy Ending

The American Recovery and Reinvestment Act (ARRA) of 2009 establishes an employer-provided subsidy for employees who involuntarily lose their jobs. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment that occurred during that period.

Lawmakers seemed poised to extend the federal COBRA subsidy, but missed the November 30 deadline, meaning those who took advantage of the subsidy when it first launched will soon lose the benefit, and those who are terminated this month and retain employer-provided health benefits are not eligible because they must be eligible for COBRA continuation coverage as of December 31, 2009. The same is true for Cal-COBRA coverage.

More information on COBRA is available at HRCalifornia or the U.S. Department of Labor's Web site.