Whistle-Blowing Protections Outweigh Breach of Confidentiality Agreement

By Kaitlin H. Ziegler Jun 8, 2016
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As long as a whistle-blower narrowly takes confidential inf​ormation for the purposes of reporting violations to the government or seeking assistance from an attorney, strong public-policy considerations may protect the whistle-blower from breach of confidentiality agreement claims, according to the U.S. District Court for the Northern District of Illinois.

Matthew Cieszyski began working for LifeWatch Services Inc., a provider of heart monitoring services based in Rosemont, Ill., in April 2003. At that time, Cieszyski signed a confidentiality agreement that acknowledged he would not disclose any confidential information to any person not employed by LifeWatch and further would only use the information he obtained for the purposes provided by LifeWatch. Three years later, Cieszyski also acknowledged his understanding of the privacy policy, which emphasized the security of protected health information as required by Health Insurance Portability and Accountability Act regulations.

Despite these acknowledgments, Cieszyski admittedly accessed confidential information unnecessary to his job and disclosed the materials to a third party. This disclosure, however, was made to his own attorney and the government in correlation with his allegations that LifeWatch was in violation of the False Claims Act (FCA), and led to the current case.

The United States and Cieszyski sued LifeWatch under the FCA and related state statutes for “submitting to the government claims for reimbursement for heart monitoring services that it knew violated the laws and regulations of Medicare and other government health insurance programs.” LifeWatch responded with a one-count counterclaim alleging Cieszyski breached his confidentiality agreement and the privacy policy. Cieszyski then filed a motion to dismiss, arguing a violation of public policy, overbroadness and unenforceability of the confidentiality agreement, and an inability to breach the privacy policy.

After balancing “the need to protect whistle-blowers and prevent chilling their attempts to uncover fraud against the government against an employer’s legitimate expectations that its confidential information will be protected,” Magistrate Judge Sidney I. Schenkier agreed with Cieszyski. Schenkier evaluated the case based on the reasonableness and scope of the disclosures in connection with the third parties to whom Cieszyski made the disclosures, and found Cieszyski only disclosed that information needed to “support his suspicions of fraud against the government.”

Schenkier differentiated this case from prior FCA cases in which a company was able to pursue its counterclaim against the plaintiff. In those other instances, the plaintiffs had taken documents with no intent to file an FCA lawsuit, made documents public, disclosed documents with trade secret information that could cause independent damage to the business, and/or convinced other employees to also take documents. Because LifeWatch only alleged damages related to pursuing the counterclaim and did not provide sufficient evidence of an overbroad use of documents, the court did not find the breach of confidentiality strong enough to outweigh the protection due to a whistle-blower.

United States ex. Rel. Cieszyski v. LifeWatch Servs. Inc., N.D. Ill., No. 13-CV-4052, No. 95 (May 9, 2016).

Professional Pointer: Even if an organization has narrow confidentiality and nondisclosure agreements, they are not infallible. An FCA whistle-blower is protected by a higher standard that could allow for disclosure of confidential information. Employers should investigate the parameters of a disclosure before filing a breach of contract claim that could potentially end up as a further retaliation claim against the organization.

Kaitlin H. Ziegler is an attorney with Kamer Zucker Abbott, the Worklaw® Network member firm in Las Vegas.

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