Buried in the budget legislation recently signed into law by President Obama is a provision that will increase FCA civil penalties significantly. The FCA’s civil penalties were last increased by 10%, to their current levels of $5,500-$11,000, in 1999. However, the budget law requires DOJ to issue new regulations by July 1, 2016 to increase those penalties. The law also requires that the penalties be automatically adjusted each year thereafter

How much will the new penalties be?

The formula for determining the new penalties is based in part on the CPI at the time the increase is published in 2016, and therefore it is not possible to calculate the increase with precision. However, using the current CPI as a benchmark, civil penalties are eligible to increase as much as 40% from current levels. Last time the penalties were increased, DOJ voluntarily capped the increase dictated by the CPI formula at 10%. It remains to be seen whether DOJ will apply a similar cap to the forthcoming increase.

Will the increase be retroactive?

Probably not — but we won’t know for sure until we see the regulations. When DOJ last increased FCA civil penalties to account for inflation in 1999, the implementing regulation stated that the increased penalties were “effective for violations occurring on or after” the implementing date. If DOJ follows a similar approach with the new regulations, the increased penalties will apply only to alleged false claims made after the date of the increase.