On 27 January 2022, the California Supreme Court answered a question certified to it by the Ninth Circuit: whether whistleblower claims under California Labor Code section 1102.5 are governed by the burden-shifting test for proof of discrimination claims established by the U.S. Supreme Court in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), or the more employee-friendly standard set forth in Labor Code section 1102.6. The Court unanimously held that the Labor Code section 1102.6 standard applies.

Section 1102.5 makes it illegal for employers to retaliate against an employee for disclosing information to government agencies or “to a person with authority over the employee” where the employee has reasonable cause to believe that the information discloses a violation of a state or federal statute, or a local, state, or federal rule or regulation.

In Lawson v. PPG Architectural Finishes, Inc., plaintiff Wallen Lawson was employed by Defendant PPG Architectural Finishes, Inc. (PPG), a paint and coating manufacturer, for approximately two years as a territory manager. Although at first Lawson performed his job well, his performance declined over time, and he was placed on a performance improvement plan. During the same time, Lawson made two anonymous complaints to PPG’s central ethics hotline regarding instructions he allegedly had received from his supervisor regarding certain business practices with which he disagreed and refused to follow. Lawson’s complaints led to an investigation by PPG and the business practices at issue were discontinued. Some months later, after determining that Lawson had failed to meet the goals identified in his performance improvement plan, his supervisor recommended that Lawson’s employment be terminated.

Lawson filed a lawsuit alleging that PPG had fired him because he blew the whistle on his supervisor, in violation of section 1102.5. PPG moved for summary judgment, which the district court granted, holding that Lawson failed to produce sufficient evidence that PPG’s stated reason for firing him was a pretext for retaliation under the framework of the McDonnell Douglas test.

Under the McDonnell Douglas standard, which typically is applied to Title VII and Fair Employment and Housing Act cases, the burden of proof never shifts from the plaintiff. Once the employee-plaintiff establishes a prima facie case of retaliation, the employer is required to offer a legitimate, nondiscriminatory reason for the adverse employment action. If the employer meets that burden of production, the presumption of discrimination created by the prima facie case disappears, and the employee must prove that the employer’s proffered non-retaliatory reason for the adverse employment decision was a pretext and that the real reason for the termination was discrimination or retaliation.

The California Supreme Court answered the Ninth Circuit’s question by stating that the McDonnell Douglas standard is not the correct standard by which to analyze section 1102.5 cases. Instead, the Court held that the more employee-friendly test articulated under section 1102.6 applies.

Under Labor Code section 1102.6, the employee has the burden to establish, by a preponderance of the evidence, that retaliation for the employee’s protected activities was a contributing factor in the adverse employment action. The burden then shifts to the employer to prove, by clear and convincing evidence, that it would have taken the adverse action for a legitimate, independent reason even if the plaintiff-employee had not engaged in protected activity. Under section 1102.6, the employer has the burden of persuasion to show that the adverse employment decision was based on non-retaliatory conduct, and unlike McDonnell Douglas test, the burden does not shift back to the employee. Under section 1102.6, the employee does not have to prove that the non-retaliatory reason for termination was pretextual as required by McDonnell Douglas.

IMPLICATIONS FOR EMPLOYERS

The Lawson decision resolves widespread confusion amongst state and federal courts regarding the proper standard for evaluating whistleblower retaliation cases brought under section 1102.5. It also places a heavy burden on employers to show, by clear and convincing evidence, that they would have taken the adverse action even if the employee had not engaged in protected activities. Employers should be prepared for the fact that summary judgment in whistleblower cases will now be harder to attain, and that any retaliatory motive, even if relatively insignificant as compared to the legitimate business reason for termination, could create liability.