Whistleblower retaliation claims brought under California Labor Code section 1102.5 should be evaluated using the evidentiary standard set forth in Labor Code section 1102.6, rather than the more stringent burden-shifting test set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), the California Supreme Court held in Lawson v. PPG Architectural Finishes, Inc., No. S266001, — P.3d — (Cal. Jan. 27, 2022).
Labor Code section 1102.6 provides that the plaintiff-employee has the burden of establishing, by a preponderance of the evidence, that retaliation for an employee’s protected activity was a contributing factor in the alleged adverse employment action. Once the plaintiff-employee has made this showing, the burden shifts to the employer to demonstrate, by clear and convincing evidence, that the alleged action would have occurred for legitimate, independent reasons even if the employee had not engaged in the protected activity.
Despite section 1102.6 setting forth the framework for evaluating California whistleblower retaliation claims, some courts in California instead applied the McDonnell Douglas burden-shifting approach, which originated in the context of Title VII discrimination claims. Under the McDonnell Douglas test, which is widely considered more employer-friendly than the section 1102.6 standard, once the plaintiff-employee establishes a prima facie case of unlawful retaliation, the employer can escape liability by proving that the adverse action was taken for legitimate and non-retaliatory reasons, unless the plaintiff-employee can show that the employer’s stated reason was merely pretext for unlawful retaliation.
Plaintiff Wallen Lawson worked as a territory manager for defendant PPG Architectural Finishes, Inc. (“PPG”), a paint and coatings manufacturer, and claims that he was directed by his supervisor to intentionally “mistint” slow-selling paint products so that PPG could avoid having to buy back unsold product from retailers. Lawson told his supervisor he would not do this and reported this issue to PPG’s central ethics hotline on two separate occasions. During this time, Lawson received poor performance ratings, was placed on a performance improvement plan, and was eventually terminated. Lawson then filed a complaint against PPG in the United States District Court for the Central District of California, alleging that he was retaliated against as a whistleblower in violation of California Labor Code section 1102.5.
In Lawson, the district court applied the McDonnell Douglas standard and held that Lawson adequately established a prima facie case of unlawful retaliation due to his complaints about the fraudulent “mistinting” scheme, but that he failed to produce sufficient evidence that PPG’s stated reason for firing him—his poor performance—was pretextual.
On appeal, Lawson argued that the federal trial court should have used the evidentiary standard set forth in California Labor Code section 1102.6, rather than the stricter McDonnell Douglas framework. The Ninth Circuit then asked the California Supreme Court to clarify the proper evidentiary standard.
On January 27, 2022, the California Supreme Court held that Labor Code section 1102.6, and not the McDonnell Douglas test, “supplies the applicable framework for litigating and adjudicating section 1102.5 whistleblower claims.”
The court stated that section 1102.6 sets forth “a complete set of instructions for the presentation and evaluation of evidence in section 1102.5 cases,” and while an employer’s liability under section 1102.6 requires proof of retaliatory intent, the McDonnell Douglas framework is not “a method of proof well suited to litigation under the section 1102.6 framework.” The court explained that McDonnell Douglas “was not written for the evaluation of claims involving multiple reasons for the challenged adverse action” because it “was decided at a time when the law generally presumed that the employer has a single reason for taking an adverse action against the employee and that the reason is either discriminatory or legitimate.” According to the court, the “central problem” in using McDonnell Douglas to evaluate section 1102.5 claims lies in requiring employees to prove that “an employer’s proffered legitimate reason for taking an adverse action was a pretext for impermissible retaliation.”
Under the section 1102.6 standard, the court said that “a plaintiff does not need to show that the employer’s nonretaliatory reason was pretextual.” This means that, “[e]ven if the employer had a genuine, nonretaliatory reason for its adverse action, the plaintiff still carries the burden assigned by statute if it is shown that the employer also had at least one retaliatory reason that was a contributing factor in the action.” To the extent the defendant-employer is concerned this framework “sets the plaintiff’s bar too low,” the court stated that the remedy “lies with the Legislature that selected this standard, not with this court.”
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