Overview
The California Supreme Court issued its decision in Lawson v. PPG Architectural Finishes, Inc., __ P.3d __, 2022 WL 244731 (Cal., Jan. 27, 2022) last week, resolving a split amongst California courts regarding the proper method for evaluating whistleblower retaliation claims brought under Labor Code section 1102.5. Although the California legislature prescribed a framework for such actions in 2003, many courts continued to employ the well-established McDonnell Douglas test to evaluate whistleblower retaliation claims, causing confusion over the proper standard. The California Supreme Court has now concluded that courts should apply the framework established by the legislature in 2003, when it wrote Labor Code section 1102.6 into law.
A Tale of Two Standards
In 2017, plaintiff Wallen Lawson, employed by PPG Architectural Finishes, Inc. (PPG), a paint and coatings manufacturer, was placed on a performance improvement plan after receiving multiple poor evaluations. Shortly thereafter, Lawson had reported his supervisor for instructing him to intentionally tint the shade of slow-selling paint products so that PPG would not have to buy back unsold product from retailers. Within a few months, Lawson was terminated for failing to meet the goals set forth in his performance improvement plan.
Lawson then brought a whistleblower retaliation claim under Labor Code section 1102.5 in the U.S. District Court for the Central District of California, alleging that he was terminated for reporting his supervisor for improper conduct. At the summary judgment stage, the district court applied the three-part burden-shifting framework established in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). Under the widely adopted McDonnell Douglas framework, an employee is required to make its prima facie case by establishing a causal link between protected activity and an adverse employment action. The burden then shifts to the employer to show a legitimate, nondiscriminatory, reason for the adverse employment action, here, Lawson’s termination. If the employer can meet this burden, the employee then must show that the legitimate reason proffered by the employer is merely a pretext for the retaliation. The court granted PPG’s summary judgment motion on the basis that Lawson could not meet his burden to show that PPG’s offered reason was only a pretext.
Lawson subsequently appealed to the Ninth Circuit, arguing that the district court erred by employing the McDonnell Douglas framework instead of Labor Code section 1102.6. The 1102.6 framework provides for a two-step analysis that applies to whistleblower retaliation claims under section 1102.5. It first requires the employee to prove by a preponderance of the evidence that the whistleblowing activity was a “contributing factor” to his termination. The employer then has the burden of showing by clear and convincing evidence that the termination would have occurred regardless of the protected whistleblowing activity. Unlike under the McDonnell Douglas framework, the burden does not shift back to plaintiff-employees.
Finding the difference in legal standards dispositive under the facts presented and recognizing uncertainty on which standard applied, the Ninth Circuit asked the California Supreme Court to resolve this question of California law.
Section 1102.6 Is the Prevailing Standard
On January 27, the California Supreme Court answered the Ninth Circuit’s certified question by holding that Section 1102.6 provides the governing framework for the evaluation of whistleblower claims brought under section 1102.5. The supreme court found that the statute provides a complete set of instructions for what a plaintiff must prove to establish liability for retaliation under section 1102.5 and the applicable evidentiary standard. Under section 1102.6, plaintiffs may satisfy their burden of proving unlawful retaliation even when other legitimate factors contributed to the adverse action.
The court went on to state that it has never adopted the McDonnell Douglas test to govern mixed-motive cases and, in such cases, it has only placed the burden on plaintiffs to show that retaliation was a substantial factor motivating the adverse action. According to the supreme court, placing an additional burden on plaintiffs to show that an employer’s proffered reasons were pretextual would be inconsistent with the Legislature’s purpose in enacting section 1102.6, which was to expand protections against retaliation.
What Employers Should Know
Although Lawson relaxes the evidentiary burden on plaintiffs advancing a retaliation claim under section 1102.5, it provides clarity on how retaliation claims should be evaluated under California law and does not impact the application of the McDonnell Douglas framework to retaliation claims brought under federal law.
