The recent California Supreme Court decision Lawson v. PPG Architectural Finishes, Inc., __ P.3d __, 2022 WL 244731 (Cal., Jan. 27, 2022) (Lawson) clarifies the applicable standard for whistleblower retaliation claims brought pursuant to Labor Code section 1102.5. The Court unanimously held that the applicable standard is articulated in Labor Code section 1102.6 instead of the burden-shifting framework set forth in the United States Supreme Court’s decision of McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792 (McDonnell Douglas) ― which is applicable to employment discrimination cases under the Fair Employment and Housing Act (FEHA).
In Lawson, a paint manufacturer employee claimed he was retaliated against for reporting his supervisor’s fraudulent business practices in violation of Labor Code section 1102.5. Section 1102.5 prohibits an employer from retaliating against an employee for providing information the employee has reasonable cause to believe violates a local, state, or federal rule or regulation with a government agency, with a person with authority over the employee, or with another employee who has authority to investigate or correct the violation.
In accordance with McDonnell Douglas, the Lawson District Court utilized the burden-shifting framework encompassed therein, which includes an analysis of the following three factors: (1) the employee’s ability to establish a prima facie case of retaliation; (2) the burden shift to the employer to articulate a legitimate reason for the decision; and (3) the burden shift back to the employee to show that the employer’s reason is pretextual. Thus, the McDonnell Douglas framework provided a more employer-friendly test, in part due to the lower standard by which the employer could shift the burden back to the employee. Relying upon the McDonnell Douglas framework, the Lawson District Court held that the employee failed to satisfy the third factor, which was a finding that the employer’s reason for termination was pretextual.
The decision was appealed to the Ninth Circuit, and the question of the applicable standard was ultimately certified to the California Supreme Court. The Court reasoned the McDonnell Douglas burden-shifting framework is not consistent with the legislature’s purpose in passing section 1102.5, which is “encourag[ing] earlier and more frequent reporting of wrongdoing by employees.”
Under the section 1102.6 standard, a plaintiff must show that the protected activity was a contributing factor to a prohibited action against the employee by a preponderance of the evidence. Then, the employer must demonstrate by clear and convincing evidence that the action would have occurred for legitimate reasons, even if the employee had not engaged in the protected action. Section 1102.6 provides a more employee-friendly test because the clear and convincing standard places a higher burden of proof on the employer as compared to the legitimate reason standard set forth by the McDonnell Douglas framework.
The Lawson opinion only clarifies the standard for whistleblower retaliation claims brought pursuant to Labor Code section 1102.5. The McDonnell Douglas framework still applies for employment claims brought under FEHA. With the Court removing any ambiguity regarding the applicable standard, employers will need to demonstrate that the protected act was not a contributing factor to the adverse employment action in accordance with the Labor Code section 1102.6 standard.