California Supreme Court Clarifies Legal Standard for Statutory Whistleblower Retaliation Claims

February 1, 2022

On Jan. 27, 2022, the California Supreme Court issued its unanimous decision in Lawson v. PPG Architectural Finishes, Inc., clarifying that whistleblower retaliation claims brought pursuant to Section 1102.5 of the California Labor Code must be analyzed under the more employee-friendly framework set forth in Section 1102.6 of the Labor Code, rather than the McDonnell Douglas burden-shifting standard employed under federal law.

Lawson involved a former employee of PPG Architectural Finishes, Inc., a paint and coatings manufacturer. After an initial positive review, PPG gave Lawson poor performance ratings, placed him on a performance improvement plan and eventually terminated his employment. Lawson filed suit against PPG in federal court, claiming that PPG fired him in violation of Section 1102.5 after he complained about purportedly fraudulent practices.

PPG moved for summary judgment under the three-part McDonnell Douglas burden-shifting framework that applies to retaliation claims under the California Fair Employment and Housing Act and Title VII of the Civil Rights Act. Under that standard, an employee must first establish a prima facie case of retaliation, at which point the burden shifts to the employer to state a legitimate reason for the adverse employment action. If a legitimate reason is proffered, the burden shifts back to the employee to demonstrate, through substantial evidence, that the employer’s proffered legitimate reason is a pretext for retaliation. Applying the McDonnell Douglas standard, the federal court granted summary judgment in PPG’s favor.

Lawson appealed to the U.S. Court of Appeals for the Ninth Circuit and asserted that the lower court erroneously applied the McDonnell Douglas standard to his whistleblower claim, as opposed to the statutory framework set out in Section 1102.6. The California Legislature added this section to the Labor Code in 2003 to provide that “[i]n a civil action or administrative proceeding brought pursuant to Section 1102.5,” an employee has the initial burden to establish by a “preponderance of evidence” (more likely than not) that retaliation for whistleblower activity was a contributing factor in an adverse employment action. Once an employee makes this showing, the burden shifts to the employer to demonstrate, by clear and convincing evidence, that it would have taken the action in question for legitimate, independent reasons even if the employee had not engaged in the protected activity.

When confronted with Lawson’s appeal, the Ninth Circuit noted that, despite the enactment of Section 1102.6, there continued to be variation and confusion among courts assessing Section 1102.5 claims as to which legal standard applied. It asked the California Supreme Court to provide guidance. In its decision, which it described as “[u]nsurprising[],” the California Supreme Court unanimously concluded that “courts should apply the framework prescribed by statute in Labor Code section 1102.6” when evaluating whistleblower retaliation claims brought under Section 1102.5.

Under this standard, employee-plaintiffs will have a much easier time surviving summary judgment and establishing whistleblower retaliation claims. They will not need to show that the employer’s nonretaliatory reason for the adverse employment action was pretextual, and need to show only that retaliation was a contributing factor in the adverse employment decision.

Likewise, Section 1102.6 imposes a higher standard on employers to rebut the employee’s minimal showing, as an employer must present “clear and convincing” evidence that the adverse action would have been taken for legitimate reasons even if the employee did not engage in protected activity. To meet this standard under California law, an employer must show that it is “highly probable” that its contentions are true, or that the evidence is “sufficiently strong to command the unhesitating assent of every reasonable mind.” Notably, the standard of proof for employers is higher than the standard for employees to show that their whistleblower activity was a contributing factor to the adverse action.

As a result of this decision, employers can expect to see more retaliation claims cast as statutory whistleblower claims in the future.

For further information about the impact of this decision, please contact the authors of this article or your McGuireWoods contact.