Protecting Whistleblowers from Retaliation – CA Supreme Court Confirms That Section 1102.6’s Pro-Employee Standards Control, Not The Pro-Employer McDonnell Douglas Test

Oct 12, 2022 / Insight

Protecting Whistleblowers from Retaliation – CA Supreme Court Confirms That Section 1102.6’s Pro-Employee Standards Control, Not The Pro-Employer McDonnell Douglas Test

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The California Supreme Court has resolved an almost twenty-year-old disagreement about which burden-shifting test applies to whistleblower retaliation claims. Since 2003, some courts have applied the framework set forth in Labor Code Section 1102.6, while others have applied the test described in the United States Supreme Court’s decision McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792.

Upon certification from the Ninth Circuit to resolve the dispute, the California Supreme Court concluded that Section 1102.6 governs and employees need not satisfy the McDonnell Douglas test.

The Conflicting Tests

Labor Code Section 1102.5 protects California employees from retaliation for reporting perceived unlawful conduct by their employer.

Section 1102.6, which sets out the test for evaluating such retaliation claims, states that once the employee establishes “by a preponderance of the evidence” that retaliation was a “contributing factor” in the employee’s termination, demotion, or other adverse action, the burden then shifts to the employer to demonstrate “by clear and convincing evidence” that it would have taken the same adverse action “for legitimate, independent reasons.”

The similar, but meaningfully different, McDonnell Douglas test tasks the employee with presenting prima facie evidence of discrimination or retaliation. The burden then shifts to the employer to articulate a “legitimate reason” for the adverse action, upon which the burden shifts back to the employee to demonstrate that the proffered legitimate reason is a “pretext” for discrimination or retaliation. It is this last hurdle by the plaintiff to prove pretext that was considered by the Lawson court.

**The Lawson Facts**

The plaintiff, Wallen Lawson, worked for a manufacturer (PPG) selling paint product to Lowes. According to Lawson, his manager told him to intentionally mis-tint certain slow-selling paint products to force Lowes to sell the paint at a discount and avoid PPG having to buy back the unsold product. Lawson refused to participate and made anonymous complaints to PPG’s ethics hotline. PPG investigated and told the manger to stop the practice but allowed the manager to continue supervising Lawson. Lawson’s performance evaluations declined, and he was fired several months later.

Lawson filed suit in California District Court under Section 1102.5, alleging that he was fired for whistleblowing his manager’s fraudulent practices. PPG filed for summary judgment. The district court applied the McDonnell Douglas test. Finding that Lawson failed to satisfy his burden to prove pretext, the court granted summary judgment for PPG.

On appeal, the Ninth Circuit asked the California Supreme Court for guidance on which burden-shifting test to apply.

Section 1102.6 Governs the Presentation and Evaluation of Section 1102.5 Whistleblower Retaliation Claims

The California Supreme Court began by explaining that, as originally drafted, Section 1102.5 only provided substantive protections against whistleblower retaliations without identifying the procedure by which a plaintiff could enforce such protections. Based on analogous caselaw in the FEHA context, California courts borrowed the McDonnell Douglas burden-shifting test, which was created to test circumstantial-evidence claims of Title VII employment discrimination. Following this precedent, California authorities held that an employer could avoid whistleblower retaliation liability if it could prove that it would have made the same adverse employment decision regardless of any retaliatory motive.

In response to several high-profile scandals, the Legislature amended the whistleblower statutes and added Section 1102.6 in 2003 to encourage employees to report illegal acts and to protect them in doing so. Section 1102.6 is a purely procedural section that clearly sets out the respective burdens of proof and evidentiary standards to be applied in whistleblower claims brought under Section 1102.5.

Unfortunately, California authority remained split after 2003, with some courts recognizing and applying the new Section 1102.6 standard and others continuing to apply the McDonnell Douglas test. This confusion spilled over to federal courts applying California law.

The California Supreme Court surveyed the legislative history behind the 2003 amendments to the whistleblower statutes as well as the shifting understanding of employer/employee dynamics since McDonnell Douglas was decided. It highlighted the fact that, in 1973, 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.’” The test is designed to force the parties to identify the “true” reason for the employer’s action. The law has since evolved to recognize the reality that employers frequently act for multiple reasons, so-called “mixed motive” cases, and the California Supreme Court already determined that the McDonnell Douglas test is not appropriate for evaluating mixed motive FEHA discrimination actions.

The Court recognized that the Section 1102.6 framework is more employee-friendly than the McDonnell Douglas test but explained that this made sense in the context of when it was enacted. The purpose of adding Section 1102.6 was to help employees feel safe reporting their employer’s illegal activity. Forcing them to prove pretext by their employers conflicted with that intent. Accordingly, whistleblower retaliation plaintiffs need only satisfy Section 1102.6’s requirements, not the extra requirements imposed by McDonnell Douglas.

Key Takeaways

This decision has significant implications for employees and employers because Section 1102.6 shifts the burden of proof dramatically in favor of the employee. The clear and convincing evidentiary standard is high and forces the employer to prove that retaliatory motives played essentially no part in their decision to take adverse employment actions. Employers will need to ensure they develop a deep and comprehensive pool of evidence establishing the legitimate reasons that justified the adverse actions they took against the whistleblower.

This decision is also a compelling reminder that, even with a reasonably clear statutory directive like Section 1102.6, entrenched precedent can be difficult to change and can create confusing and inconsistent results. The best place to start any legal analysis is the text of the law itself.

Case Information: Lawson v. PPG Architectural Finishes – filed Jan. 27, 2022, 12 Cal. 5th 703 (https://www.courts.ca.gov/opinions/documents/S266001.PDF)

Author: Daniel Corren is an experienced trial lawyer at Cypress, LLP in Los Angeles, California. He is a member of the firm’s Business Litigation and Intellectual Property/Technology practice groups. He can be contacted at dan@cypressllp.com.