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California Supreme Court Confirms Employee-Friendly Test For Evaluating Whistleblower Retaliation Claims
Wallen Lawson worked as a territory manager for PPG Architectural Finishes, Inc. (PPG) — a paint and coatings manufacturer — from 2015 until he was fired in 2017. PPG used two metrics to evaluate Lawson’s work performance: 1) his ability to meet sales goals, and 2) his scores on “market walks” during which PPG managers shadowed Lawson as he did his work. While Lawson received the highest possible score on his first market walk, his scores thereafter took a nosedive. He also frequently missed his monthly sales targets. In Spring 2017, PPG placed Lawson on a performance improvement plan.
During this same time, Lawson alleged his direct supervisor began ordering him to intentionally mistint slow-selling PPG paint products so that PPG could avoid buying back what would otherwise be excess unsold products. Lawson did not agree with this mistinting order, and he filed two anonymous complaints with PPG’s central ethics hotline. He also told his supervisor he refused to participate in mistinting. PPG investigated the issue and told the supervisor to discontinue the order. Yet, the supervisor continued to directly supervise Lawson and oversee his market walk evaluations. After Lawson failed to improve as outlined in his performance improvement plan, his supervisor recommended that he be fired. PPG then terminated Lawson’s employment.
Lawson sued PPG. He alleged that PPG had fired him because he “blew the whistle” on his supervisor’s mistinting order, in violation of Labor Code Section 1102.5. Section 1102.5 prohibits an employer from retaliating against an employee for disclosing information to a government agency or person with authority to investigate if the employee “has reasonable cause to believe” the information discloses a violation of a state or federal statute, rule, or regulation.
In considering PPG’s motion for summary judgment, the district court applied the three-part burden-shifting framework the U.S. Supreme Court laid out in McDonnell Douglas Corp. v. Green. Under this framework, the employee must first establish a prima facie case of unlawful retaliation. Next, the employer must state a legitimate reason for taking the challenged adverse employment action. Finally, the burden shifts back to the employee to demonstrate that the employer’s stated reason is actually a pretext for retaliation. The district court determined that Lawson could not satisfy the third step of this McDonnell Douglas test, and it entered judgment in favor of PPG on Lawson’s whistleblower retaliation claim.
On appeal, Lawson argued that the district court was wrong to use the McDonnell Douglas framework. Instead, he contended that the court should have followed Labor Code Section 1102.6. Under Section 1102.6, Lawson only needed to show that his whistleblowing was a “contributing factor” in his dismissal. Section 1102.6 did not require Lawson to show that PPG’s stated reason was pretextual. The Ninth Circuit asked the California Supreme Court to decide the issue.
The California Supreme Court clarified that Labor Code Section 1102.6, and not McDonnell Douglas, is the framework for litigating whistleblower claims under Labor Code Section 1102.5. After all, Labor Code Section 1102.6 describes the standards and burdens of proof for both parties in a Labor Code Section 1102.5 retaliation case. First, the employee must demonstrate “by a preponderance of the evidence” that the employee’s protected whistleblowing was a “contributing factor” to an adverse employment action. Second, once the employee has made that showing, the employer has to prove by “clear and convincing evidence” that the alleged adverse employment action would have occurred for legitimate, independent reasons, even if the employee was not involved in protected whistleblowing activities.
The Court noted that other courts addressing burden-shifting frameworks similar to Section 1102.6 have found the McDonnell Douglas framework to be inapplicable. For instance, nearly all courts to address the issue have concluded that McDonnell Douglas does not apply to First Amendment retaliation claims, or to federal statutes that are similar to Labor Code Section 1102.6.
Finally, the Court found that there was no reason why Labor Code Section 1102.5 would require employees to prove that any of the employer’s proffered legitimate reasons were pretextual. This is because Section 1102.5 prohibits employers from considering the employee’s protected whistleblowing as any “contributing factor” to an adverse employment action. Requiring an employee to also prove the falsity of any potentially legitimate reasons the employer may have had for an adverse employment action would be inconsistent with the Legislature’s intent to encourage reporting of wrongdoing.
Lawson v. PPG Architectural Finishes, Inc., 2022 WL 244731 (Cal. Jan. 27, 2022).
Although Labor Code Section 1102.6 has specifically stated the framework for adjudicating Labor Code Section 1102.5 claims since 2004, California courts were not consistently applying Section 1102.6’s employee-friendly test. Instead, some California Courts were ignoring Section 1102.6 and applying the more employer-friendly McDonnel Douglas test.