California Makes It Easier for Employees to Recover on Whistleblower Retaliation Claims

In Lawson v. PPG Architectural Finishes, Inc., a unanimous California Supreme Court strengthened whistleblower protections in the state by holding that whistleblower claims brought by an employee (or former employee) are to be analyzed under the framework set forth in California Labor Code Section 1102.6, rather that the stricter burden-shifting test commonly applied in federal discrimination suits.

The Court concluded that an employee's whistleblower claim may proceed unless the employer can demonstrate by "clear and convincing evidence" it would have taken the same adverse action (discharge or otherwise) for "legitimate" reasons independent from the employee's protected whistleblowing activities.

Under this standard, an employee need only show an alleged whistleblowing activity was a "contributing factor" to an adverse employment action, making it much harder for employers to defeat disgruntled employees' retaliation claims under Labor Code Section 1102.5 at the summary judgment stage of a case.

Section 1102.5 Claims and Section 1102.6 Two-Part Burden-Shifting Framework

Section 1102.5 prohibits an employer from retaliating against an employee for disclosing information to a government or law enforcement agency the employee reasonably believed to be a violation of law (i.e., protected conduct), such as:

• Disclosing a violation of local, state, or federal laws, rules, or regulations;
• Reporting, disclosing, and testifying about unlawful conduct of the employer; and/or
• Refusing to participate in unlawful conduct.

In actions brought under Section 1102.5, Section 1102.6 requires an employee to first establish by a preponderance of the evidence (i.e., more likely than not) that engaging in protected conduct was a "contributing factor" to an alleged adverse employment action, such as demotion, termination, discrimination, or harassment, or other action that adversely affected working conditions of the employee.

When the employee makes this threshold showing, the employer then must demonstrate by clear and convincing evidence ("highly" and "substantially" more probable to be true rather than untrue) the adverse employment action would have occurred for legitimate, independent reasons even if the employee had not engaged in activities protected by Section 1102.5.

Employer Prevailed Initially Under the Conventional Burden-Shifting Framework

The plaintiff, Wallen Lawson, worked as a territory manager for PPG Architectural Finishes. After Lawson's sales and service scores declined, PPG placed him on a performance improvement plan (PIP). About this time, Lawson's direct supervisor ordered him to engage in what he viewed as fraudulent activity; namely, changing certain paint products before they were sold to customers.

Lawson refused to participate and filed two anonymous complaints about the practice. A few months later, he was fired. Lawson then sued PPG in federal district court, claiming violations of Section 1102.5. PPG moved for summary judgment, and the district court applied the ruling in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973) to evaluate the burden of proof in Lawson's Section 1102.5 claim.

The McDonnell Douglas test is by now well-known and applies a three-part burden-shifting framework for aggrieved employees to prove unlawful discrimination and retaliation. Once the employee can establish a prima facie case, the burden shifts to employers to prove that the adverse action they took against the employee was for legitimate and nondiscriminatory reasons.

If the employer can establish this burden, the employee then must show the employer's stated reason was merely pretext for their own unlawful conduct. The district court found the employee adequately showed he was fired for refusing illegal orders but failed to rebut the employer's contention it really fired him because of poor performance.

On appeal, Lawson argued that instead of McDonnell Douglas test, the district court should have applied the more lenient 1102.6's two-part framework. The 9th Circuit asked the California Supreme Court to provide guidance on the proper evidentiary standard for Section 1102.5 claims because California appellate courts did not "follow a consistent practice."

The California Supreme Court held that claims brought under Section 1102.5 should be evaluated under the framework provided in Section 1102.6. The Court noted that requiring plaintiffs to satisfy the McDonnell Douglas test would be inconsistent with the California State Legislature's purpose in enacting Section 1102.6, which was intended to expand employee protection against retaliation.

Lawson Changes the Framework for California Employers

The Court's decision changes the burden employers must satisfy in attempting to prove they took adverse employment actions, including discharge, for legitimate, nonretaliatory reasons. Under McDonnell Douglas, an employer must show only a legitimate, nonretaliatory reason for its decision, at which point the burden shifts to the employee to prove that reason is pretextual.

But under Section 1102.6, an employer must instead prove, by "clear and convincing" evidence, that it would have taken the same action against the employee "even had the plaintiff not engaged in protected activity." The employee-friendly framework under Section 1102.6 makes it more difficult for employers to dispose of whistleblower retaliation claims.

It is important for employers to review and consider updating their policies prohibiting retaliation and policies related to internal complaint procedures. Employers also need to ensure they document all adverse actions against an employee who has engaged in a protected activity and obtain legal advice prior to taking action.

If you have any questions concerning this case or whistleblower retaliation claims in general, please don't hesitate to contact us.