California High Court Rules on Standard for Whistle-Blower Retaliation Claims

​Last year the California Supreme Court agreed to take up a question from the 9th U.S. Circuit Court of Appeal regarding the evidentiary standard for whistle-blower retaliation claims brought under California Labor Code Section 1102.5. 

The California Supreme Court in Lawson v. PPG Architectural Finishes, Inc, held that Labor Code Section 1102.6 "provides the governing framework for the presentation and evaluation of whistleblower retaliation claims brought under section 1102.5." And plaintiff-employees are not required to meet the McDonnell Douglas test, set forth in McDonnell Douglas Corp. v. Green, which pertained to a claim under Title VII of the Civil Rights Act of 1964, the federal statute for workplace discrimination.

Under Labor Code Section 1102.6, the plaintiff-employee has the burden to establish by—a preponderance of the evidence—that retaliation for an employee's protected activities was a contributing factor in a contested employment action. Once the plaintiff-employee has made the required showing, the burden shifts to the employer to demonstrate—by clear and convincing evidence—that it would have taken the action in question for a legitimate, independent reason even had the plaintiff not engaged in protected activity.

The McDonnell-Douglas test swaps those burdens of proof, once the plaintiff shows that retaliation occurred, the employer could escape liability if it stated a nonretaliatory reason for its action unless the plaintiff could show, by substantial evidence, that the nonretaliatory reason was a pretext for illegal retaliation. This test is more employer-friendly than the California Labor Code Section 1102.6 standard.

The underlying case in Lawson involved a manufacturer of paint, stains, caulks and other products. The plaintiff was a territory manager whose duties included merchandising products to home improvement stores and ensuring that the company's displays were stocked and in good condition. The plaintiff was allegedly directed by his supervisor to handle a product in a way that fraudulently removed a slow-selling product from its inventory. The plaintiff told his supervisor he would not do this and reported the issue to the company's ethics hotline on two separate occasions. The second report to the ethics hotline resulted in an investigation. At the same time, the plaintiff received poor ratings for his work, was put on a performance improvement plan, and eventually terminated.

The plaintiff alleged in his U.S. district court lawsuit against the company that he was retaliated against as a whistleblower.

The trial court in Lawson applied the McDonnell Douglas test and concluded that the plaintiff failed to carry his burden to raise triable issues of fact regarding pretext and granted the employer's motion for summary judgment. However, in light of the decision by the California Supreme Court, the case is very likely to be directed back to the trial court with directions to apply the California Labor Code burden-shifting standard. This could result in a denial of the motion for summary judgment.

Arthur K. Cunningham is an attorney with Jackson Lewis in Riverside, Calif. © 2022 Jackson Lewis. All rights reserved. Reposted with permission.