California Supreme Court Adopts “Contributing Factor” Standard for Whistleblower Claims
The California Supreme Court held in Lawson v. PPG Architectural Finishes, Inc., (2022) 12 Cal.5th 703, the Court eliminated the McDonnell Douglas burden-shifting test. This test was previously applied to whistleblower and retaliation claims under California Labor Code section 1102.5.
California Labor Code section 1102.5 provides whistleblower protections to employees who disclose wrongdoing to authorities. California Labor Code section 1102.5 prohibits an employer from retaliating against an employee for sharing information the employee “has reasonable cause to believe … discloses a violation of state or federal statute” or of “a local, state, or federal rule or regulation” with a government agency, with a person with authority over the employee, or with another employee who has authority to investigate or correct the violation. (Labor Code section 1102.5, subd. (b).) “This provision reflects the broad public policy interest in encouraging workplace whistle-blowers to report unlawful acts without fearing retaliation.” (Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 77, 78 Cal.Rptr.2d 16, 960 P.2d 1046.) An employee injured by prohibited retaliation may file a private suit for damages. (Labor Code section 1105; see Gardenhire v. Housing Authority (2000) 85 Cal.App.4th 236, 241, 101 Cal.Rptr.2d 893.)
On January 27, 2022, the California Supreme Court released a new decision regarding employees who assert for claims for retaliation under Labor Code section 1102.5 can succeed in proving liability and damages by showing by a preponderance of the evidence (50.5%) a retaliatory motive was merely a “contributing factor” behind an adverse employment action, like a demotion, termination, unwanted transfer or other actions. Many employers see this as easier to achieve than the burden-shifting McDonnell Douglas test, which required “substantial evidence” of retaliation. Put another way, the Court held that under the Labor Code’s whistleblower provision, a plaintiff does not need to show that the employer’s nonretaliatory reason for taking adverse action was pretextual; even if the employer had a genuine, nonretaliatory reason for its adverse action, the plaintiff still carries burden assigned by statute if it is shown that employer also had at least one retaliatory reason that was contributing factor in action. See Labor Code sections 1102.5, 1102.6. Lawson v. PPG Architectural Finishes, Inc., (2022) 12 Cal. 5th 703, 715-716. Looking at the legislative intent the Court held that placing this unnecessary burden on plaintiffs would be inconsistent with the Legislature’s evident purpose in enacting [California Labor Code] section 1102.6: namely, “encourag[ing] earlier and more frequent reporting of wrongdoing by employees and corporate managers when they have knowledge of specified illegal acts” by “expanding employee protection against retaliation.” (Assem. Com. on Judiciary, Analysis of Sen. Bill No. 777, supra, as amended May 29, 2003, p. 1, italics omitted.)
The underlying Lawson v. PPG case involved a former territory manager who filed a lawsuit in federal court, alleging a Labor Code section 1102.5 whistleblower retaliation claim against his employer. The employer’s motion for summary judgment was granted and the federal trial court applied the three-part McDonnell Douglas test to evaluate the 1102.5 claim. This application holds the “aggrieved” employee must first establish an adverse employment action that was somehow causally linked to some protected activity in which the employee engaged. The employer then has the burden of putting forth a legitimate, non-retaliatory business reason for pursuing the adverse employment action against the employee. If they provide a legitimate reason for said action, the burden shifts back to the employee to demonstrate by “substantial proof” and “sufficient evidence” (whatever the trial court decides that is) the employer’s articulated “legitimate” reason is a mere pretext for the alleged retaliation.
In granting summary judgment and ending the case, the trial court determined the employee met his initial burden. However, the employer had similarly sustained its burden of articulating a legitimate, non-retaliatory reason for firing him. The employee did not put forth this elusive and amorphous “sufficient evidence” showing the employer’s stated reason for firing him was a mere pretext (also known as a false reason).
Plaintiff appealed the decision to the Ninth Circuit Court of Appeals for the Federal Court system Lawson’s argument was that the trial court erred in applying the McDonnell Douglas test, and instead, should have applied the easier California Labor Code section 1102.6, which: (1) only requires a plaintiff to show that retaliatory motives “contributed to the adverse action”; (2) does not require a plaintiff to show that the employer’s legitimate reasons were pretextual or false; and (3) requires the employer to prove through “clear and convincing evidence” (if this were a chart I would say 75% sure) that its legitimate business reasons would have led to the same adverse action, here the termination of poor Mr. Lawson. The Ninth Circuit certified the question (basically asked the California Supreme Court to rule on an important issue of state law – This is like a “What would Jesus Do?” as the California Supreme Court is the ultimate authority on state law – but it sounds a little like passing the “buck” – typically I “certify the question” of how much information should go into answering discovery to my associate lawyers before making the call – but I digress…) The Ninth Circuit wanted to know the California Supreme Court’s decision regarding the applicability of the McDonnell Douglas test stacked up against the more lenient standard of proof in the Labor Code section 1102.6.
Fortunately for employees, and not good for employers, the California Supreme Court held that whistleblower retaliation claims under section 1102.5 are now subject to the framework laid out in Labor Code section 1102.6 as the legislature intended and rejected the use of the McDonnell Douglas test for claims brought under Labor Code section 1102.5. These claims can be safety complaints, wage complaints, complaints of fraud or other types of complaints as outlined above. The California Supreme Court reasoned section 1102.6 expressly provides the standards and burdens of proof for both parties in a section 1102.5 retaliation case. The Court also rejected the plaintiff’s argument about how to section 1102.6 was not intended to displace the McDonnell Douglas test but rather was intended to codify a specific type of affirmative defense available to employers.
This application of Labor Code section 1102.6 makes it easier for employees alleging retaliation to avoid summary judgment.
If you have any questions about this article, whistleblower claims, or have issues with unpaid wages, commissions, company charges to your wages, business expenses, off-the-clock work, or any issues with your pay at your current or former employer, please feel free to contact:
Richard E. Quintilone II, Esq. or Jeffrey T. Green, Esq.
Quintilone & Associates
22974 El Toro Road, Suite 100
Lake Forest CA 92630
Email [email protected]; or Email [email protected] web www.quintlaw.com
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