On January 27, 2022, the California Supreme Court unanimously decided that the McDonnell Douglas burden-shifting analysis that is widely used to determine whether an employment discrimination or retaliation case should be dismissed before trial does not apply to whistleblower retaliation claims brought under California Labor Code section 1102.5. As a result, employers will face a higher burden to obtain summary judgment before trial in whistleblower retaliation cases.
The case prompting this question was Lawson v. PPG Architectural Finishes, Inc. (Lawson), which was originally pending in the Ninth Circuit Court of Appeals. The Ninth Circuit certified the following question of state law for the California Supreme Court to answer: “Does the evidentiary standard outlined in Section 1102.6 of the California Labor Code replace the McDonnell Douglas test as the evidentiary standard for retaliation claims brought under Section 1102.5 of California’s Labor Code?”
Lawson v. PPG Architectural Finishes, Inc.
Lawson worked as a territory manager for a manufacturer that sold paint and other home-improvement products to retailers. Lawson claimed that his supervisor asked him to “mistint” slow-selling paint products at Lowe’s stores in order to allow the manufacturer to fraudulently avoid having to repurchase the slow-selling paint. Lawson claims he refused and reported the directive to the company – twice. During the same month he first reported this directive to the company, he was placed on a Performance Improvement Plan. After he submitted his second complaint, he received a low rating for his work and was eventually terminated. Lawson filed a complaint against the manufacturer alleging that he was retaliated against as a whistleblower for his reports about the request to “mistint” the paint.
The employer in Lawson moved for summary judgment. The trial court applied the McDonnell Douglas burden-shifting test to Lawson’s whistleblower claim. For nearly 40 years the McDonnell Douglas has set forth the process for summary judgment motions in employment discrimination and retaliation cases in both state and federal courts, except for the rare cases in which direct evidence of discrimination or retaliation is shown.
McDonnell Douglas Test
Step One: The Plaintiff must establish, by a preponderance of evidence, their prima facie case of retaliation : (1) that they engaged in protected activity; (2) that they suffered an adverse employment action; and (3) there is a causal connection between the protected activity and the adverse employment action.
Step Two: If the Plaintiff can do so, the Defendant Employer must carry the burden of production to articulate a legitimate, non-retaliatory reason for the adverse employment action.
Step Three: If the Defendant carries its burden, the Plaintiff is then given the opportunity to prove, by a preponderance of evidence, that the Defendant Employer’s stated reason was in fact pretext.
After applying this well-established framework to Lawson’s section 1102.5 whistleblower retaliation claim, the federal trial court found that Lawson failed to carry his burden of showing pretext and granted summary judgment to his employer. Lawson appealed to the Ninth Circuit.
Lawson argued in his appeal that the trial court should have applied the evidentiary standard set forth in California Labor Code section 1102.6 – not the McDonnell Douglas test – to his section 1102.5 retaliation claim. Under section 1102.6, the test operates as follows:
Section 1102.6 Test
Step One: the Plaintiff must establish, by a preponderance of evidence, that retaliation for their protected activities was a contributing factor in the contested employment action.
Step Two: Once the Plaintiff makes the required showing, the burden shifts to the Defendant Employer to demonstrate, by clear and convincing evidence, that it would have taken the action in question for legitimate, independent reasons even if the plaintiff had not engaged in protected activity.
The preponderance of evidence test in Step One requires the employee to prove that a fact is more likely than not true, whereas the clear and convincing test in Step Two requires the employer to prove that it is highly probable that the fact is true.
The Ninth Circuit reviewed existing case law and found that some courts insisted on applying the McDonnell Douglas framework for summary judgment motions, while other courts applied the section 1102.6 framework. The Ninth Circuit noted that “the continued application of McDonnell Douglas to section 1102.5 retaliation claims seems to ignore a critical intervening statutory amendment” – Senate Bill 777 of 2003. According to the Ninth Circuit, “the California legislature thus expressly adopted a burden-shifting evidentiary standard that seemingly replaced the McDonnell Douglas test for section 1102.5 retaliation claims.” As a result, the Ninth Circuit asked the California Supreme Court to decide which test it should apply to a summary judgment motion on a section 1102.5 claim.
California Supreme Court
In its January 27, 2022 decision, the California Supreme Court unanimously decided that trial courts should apply the Labor Code section 1102.6 test when evaluating whistleblower retaliation claims brought under Section 1102.5, and not the McDonnell Douglas test. The Court reasoned that while both McDonnell Douglas and section 1102.6 offer a method for proving retaliatory intent, the California Legislature in 2003 intentionally added section 1102.6 to establish the evidentiary burdens of both parties to a whistleblower retaliation action. (Slip Opinion, pg. 7; 10). The Court noted that in drafting section 1102.6, the Legislature departed from the McDonnell Douglas presumption that an employer has a single reason for taking an adverse action against an employer, and instead established a “contributing factor” inquiry that contemplates an employer having multiple possible reasons for the employment action. (pg. 12). Under this inquiry, even if an employer has a genuine, nonretaliatory reason for its adverse action, the plaintiff may prove a violation of section 1102.5 by showing that the employer also had at least one retaliatory reason that was a contributing factor to the employment decision. (pg. 11; 15).
As a result, the Court found that the well-established McDonnell Douglas framework does not work for the evaluation of section 1102.5 whistleblower retaliation claims, as these claims contemplate multiple reasons for the disputed adverse employment action. (pg. 14-15). Thus, the Court decided that section 1102.6 provides the governing whistleblower retaliation framework for summary judgment motions on section 1102.5 claims.
What this means for Employers
Although California jury instructions had already adopted the section 1102.6 clear and convincing standard for trials long ago, most California courts had continued to use the McDonnell Douglas burden shifting test for summary judgment motions on section 1102.5 claims. The rejection of the McDonnell Douglas test will make it more difficult for employers to obtain summary judgment of whistleblower retaliation claims under section 1102.5 by requiring employers to meet a significantly higher evidentiary standard – clear and convincing – to prove their legitimate business decision, and by enabling employees to defeat summary judgment without disproving an employer’s legitimate business reason if the employee can show a retaliatory reason was a contributing factor to the decision.
Liebert Cassidy Whitmore is here to address any questions and claims regarding this matter.