Employees No Longer Need to Satisfy McDonnell Douglas Test for Whistleblower Retaliation Claims

The California Supreme Court issued an opinion in Lawson v. PPG Architectural Finishes, Inc. (S266001, Jan. 27, 2022), addressing the Ninth Circuit’s question of the proper method for presenting and evaluating a claim of whistleblower retaliation under Labor Code section 1102.5. The Supreme Court clarified that “employees need not satisfy the McDonnell Douglas [Corp. v. Green (1973) 411 U.S. 792 (McDonnell Douglas)] test to make out a case of unlawful retaliation.”

The employee sued his employer in the United District Court of California. He claimed that his employer fired him because he blew the whistle on fraudulent practices in violation of Labor Code section 1102.5. The employer moved for summary judgment. In evaluating the employee’s section 1102.5 claim, the district court applied the three-part burden-shifting framework laid out in McDonnell Douglas. Under that approach, the employee must first establish a prima facie case of unlawful discrimination or retaliation. Next, the employer bears the burden of articulating a legitimate reason for taking the challenged adverse employment action. Finally, the burden shifts back to the employee to demonstrate that the employer’s proffered legitimate reason is a pretext for discrimination or retaliation.

On appeal, the employee argued that the district court erred in applying the McDonnell Douglas test and should have applied the standard under section 1102.6. The Ninth Circuit determined that the outcome of the appeal was based on which standard applied, noted that the state courts did not follow a consistent practice and requested the Supreme Court clarify the issue.

The California Supreme Court granted the certification order. According to the court, the unlawful retaliation framework proscribed since 2003 states that once “an employee-whistleblower established by preponderance of the evidence that retaliation was a contributing factor in the employee’s termination, demotion, or other adverse action, the employer then bears the burden of demonstrating by clear and convincing evidence that it would have taken the same action ‘for legitimate, independent reasons.’” (Lab. Code, § 1102.6.) However, since section 1102.6 became law, “some courts have applied a well-worn, but meaningfully different, burden-shifting framework borrowed from the United States Supreme Court’s decision in McDonnell Douglas.”

Indeed, the statute establishes the applicable substantive standards and burdens of proof for both the employee and employer. Pursuant to section 1102.6, it must first be “demonstrated by a preponderance of the evidence” that the employee’s protected whistleblowing was a “contributing factor” to an adverse employment action. (Lab. Code, § 1102.6.) The plaintiff does not need to satisfy McDonnell Douglas in order to discharge this burden. Once the employee has made that necessary threshold showing, the employer bears “the burden of proof to demonstrate by clear and convincing evidence” that the alleged adverse employment action would have occurred “for legitimate, independent reasons” even if the employee had not engaged in protected whistleblowing activities.

According to the Court, “[l]iability under section 1102.6 does require proof of retaliatory intent, and McDonnell Douglas does offer a method for proving such intent.” Moreover, employees should not be required to satisfy the third step of the McDonnell Douglas test—that the employer’s proffered legitimate reasons were pretextual—in order to establish a whistleblower retaliation claim. “To the contrary, placing this unnecessary burden on plaintiffs would be inconsistent with the Legislature’s evident purpose in enacting 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.’”

The Court’s opinion clarified that under section 1102.6, the employer must demonstrate by clear and convincing evidence that the adverse employment action would have occurred for legitimate, independent reasons even if the employer had not engaged in whistleblowing activities. As such, under the new clarified standard, it is easier for employees alleging retaliation for exercising rights under the whistleblower protection laws to prove their case and more difficult for employers to demonstrate legitimate reasons for their adverse employment actions. However, employers can still “raise a same-decision defense on summary judgment,” in an effort to dismiss “meritless” retaliation claims before trial.

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February 18, 2022