California Supreme Court Clarifies Standard for Whistleblower Retaliation Claims

The California Supreme Court issued a unanimous decision on January 27, 2022, Lawson v. PPG Architectural Finishes, Inc., making it easier for an employee to successfully sue if they were terminated or otherwise retaliated against for making a whistleblowing claim. The Court clarified that the test set forth in the California Labor Code (“Labor Code”) should be the benchmark used when determining whether whistleblower retaliation claims by employees who disclosed alleged wrongdoing are viable.

Labor Code section 1102.5 prohibits an employer from retaliating against an employee if that employee shares 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.

In this case, the Court determined that courts should no longer apply the more rigid burden-shifting test commonly applied in federal discrimination suits that was outlined by the U.S. Supreme Court in 1973 in McDonnell Douglas Corp. v. Green. Instead, they should use the test in Labor Code section 1102.6 (“Labor Code test”).

Under the Labor Code test, the plaintiff simply needs to show that retaliation for whistleblowing was a contributing factor in the adverse action (like termination or demotion) the employer took against them.

In order to defeat such a claim, the employer then has to show, by meeting a higher evidentiary standard, that the adverse action would have occurred “for legitimate, independent reasons” even if the employee had not engaged in protected conduct. Unlike the McDonnell Douglas test, the Labor Code test does not require the plaintiff to show that their employer’s lawful reason for taking an adverse action against them was pretextual (i.e. a sham). Also, the burden on the employer under the Labor Code test, to produce “clear and convincing evidence,” is a heavier burden than under the McDonnell Douglas test.

In its decision, the Court stated that the McDonnell Douglas test was not designed “for the evaluation of claims involving multiple reasons for the challenged adverse action.” Instead, the McDonnell Douglas test reflects a presumption that there is a “single, true reason for the adverse action [which] creates complications in a so-called mixed-motives case, in which the employer is alleged to have acted for multiple reasons, some legitimate and others not.”

It is now clear that the Labor Code test, and not the McDonnell Douglas test, is the correct test for litigating and adjudicating claims of retaliation for whistleblowing under Labor Code section 1102.5.