California employee whistleblowing cases get big lift from state Supreme Court

In a unanimous decision, the California Supreme Court has ruled that employee whistleblowing claims are subject to a different burden-of-proof standard than other retaliation claims. The standard is codified in the state’s Labor Code, making the high court’s decision a straightforward interpretation and application of the statutory text. But the decision cleared up a split in lower appellate court decisions, thus providing clarity for litigants going forward. It also will make it easier for plaintiffs to survive an employer’s motion for summary judgment.

California law protects employees who report wrongdoing internally or to authorities. Specifically, 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. In Lawson v. PPG Architectural Finishes, Inc., the plaintiff alleged that he was fired in retaliation for reporting to his employer’s ethics hotline a scheme to defraud a customer. The employer countered that the plaintiff was terminated for poor performance.

The Supreme Court was asked to decide the proper allocation of proof for a section 1102.5 claim. This is no mere technicality. It is a threshold question that ultimately decides which cases go to trial and which can be tossed earlier in the litigation. The defendant urged the court to apply the familiar McDonnell Douglas test, first formulated by the US Supreme Court in a Title VII discrimination case, which requires (1) employee proof of a prima facie case; followed by (2) an employer’s articulation of a legitimate, non-discriminatory or non-retaliatory reason for its action; and then (3) proof by the employee that the employer’s reason was a pretext for discrimination or retaliation.

The plaintiff countered that Labor Code section 1102.6 provides the framework for evaluating section 1102.5 claims. Section 1102.6 reads as follows:

In a civil action or administrative proceeding brought pursuant to Section 1102.5, once it has been demonstrated by a preponderance of the evidence that an activity proscribed by Section 1102.5 was a contributing factor in the alleged prohibited action against the employee, the employer shall have the burden of proof to demonstrate by clear and convincing evidence that the alleged action would have occurred for legitimate, independent reasons even if the employee had not engaged in activities protected by Section 1102.5.

Section 1102.6 unquestionably is an easier test for employees or former employees to satisfy, as they no longer have to prove employer pretext. The standard also shifts a heavier burden (“clear and convincing evidence”) onto the employer. Pointing to the legislative history, the defendant argued that section 1102.6 merely addresses the “same decision” defense in a mixed motive case, whereby an employer may avoid liability by proving that (even assuming it retaliated against the plaintiff) it would have made the same decision in the absence of a retaliatory motive. The defendant also cautioned that forsaking McDonnell Douglas for section 1102.6’s standard would allow unmeritorious cases to withstand summary judgment.

The Court was unmoved and unpersuaded: “Unsurprisingly, we conclude courts should apply the framework prescribed by statute in Labor Code section 1102.6. Under the statute, employees need not satisfy the McDonnell Douglas test to make out a case of unlawful retaliation.”

The decision should be of interest to court watchers—its author is Justice Leondra Kruger, who is rumored to be on President Biden’s shortlist of nominees to replace the retiring US Supreme Court Associate Justice Stephen Breyer.