The California Supreme Court, in a critical decision, has answered a key question regarding whistleblower retaliation claims. Last year, the Ninth Circuit Court of Appeals certified an important question to the Court regarding the proper burden of proof in cases alleging retaliation under California Labor Code section 1102.5: “Does the evidentiary standard set forth in Labor Code section 1102.6 replace the rest of test of McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792 as the relevant evidentiary standard for retaliation claims brought pursuant to Labor Code section 1102.5?” In Lawson v. PPG Architectural Finishes, Inc., 2022 WL 24473 (Case No. S266001, Jan. 27, 2022), the California Supreme Court answered the question by holding that Section 1102.6 sets forth the proper standard for retaliation claims brought under Section 1102.5. That means that employers now have the burden of proving by “clear and convincing evidence” that an adverse employment action would have occurred for legitimate, independent reasons even if the employee had not engaged in protected activities under Section 1102.5. 

What is Section 1102.5?

Section 1102.5 prohibits retaliation in the workplace and broadly states:

“An employer, or any person acting on behalf of the employer, shall not retaliate against an employee for disclosing information, or because the employer believes that the employee disclosed or may disclose information, to a government or law enforcement agency, to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance, or for providing information to, or testifying before, any public body conducting an investigation, hearing, or inquiry, if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee’s job duties.”  

The statute’s breadth, including the list of prohibited conduct and the use of “reasonable cause to believe” language, supports the Legislature’s intent to address retaliation in the workplace.  According to the Supreme Court in Lawson, Section 1102.5 “reflects the broad public policy interest in encouraging workplace whistle-blowers to report unlawful acts without fearing retaliation.”

Although McDonnell-Douglas concerned a Title VII claim, courts across the country, including California state and federal courts, have applied the McDonnell-Douglas testto Section 1102.5 retaliation claims based on their similarity to retaliation claims under Title VII and the California Fair Employment and Housing Act (“FEHA”).  Under the time-honored McDonnell-Douglas test, the initial burden is on the plaintiff to establish a prima facie case; the burden then shifts to the employer to establish a legitimate, nondiscriminatory reason for the challenged adverse action; and the final burden shifts back to the plaintiff to show the employer’s reason is merely a pretext or a cover-up for the employer’s unlawful motivation.

What about Section 1102.6?

In contrast to the McDonnell-Douglas test, Section 1102.6 states: “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.”  This is a much lower burden of proof for whistleblowers than the McDonnell-Douglas standard and a higher burden of proof for employers.  Although the Supreme Court in Lawson acknowledged the “well-worn” McDonnell-Douglas test, it determined that the traditional test placed an “unnecessary burden on plaintiffs” that is “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.’”

What does the Lawson decision mean for California employers? 

First and foremost, employers will likely see a substantial increase in retaliation cases brought under Section 1102.5.  The prior McDonnell-Douglas test placed a heavier burden on a retaliation plaintiff bringing a claim under Section 1102.5, i.e., the plaintiff must submit “substantial” and “specific” evidence showing that the employer’s articulated legitimate reasons for the challenged adverse action were pretextual.  Section 1105.6 now requires – after the plaintiff has cleared the relatively low bar of establishing a prima facie case – theemployer to demonstrate by clear and convincing evidence that it would have taken the same adverse action for legitimate, independent reasons even if the plaintiff had not engaged in activities protected by Section 1102.5.

In addition, effective January 1, 2021, prevailing retaliation plaintiffs are entitled to statutory attorney’s fees under Section 1102.5, further incentivizing these claims.

California employers are well-advised to review and consider revising their policies prohibiting retaliation, and their workplace complaint and investigation policies, to avoid, handle and respond to this heightened risk of retaliation claims.  For employees who may have engaged in protected activity under Section 1102.5, employers must be proactive by collecting and preserving “clear and convincing” evidence to support the legitimacy of the adverse employment actions affecting such employees.