Lawson v. PPG Architectural Finishes, Inc.

• Decision Date: 27 January 2022
• Docket Number: S266001
• Citation: Lawson v. PPG Architectural Finishes, Inc., 12 Cal.5th 703, 503 P.3d 659, 289 Cal.Rptr.3d 572 (Cal. 2022)
• Parties: Wallen LAWSON, Plaintiff and Appellant, v. PPG ARCHITECTURAL FINISHES, INC., Defendant and Respondent.
• Court: California Supreme Court

12 Cal.5th 703

503 P.3d 659

289 Cal.Rptr.3d 572

Wallen LAWSON, Plaintiff and Appellant,

v.PPG ARCHITECTURAL FINISHES, INC., Defendant and Respondent.

S266001

Supreme Court of California.

January 27, 2022

HKM Employment Attorneys, Patrick Leo McGuigan, Chaka Okadigbo, Los Angeles; Obermayer Rebmann Maxwell & Hippel, Bruce C. Fox and Andrew J. Horowitz for Plaintiff and Appellant.

Littler Mendelson, Michael W. M. Manoukian, San Jose, Theodore A. Schroeder, Robert W. Pritchard, Concord, Everett Clifton Martin ; Hopkins & Carley and Karin M. Cogbill, San Jose, for Defendant and Respondent.

Nicholas Patrick Seitz, Cristina Schrum-Herrera, David L. Bell, Redondo Beach, Dorothy A. Chang and Phoebe Liu for Department of Industrial Relations, Division of Labor Standards Enforcement as Amicus Curiae.

Opinion of the Court by Kruger, J.

The question in this case concerns the proper method for presenting and evaluating a claim of whistleblower retaliation under Labor Code section 1102.5. Since 2003, the Labor Code has prescribed a framework: Once an employee-whistleblower establishes by a 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, added by Stats. 2003, ch. 484, § 3, pp. 3518–3519.) But in the years since section 1102.6 became law, some courts have persisted in instead applying a well-worn, but meaningfully different, burden-shifting framework borrowed from the United States Supreme Court's decision in McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 ( McDonnell Douglas ). Noting the lack of uniformity, the United States Court of Appeals for the Ninth Circuit has asked us to decide which of these frameworks governs section 1102.5 retaliation claims. 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.

I.

We take the facts from the Ninth Circuit's certification order. From 2015 until he was fired in 2017, plaintiff Wallen Lawson worked as a territory manager for defendant PPG Architectural Finishes, Inc. (PPG), a paint and coatings manufacturer. Lawson was responsible for stocking and merchandising PPG paint products in Lowe's home improvement stores in Southern California. PPG used two metrics to evaluate Lawson's performance: his ability to meet sales goals, and his scores on so-called market walks, during which PPG managers shadowed Lawson to evaluate his rapport with Lowe's staff and customers, among other things. Lawson's direct supervisor, Clarence Moore, attended all but the first of these market walks. On that first market walk, Lawson received the highest possible rating, but the positive evaluations did not last and his market walk scores soon took a nosedive. Lawson also frequently missed his monthly sales targets. In spring 2017, PPG placed Lawson on a performance improvement plan.

According to Lawson, that same spring, Moore began ordering him to intentionally mistint slow-selling PPG paint products — that is, to tint the paint to a shade the customer had not ordered. Lowe's would then be forced to sell the paint at a deep discount, enabling PPG to avoid buying back what would otherwise be excess unsold product. Lawson did not agree with this mistinting scheme and filed two anonymous complaints with PPG's central ethics hotline. He also told Moore directly that he refused to participate. The complaints led to an investigation. PPG eventually told Moore to discontinue the practice, but Moore remained with the company, where he continued to directly supervise Lawson and oversee his market walk evaluations.

Some months later, after determining that Lawson had failed to meet the goals outlined in his performance improvement plan, both Moore and Moore's supervisor recommended that Lawson be fired. He was.

Lawson filed suit in the United States District Court for the Central District of California. As relevant here, Lawson claimed that PPG had fired him because he blew the whistle on Moore's fraudulent mistinting practices, in violation of the protections codified in Labor Code section 1102.5 ( section 1102.5 ). PPG moved for summary judgment. Invoking a line of authority that traces back to Patten v. Grant Joint Union High School Dist. (2005) 134 Cal.App.4th 1378, 37 Cal.Rptr.3d 113 ( Patten ), the district court applied the three-part burden-shifting framework laid out in McDonnell Douglas , supra , 411 U.S. 792, 93 S.Ct. 1817 to evaluate Lawson's section 1102.5 claim. Under that approach, the employee must establish a prima facie case of unlawful discrimination or retaliation. ( McDonnell Douglas , at p. 802, 93 S.Ct. 1817.) Next, the employer bears the burden of articulating a legitimate reason for taking the challenged adverse employment action. ( Ibid. ) Finally, the burden shifts back to the employee to demonstrate that the employer's proffered legitimate reason is a pretext for discrimination or retaliation. ( Id. at p. 804, 93 S.Ct. 1817.)

As to the first step of McDonnell Douglas , the district court concluded that Lawson had established a prima facie case of unlawful retaliation based on his efforts to stop the paint mistinting scheme. Moving to the second step of the framework, the court determined that PPG had sustained its burden of articulating a legitimate, nonretaliatory reason for firing him — namely, Lawson's poor performance on market walks and failure to demonstrate progress under the performance improvement plan. Finally, the district court concluded Lawson had failed to produce sufficient evidence that PPG's stated reason for firing Lawson was pretextual. Because Lawson could not satisfy this third step of the McDonnell Douglas test, the court granted summary judgment in favor of PPG on the whistleblower retaliation claim.

On appeal to the Ninth Circuit, Lawson argued that the district court erred in applying McDonnell Douglas . He contended the court should instead have applied the framework set out in Labor Code section 1102.6 ( section 1102.6 ). Under the statutory framework, Lawson contended, his burden was merely to show that his whistleblowing activity was "a contributing factor" in his dismissal, not to show that PPG's stated reason was pretextual. The Ninth Circuit determined that the outcome of Lawson's appeal hinged on which of those two tests applied but signaled uncertainty on this point. ( Lawson v. PPG Architectural Finishes, Inc. (9th Cir. 2020) 982 F.3d 752, 755.) It observed that our state's appellate courts do not follow a consistent practice and that this court has never ruled on the issue. ( Id. at pp. 755–759.) It asked us to consider the question and we granted the request.

II.

Section 1102.5 provides whistleblower protections to employees who disclose wrongdoing to authorities. As relevant here, 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. ( § 1102.5, subd. (b).) "This provision," we have explained, "reflects the broad public policy interest in encouraging workplace whistle-blowers to report unlawful acts without fearing retaliation." ( Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 77, 78 Cal.Rptr.2d 16, 960 P.2d 1046.) An employee injured by prohibited retaliation may file a private suit for damages. ( Lab. Code, § 1105 ; see Gardenhire v. Housing Authority (2000) 85 Cal.App.4th 236, 241, 101 Cal.Rptr.2d 893.)

When section 1102.5 was first enacted in 1984, the statute supplied only a set of substantive protections against whistleblower retaliation, unaccompanied by any provision setting forth procedures for proving retaliation.

(Stats. 1984, ch. 1083, § 1, p. 3698.) So to give life to those substantive protections, courts looked to analogous statutory schemes for procedural guidance. Much as courts had done in employment discrimination and retaliation cases brought under the Fair Housing and Employment Act (FEHA), courts in section 1102.5 cases generally adopted the three-part McDonnell Douglas burden-shifting framework. (See Morgan v. Regents of University of California (2000) 88 Cal.App.4th 52, 67–69, 105 Cal.Rptr.2d 652 ( Morgan ); Akers v. County of San Diego (2002) 95 Cal.App.4th 1441, 1453, 116 Cal.Rptr.2d 602 ; see also Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 354, 100 Cal.Rptr.2d 352, 8 P.3d 1089 ( Guz ) [applying McDonnell Douglas to a discrimination claim under FEHA; citing cases]; Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1042, 32 Cal.Rptr.3d 436, 116 P.3d 1123 [applying McDonnell Douglas to a FEHA retaliation claim; citing cases].)

As we explained in Guz , the high court established the McDonnell Douglas framework for trying claims of intentional discrimination — there, intentional employment discrimination in violation of title VII of the Civil Rights Act of 1964 ( 42 U.S.C. § 2000e et seq. ) — based on circumstantial rather than direct evidence. ( Guz , supra , 24 Cal.4th at p. 354, 100 Cal.Rptr.2d 352, 8 P.3d 1089.) Courts applying it to section 1102.5 retaliation cases adapted the test for that context, describing it as follows: First, a plaintiff who seeks to rely on circumstantial evidence must establish a prima facie case of retaliation, meaning " ‘ "a plaintiff must show that she engaged in protected activity, that she was thereafter subjected to adverse employment action by her...