Lawson Ushers in a New Era for Employee Whistleblowers . . . or Does It?

• Publication year: 2022
• Author: Ramit Mizrahi

LAWSON USHERS IN A NEW ERA FOR EMPLOYEE WHISTLEBLOWERS . . . OR DOES IT?

AUTHOR^*

Ramit Mizrahi

INTRODUCTION AND BACKGROUND

Within the past two years, Cal. Lab. Code § 1102.5,¹ California's general whistleblower protection law, went from being a secondary cause of action to the most important one for most employees alleging retaliation. Two critical events spurred this change: (1) the 2020 amendment to section 1102.5 allowing successful plaintiffs to recover attorney's fees; and (2) the California Supreme Court's January 2022 decision in Lawson v. PPG Architectural Finishes, Inc.,² which clarified the framework for evaluating section 1102.5 claims. But while the benefits of attorney's fees are readily apparent, the extent of Lawson's impact remains to be seen.

By way of background, section 1102.5 protects employees who disclose information to a government or law enforcement agency, to those with authority over them or with the authority to investigate, discover, or correct the violations, or to a public body conducting an investigation, hearing, or inquiry, regarding what they reasonably believe to be violations of or noncompliance with a local, state, or federal rule or regulation.³ It protects employees who refuse to violate the law.⁴ It also protects employees suspected of being whistleblowers (or who have that potential)⁵as well as whistleblowers' family members.⁶

LEGISLATIVE DEVELOPMENT

Before 2020, section 1102.5 did not provide for attorney's fees. Successful plaintiffs could seek attorney's fees under Cal. Code Civ. Proc. § 1021.5 for enforcing "an important right affecting the public interest," but the bar was high and the odds were low. As a result, section 1102.5 claims often took a back seat to causes of action that provided for statutory attorney's fees—those offered plaintiffs a far greater upside and leverage for settlement. This also meant that plaintiffs who only had section 1102.5 retaliation claims, even very strong ones, often had difficulties finding counsel.

That changed with A.B. 1947,⁷ which went into effect on January 1, 2021, and added subdivision (j) to section 1102.5. Subdivision (j) is a one-way, fee-shifting provision that authorizes courts to award reasonable attorney's fees to plaintiffs, who bring successful actions under the statute. With that, section 1102.5 was now on equal footing with important civil rights laws that contained attorney's fee provisions, such as the Fair Employment and Housing Act (FEHA).⁸

But section 1102.5 held the promise of being even more employee-friendly than other statutes because of the framework laid out in section 1102.6. On the books since 2003 (a response to the Enron and Worldcom scandals),⁹ section 1102.6 provides:

In a civil action or administrative proceeding brought pursuant to [s]ection 1102.5, once it has been demonstrated by a preponderance of the evidence that an activity proscribed by [s]ection 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 [s]ection 1102.5.

Despite this clear framework, some appellate courts still imposed the McDonnell Douglas

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burden-shifting test¹⁰ when evaluating section 1102.5 claims, essentially disregarding section 1102.6.¹¹

THE LAWSON DECISION

Then came the California Supreme Court's decision in Lawson. The decision, authored by Justice Leondra Kruger, made clear that the McDonnell Douglas burden-shifting test does not apply to section 1102.5 claims. Lawson held that section 1102.6 alone provides the governing framework for the presentation and evaluation of these claims.¹²

This holding promised to be a game-changer for California employee whistleblowers. Surely, many more cases would get past a motion for summary judgment and succeed at trial with the burden now shifted to the defendant to meet a clear and convincing evidence standard once the plaintiff made their initial showing. Indeed, PPG had expressed these concerns, and the court acknowledged them: "To the extent PPG is concerned that the existing framework sets the plaintiff's bar too low by requiring only a showing that retaliation was a contributing factor in an adverse decision, PPG's remedy lies with the Legislature that selected this standard, not with this court."¹³

POST-LAWSON CASE LAW

Thus far, however, this has not been borne out by the cases applying Lawson. The author has reviewed all published and unpublished post-Lawson California and Ninth Circuit appellate and federal district court decisions involving section 1102.5 claims—there were 23 of them as of October 23, 2022. A review of these cases failed to find any case in which a section 1102.5 claim survived summary judgment or other challenge while a concurrently presented FEHA retaliation claim (or other statutory retaliation claim evaluated under the McDonnell Douglas test) based on the same facts did not. Indeed, it appears that defendant employers are still regularly succeeding in disposing of section 1102.5 claims with little impact yet seen from the Lawson decision.

There have been three published...