EPL CORNER

CALIFORNIA SUPREME COURT SAYS STATUTE IS STANDARD TO FOLLOW IN WHISTLEBLOWER RETALIATION CLAIMS 

Lawson v. PPG Architectural Finishes, Inc., No. S266001 (Cal. Jan. 27, 2022)

This matter arose after an employee of a paint and coatings manufacturer alleged he was directed by his manager to engage in unethical behavior in the course and scope of his employment. 

The employee filed two anonymous complaints about this behavior, in addition to confronting his manager directly. Although the company investigated the matter, the employee was ultimately terminated for performance-related issues.

 

In the resulting whistleblower claim, the California Supreme Court examined the various standards used by California courts to analyze a claim for retaliation. For decades, whistleblower retaliation claims had been subject to the burden of proof set forth by the U.S. Supreme Court in McDonnell Douglas Corp. v. Green, which required plaintiffs to show retaliation was the sole or main reason for the employer’s actions (the “McDonnell-Douglas test”). However, in 2003, the California legislature enacted an amendment to the California Labor Code that only required plaintiffs to show that retaliation was a “contributing factor” in a company’s decision to terminate employment.

 

In the case at hand, the court found the McDonnell-Douglas test was not the appropriate framework to litigate whistleblower claims. While this test presumes an employer’s reason for adverse action “is either discriminatory or legitimate,” under the California Labor Code, an employee can prove unlawful retaliation “even when other, legitimate factors also contributed to the adverse action.” Accordingly, the court held that an employee must first prove that the whistleblowing activity was a “contributing factor” to their termination. The employer then has the burden to show the termination would have occurred regardless of the protected whistleblowing activity.

The Takeaway

This ruling lowers the pleading standard for whistleblower retaliation claims in California, a fact on which plaintiffs can be expected to capitalize. In light of this development, it is important for California employers to review their anti-retaliation policies, as well as confirm the scope of coverage for such matters under their employment practices liability insurance policies.  

ENTERTAINMENT COMPANY DOES NOT OWE SEVERANCE DESPITE AMBIGUOUS DEFINITION IN PLAN DOCUMENT

Soto v. Disney Severance Pay Plan, et al., No. 20-4081 (2nd Cir. Feb. 16, 2022)

This matter arose when an employee of an entertainment company was terminated after a stroke left her unable to work. 

The employee filed suit alleging the company wrongfully denied her benefits by improperly determining she did not experience a qualified “Layoff,” as defined in the company’s severance plan. The employee sought a monetary payout as well as reformation of the company’s severance plan language to conform to the standards set forth by the Employee Retirement Income Security Act of 1974 (“ERISA”).


Because the employee admitted she never received notice of her eligibility for severance under the plan, the district court dismissed the employee’s complaint and never reached the issue of whether the employee’s termination qualified as a “Layoff.” On appeal, a Second Circuit panel found the company’s benefits plan administrators were within their rights to determine the definition of “Layoff” under the plan; however, the court also found the definition of “Layoff” to be ambiguous, thereby subjecting the decision to review under an “arbitrary and capricious” standard. In determining that its interpretation of same was not “arbitrary and capricious,” the court noted the plan administrator reasonably interpreted the term “Layoff” to exclude a termination based on disability, consistent with Section 409A of the Internal Revenue Code, which was incorporated into the plan. Therefore, the court concluded the plan administrator had reasoned bases for its interpretation of the term “Layoff” and ultimately, the resulting denial of severance benefits.