California Court of Appeal Confirms McDonnell-Douglas Burden Shifting Applies to Section 1278.5 Whistleblower Retaliation Claims

Key Considerations for California Hospitals and Medical Staffs

• Because most private California hospitals do not employ physicians, most retaliation claims by physicians would be brought pursuant to Section 1278.5.
• After Lawson, some physician litigants claimed that the plaintiff-friendly framework described in that decision would apply to Section 1278.5 claims.
• Notwithstanding the Scheer Court’s reversal and remand of summary judgment in that case, hospital and medical staff defendants will be able to assert legitimate, non-retaliatory reasons for disciplinary action on summary judgment and shift the evidentiary burden to the plaintiff to show evidence of pretext.

Background

In 2016, Arnold Scheer, M.D. was terminated from his position as Chief Administrative Officer of the UCLA Department of Pathology and Laboratory Medicine. A year later, he sued his former employer and supervisors for whistleblower retaliation. In the complaint, Dr. Scheer alleged that he was wrongfully terminated in violation of Health & Safety Code Section 1278.5, Labor Code Section 1102.5, and the California Whistleblower Protection Act (“CWPA”). The Defendants sought summary judgment, arguing that Dr. Scheer was terminated for legitimate, nonretaliatory reasons that were listed in a Notice of Intent to Terminate. These reasons included behavioral problems such as bullying and intimidation. Dr. Scheer countered that the listed reasons were pretextual because he received an outstanding performance review in 2015 – the year prior to his termination – and his supervisors’ formal 2016 goals for him did not identify any behavioral problems.

The Trial Court’s Ruling

The trial court applied the three-part, burden-shifting framework in McDonnell-Douglas Corp. v. Green to all three claims. It found that: (1) Dr. Scheer proved a prima facie case of retaliation by a preponderance of the evidence, shifting the burden to Defendants; (2) Defendants showed legitimate, nonretaliatory reasons for termination, shifting the burden back to Dr. Scheer; and (3) Dr. Scheer failed to show that the reasons were untrue or pretextual. Thus, the trial court granted summary judgment. Dr. Scheer appealed.

Court of Appeal Decision

In Scheer v. Regents of the University of California, the Second District Court of Appeal reversed and remanded. The Court held that the analytical framework from Lawson v. PPG Architectural Finishes applies to Labor Code Section 1102.5 claims and CWPA claims.
 
In Lawson, the California Supreme Court held that the evidentiary standard set forth in Labor Code Section 1102.6, not the McDonnell-Douglas framework, applies to whistleblower retaliation claims under Labor Code Section 1102.5. While the McDonnell-Douglas framework has three analytical steps, Labor Code Section 1102.6 has two: first, the plaintiff has the burden to establish by a preponderance of the evidence that retaliation was a contributing factor in the termination; then, if plaintiff satisfies that burden, the burden shifts to the defendant to show by clear and convincing evidence that it had legitimate and independent reasons to terminate the plaintiff. This “clear and convincing evidence” standard contrasts with the standard under McDonnell-Douglas, which merely requires the defendant to articulate legitimate reasons for the termination. Because the trial court applied the wrong framework to the Labor Code claim, the Court reversed and remanded as to that claim. For the same reason, Court reversed and remanded as to the claim under CWPA, which contains language nearly identical to Labor Code Section 1102.6. 
 
On the other hand, the Court held that the Lawson framework does not apply to retaliation claims under Health & Safety Code Section 1278.5. Because that section is structured differently from the Labor Code section interpreted in Lawson, the Court of Appeal held the trial court was correct in applying the McDonnell-Douglas framework to Dr. Scheer’s Section 1278.5 claim. Even still, the Court examined the evidence presented by Dr. Scheer and held that triable issues of fact remained regarding whether the Defendants’ reasons for firing him was pretextual. The Court found that because Dr. Scheer met his burden on the third step of the McDonnell-Douglas analysis, the trial court erred in granting Defendants’ motion for summary judgment.