California Supreme Court: Undocumented Worker May Recover Lost Wages for Period Up to Employer’s Discovery of Immigration Status

Salas v. Sierra Chemical Co., S196568 (June 26, 2014): On June 26, the California Supreme Court issued a decision holding that federal immigration law does not preempt a California law that extends state law protections to all workers regardless of their immigration status. However, the court held that federal law does preempt state law on the issue of liability for lost wages for any period after an employer discovers that an employee is not authorized to work in the United States.

Vicente Salas worked as a seasonal employee for Sierra Chemical Company since 2003.  Twice he injured his back at work and, after the second injury, filed a workers’ compensation claim. In 2006, he was laid off and not rehired, allegedly due to his disability. Salas filed a lawsuit against Sierra Chemical, alleging disability discrimination in violation of California’s Fair Employment and Housing Act (FEHA) and retaliation. During the course of litigation, the employer discovered that Salas was not authorized to work in the United States and had been using another person’s Social Security number.

Sierra Chemical argued that it would not have hired Salas if the company knew that Salas was using a false Social Security number. Based on this “after-acquired evidence,” Sierra Chemical asked the trial court to dismiss the case by summary judgment. It argued that since Salas was not authorized to work in the United States, he is be precluded from recovering lost wages. The employer also argued that the doctrine of “unclean hands”—according to which a party that acted in bad faith should not be entitled to a recovery—would prevent Salas from recovering from his claim.

The trial court initially denied the petition for summary judgment but after an appeal on the motion, granted the dismissal by summary judgment. Salas appealed the judgment.

The Court of Appeal agreed with the dismissal, holding that the after-acquired evidence and the doctrine of unclean hands go to the heart of Salas’s employment relationship with Sierra Chemical. The court said that Salas misled his employer regarding his work status and is barred from recovering lost wages. In its analysis, the Court of Appeal considered a California law enacted in 2002 under Senate Bill 1818 that declares that all protections, rights, and remedies available under state law are available to all individuals who have applied for work in California regardless of their immigration status. However, the court held that the statute does not require awarding backpay in a case where after-acquired evidence and the doctrine of unclean hands would otherwise preclude the employee’s claim. Again, Salas appealed.

The California Supreme Court considered the issue of whether federal immigration law preempts California’s Senate Bill 1818. The state high court disagreed with the Court of Appeal, holding that (1) federal immigration law does not preempt Senate Bill 1818, which expands state law employee protections and remedies to all workers regardless of immigration status, except to the extent that it allows an award of lost wages for any period after an employer discovers that the employee is undocumented to work in the United States; and (2) the doctrines of after-acquired evidence and unclean hands are not complete defenses to an employee’s claim for violation of FEHA or state public policy, but can be a factor in limiting the employee’s recovery. The state supreme court explained that “not allowing unauthorized workers to obtain state remedies for unlawful discharge . . . would effectively immunize employers that, in violation of fundamental state policy, discriminate against their workers.”

Practical Impact

Future litigation concerning both parts of the Salas decision will likely follow.

The first part of the Salas decision appears to run counter to the Supreme Court of the United States’ decision in Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137—a point well-made by Justice Baxter’s scathing dissent. Hoffman concluded that federal immigration policy is undermined when an alien who is unauthorized for employment, and who obtained it by criminal means, seeks unearned wages for being terminated from the job he or she was never entitled to have. In Hoffman, the Supreme Court of the United States refused to allow backpay awards to illegal aliens. It said: “awarding backpay to illegal aliens runs counter to policies underlying IRCA [the Immigration Reform and Control Act].”

Yet, in Salas, the California Supreme Court held that employees who are not eligible to work in the United States can still recover lost pay damages under the state’s Fair Employment and Housing Act up until the point that an employer discovers the employee is not authorized to work in the United States. In essence, the California Supreme Court is saying that awarding backpay to illegal aliens does not run counter to policies underlying the IRCA, at least not in all instances. This holding appears to present a conflict in how the California Supreme Court and Supreme Court of the United States interpret federal immigration policy and the propriety of backpay awards to employees who are not authorized to work in the United States.

The second part of the decision is equally troublesome. The court held that the doctrines of after-acquired evidence and unclean hands are not complete defenses to an employee’s claim for violations of FEHA or state public policy, but can be a factor in limiting the employee’s recovery. Yet, the court did not explain how these defenses should be applied to limit recovery. So, on this critical second point, the decision created uncertainty.