California Supreme Court Holds, Contrary to Federal Law, That Unauthorized Workers Can Recover Back Pay Even for the Post-Termination Time Period When They Did Not Perform Work and Could Not Legally Earn Wages
Today the California Supreme Court issued its decision in Salas v. Sierra Chemical Co., holding that an employee who fraudulently obtained employment through use of someone else’s social security number, may still pursue employment discrimination claims stemming from termination and recover damages against the employer, including post-termination back pay for the period when the employee was not authorized to work and did not actually perform work. The Court held that federal immigration law does not preempt this result.
Salas applied for employment with Sierra Chemical in 2003 and was hired. In compliance with its legal obligations, Sierra Chemical required Salas to complete an I-9 form as well as a W-4. Salas completed these forms by providing a resident alien card and a social security card. From 2003 to 2005, Salas was subject to seasonal layoffs on a few occasions, but was later recalled to work. Each time he was recalled to work, Salas provided the same social security number he had provided upon hire. In 2006, Salas injured his back in the course of his work. He sought medical treatment and returned to work with temporary modified work restrictions, with Sierra Chemical accommodated. A few months later, Salas was released to full duty.
Later the same year, Salas injured his back again and filed a workers’ compensation claim. He performed modified duties, which Sierra Chemical accommodated, until the winter of 2006, when he was subject to another seasonal layoff along with Sierra Chemical’s other production workers. In May 2007, Sierra Chemical notified Salas and other production workers that it was recalling them for work and directing them to make arrangements to return to work. Salas’ supervisor told Salas to also bring a doctor’s note indicating he was released to return to work. Salas contacted his supervisor and told him that he had not been released to return to full duty but that he had an appointment in June to obtain the release. Salas’ supervisor agreed to hold his job open for him until that time. Salas’ supervisor never heard from him again.
In August 2007, Salas sued Sierra Chemical, alleging claims for failure to accommodate a disability in violation of FEHA, and for unlawful refusal to rehire him in retaliation for filing a workers’ compensation claim. Salas sought lost wages, emotional distress damages, punitive damages, and attorneys’ fees. Two years into the litigation, Sierra Chemical learned that Salas had falsified his employment eligibility documentation and that he was not authorized to work in the United States. Sierra Chemical filed a motion for summary judgment, arguing that it was entitled to judgment as a matter of law on Salas’ claims based on the doctrines of after-acquired evidence and unclean hands. The trial court denied Sierra Chemical’s motion, but was then directed by the court of appeal (by writ of mandate) to grant the motion. After judgment was entered for Sierra Chemical, Salas appealed. The court of appeal again held that Salas’ claims were barred by the doctrines of after-acquired evidence and unclean hands and affirmed the judgment in favor of Sierra Chemical. The California Supreme Court granted review and reversed the judgment in favor of Sierra Chemical, holding that the doctrines of after-acquired evidence and unclean hands did not operate to completely bar Salas’ claims.
The Court (in an opinion authored by Justice Kennard and joined by Justices Cantil-Sakauye, Werdegar, Corrigan, and Liu) held that the doctrines of after-acquired evidence and unclean hands may operate to reduce an employee’s damages and/or preclude reinstatement, but that they are not a complete defense to an employee’s claims. The court held that where lost wage damages are at issue, these doctrines generally preclude recovery of lost wage damages from the point of the employer’s discovery of the employee’s misconduct forward, but that the doctrines do not bar recovery of damages for the period of time prior to the employer’s discovery of the information. In the case of an employee who is fired and later sues, and during the litigation the employer discovers that the employee fraudulently obtained employment through use of someone else’s social security number, the employee would still be entitled to recover lost wages for the time period from termination until the employer discovered the fraud (typically years later during the litigation process). In other words, the employee who wasn’t even authorized to hold employment in the first instance and did not perform any work for the employer during the post-termination time period could still recover lost wages for being denied employment during that time period. Really?
Employers shaking their heads have good reason to do so. The United States Supreme Court does not seem to agree with the result reached today by the California Supreme Court. Indeed, in 2002, in Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, the United States Supreme Court held that a worker who fraudulently obtained employment in violation of immigration laws was not entitled to backpay from the period of time from termination through the employer’s discovery of the fraud. Reversing an award of backpay to an employee for a four and one-half period of time from his termination through his employer’s discovery of his undocumented status, the Court held that “awarding backpay to illegal aliens runs counter to policies underlying” the Immigration Reform and Control Act of 1986, and that it was improper to “award backpay to an illegal alien for years of work not performed, for wages that could not lawfully have been earned, and for a job obtained in the first instance by criminal fraud.” Makes sense, right? The California Supreme Court apparently does not think so. In an effort to get around Hoffman Plastics, the California Supreme Court held that Hoffman Plastics did not apply because it dealt with NLRB proceedings and that somehow made it materially different. The Court held that because this case involves California law and, more specifically, discrimination claims brought under FEHA, there are different public policy considerations at issue. The Court also emphasized the fact that in 2002, the California legislature, which also did not like the Hoffman Plastics decision, enacted a state law specifically designed to render Hoffman Plastics inapplicable to state law employment claims. That 2002 California state law specifically provided that all state-provided worker protections, rights, and remedies (except reinstatement prohibited by federal law) were equally available and applicable to all individuals regardless of immigration status.
Hmmm. Doesn’t federal immigration law preempt state laws to the contrary? Not so, according to today’s California Supreme Court ruling. The Court held that there was no direct conflict between federal immigration law and California law permitting unauthorized workers to recover lost wages for a period of time when the employer did not know of the employee’s fraud and unauthorized status. The Court also held that California law was not in conflict with the policy and purpose of federal immigration law. According to the Court:
“Even if permitting [unauthorized aliens who have used false documents to secure employment] to obtain state remedies for violations of the state labor and employment laws provides an incentive for such federal law violations, the practical effect of such incentive is minimal because the typical unauthorized alien wage earner is not familiar with the state law remedies available for unlawful termination and because job seekers rarely contemplate being terminated in violation of the law. Thus, it is highly unlikely that an unauthorized alien’s decision to seek employment in this country would be based in any significant part on the availability of lost wages as a remedy for unlawful discharge. . . . Furthermore, not allowing unauthorized workers to obtain state remedies for unlawful discharge, including prediscovery period lost wages, would effectively immunize employers that, in violation of fundamental state policy, discriminate against their workers on grounds such as disability or race, retaliate against workers who seek compensation for disabling workplace injuries, or fail to pay the wages that state law requires.”
Based on this and other reasoning, the California Supreme Court held that California’s 2002 law and its holding were not preempted by federal immigration law.
In sum, the California Supreme Court held that a worker who fraudulently obtains employment through false immigration documents and is later terminated for reasons unrelated to the employee’s fraud may pursue claims for employment discrimination and that those claims are not completely barred by the employee’s fraudulent conduct. The employee loses the right to reinstatement as a remedy if the employee was not actually authorized to work in the United States in the first place and also loses the right to recover lost wages for any time AFTER the employer discovers the employee’s fraud. However, the employee can still recover lost wages from the time of termination until the time the employer discovers the fraud, even though the employee was not authorized to work and did not actually perform any work for the employer during that time period. Of course, the employee can also still seek emotional distress damages, punitive damages, and attorneys’ fees as well.
Justice Baxter, joined by Justice Chin, dissented from the majority’s holding, stating that in their view, Hoffman Plastics and federal immigration law preempt and preclude a state law award of back pay during the time period from an employee’s termination through the employer’s discovery of the fraudulent conduct. Perhaps Sierra Chemical will seek review by the United States Supreme Court. Stay tuned. Today’s decision is available in full here.