A year ago, the California Supreme Court limited damages in employment discrimination claims brought under the California Fair Employment and Housing Act (FEHA) when an employer discovers it employed an unauthorized worker. In Salas v. Sierra Chemical Co. (June 26, 2014), the Court determined federal immigration laws do not preempt FEHA-based discrimination claims brought by unauthorized aliens. However, the Court did hold such laws should bar an employee from recovering any lost future wages from the date the employer discovers the employee’s ineligibility to work in the United States.

Facts

In 2003, Salas was hired to work for Sierra Chemical Company, which manufactures, packages and distributes chemicals for treating water. In 2006, Salas injured his back during the course and scope of his employment. Sierra Chemical laid him off due to the seasonal nature of his employment but called him to return to work in 2007. At that time, Sierra Chemical asked Salas to provide a doctor’s release. Salas never provided the documentation but nevertheless sued Sierra Chemical claiming it failed to provide reasonable accommodations for his disability and wrongfully denied him reemployment.

After Salas sued, Sierra Chemical discovered he fraudulently used another person’s social security number to obtain employment. Sierra Chemical asserted in a motion for summary judgment that Salas’s actions barred his complaint via the doctrines of after-acquired evidence and unclean hands. In reviewing the issue, the California Supreme Court reviewed federal and state laws pertaining to immigration.

Federal Immigration Law

Federal immigration law requires employers to verify the identity and work eligibility of new employees. If an employer discovers an employee is unauthorized to work, termination of employment is required. An employer who fails to comply with these provisions is subject to civil fines and possible criminal prosecution.

California Immigration Law

The California law at issue included FEHA and several statutes stemming from the passage of Senate Bill 1818, including Government Code §7285, Labor Code §1171.5 and Civil Code §3339, which state:

All protections, rights and remedies available under state law … are available to all individuals regardless of immigration status who have applied for employment, or who are or who have been employed, in this state.

The California legislature enacted SB 1818 to provide additional protections to unauthorized aliens not recognized under federal law following decisions such as the one in Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137, where the United States Supreme Court held as follows:

… to award back pay 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 … runs counter to policies underlying … [the] Immigration Reform Control Act of 1986 [IRCA].

Preemption

Ultimately, the Salas court held that federal immigration laws do not completely preempt California law that “deals with aliens” but does not “regulate” immigration, an exclusively federal function. However, the Court also recognized that permitting any award for lost wages after the discovery of an employee's unauthorized status would conflict “with [IRCA's] prohibition against continuing to employ workers whom the employer knows are unauthorized aliens." Based on this analysis, the Salas court held "federal law preempts state Senate Bill No. 1818 to the extent that it makes a California FEHA lost pay award available to an unauthorized alien worker for the post-discovery period.” Conversely, lost earnings awards can be awarded for the period pre-discovery without conflicting with federal law, as an employer can simultaneously comply with state and federal law during such periods where it is unaware of the employee’s unauthorized status.

The After-Acquired Evidence Doctrine

The doctrine of after-acquired evidence refers to an employer’s discovery of information that would have resulted in a justified termination of employment, after that employee has been allegedly wrongfully discharged. After a lengthy review of prior applications of the doctrine, the Salas court found discovery of information that would have led to justified termination of employment is not a complete bar to FEHA claims under the following justification:

… the antidiscrimination goal [of FEHA] would be substantially impaired…. To allow such after-acquired evidence to be a complete defense would eviscerate the public policies embodied in the FEHA by allowing an employer to engage in invidious employment discrimination with total impunity.

Notably, the Court left some room to prevent an employee from recovering any lost wages in “appropriate case[s]” where their wrongdoing is particularly egregious. In the Salas case, the Court found the mismatched social security number could have an innocent explanation.

The Unclean Hands Doctrine

The equitable doctrine of unclean hands applies when a plaintiff acts unconscionably, in bad faith or inequitably in the matter in which the plaintiff seeks relief. This equitable defense cannot be used to “wholly defeat a claim based on a public policy expressed by the Legislature in a statute.” Since the Salas action was founded on public policies established by the Legislature in FEHA, the doctrine of unclean hands was unavailable.

Practical Application

In many FEHA cases, the issue of future lost wages is an alleged damage that is, at times, controversially quantified. Plaintiffs’ economist experts may allege that a plaintiff may not find comparable employment for 5–10 years because of a poor job market, or the emotional or physical condition of the plaintiff, or the need for additional training and education. Conversely, defense economist experts look at industry growth rates and other factors to opine that a plaintiff may obtain comparable employment in less time, resulting in lower awards for future lost wages.

However, under the Salas case, if it is found during the discovery phase that a plaintiff is actually unauthorized to work in the United States, such a recovery is barred from that date. Such a discovery would result in an eradicated future lost wage award and would save costs associated with retaining and deposing experts regarding the scope of future lost wages. Given the potential savings, an employer should always seek to ascertain a former employee’s work eligibility status when defending against discrimination claims.