On July 10, 2013, the U.S. Court of Appeals for the Second Circuit issued its decision in Palma v. NLRB, Docket No. 12-1199 (2d Cir. 2013). The Palma case involved a petition to review an order of the National Labor Relations Board ("NLRB") that denied back pay to undocumented workers who alleged that they had been discharged by their employer in violation of the National Labor Relations Act ("NLRA"). Relying on the SCOTUS decision in Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137 (2002), the NLRB found that it could not award back pay to the petitioners because the NLRB’s General Counsel had stipulated that they were undocumented workers to avoid discovery into their immigration status. The NLRB did not address the petitioners’ claims that they also were entitled to reinstatement due to the employer’s violation of the NLRA.

On appeal, the petitioners claimed that the NLRB erred in relying on Hoffman Plastics because the undocumented workers in that case had defrauded the employer during the Form I-9 process, while the employer in this case had failed to satisfy the Form I-9 requirements. The Second Circuit upheld the NLRB’s decision and found that Hoffman Plastics precluded an award of back pay, regardless of whether the employer or employee was responsible for the Form I-9 violation. At the same time, the Second Circuit noted that the NLRB had failed to address the reinstatement issue. Here, the Second Circuit remanded the case to direct reinstatement only if the petitioning employees now satisfied the Form I-9 requirements.

Palma represents the latest Circuit decision interpreting Hoffman Plastics to bar all back pay claims by undocumented workers, regardless of whether the employer satisfied the Form I-9 requirements in the hire, and to foreclose reinstatement unless the employees could satisfy all Form I-9 requirements. The rules in many states, including New York, appear to permit back-pay claims where the employer failed to satisfy the Form I-9 requirements when the complaining employee was hired. Thus, Palma appears to provide employers with additional arguments in resisting these state law claims.