Sierra Chemical Co. manufactures, packages, and distributes chemicals for treating water, including water in swimming pools.  Sierra often lays off many of its production line employees in the fall and winter when demand for its products decreases.  Vicente Salas applied for a job with Sierra in 2003, and provided a Social Security number and resident alien card.  He completed and signed under penalty of perjury a federal Immigration and Naturalization form I-9, to which he attached a copy of a Social Security card.  Salas was laid off in October 2003 and rehired in March 2004.  Salas and some of his coworkers received a letter from the federal Social Security Administration stating that their names and Social Security numbers did not match the agency's records.  According to Salas, the production manager told the workers not to worry about the discrepancies, and that they would not be terminated as long as the company was satisfied with their work. 

Salas injured his back twice in 2006 while stacking crates on the production line.  He filed a workers' compensation claim after the second injury.  He came to work and performed modified duties until he was laid off in December 2006.  The production manager contacted him in March 2007 about returning to work.  Salas was told to bring a doctor's note releasing him to return to full duty.  Salas told the production manager that he had not yet been released to work, but had an appointment on June 12 to obtain the release.  The production manager said they would hold the job open for Salas until he obtained the release.  The production manager never heard from Salas again.

Salas sued Sierra in August 2007 for (1) failure to provide reasonable accommodations in violation of the Fair Employment and Housing Act (FEHA) and (2) wrongful denial of employment in violation of the public policy expressed in the FEHA by retaliating against Salas for filing a workers' compensation claim and for being disabled.  Salas filed a pretrial motion in which he acknowledged that it is a criminal offense under both federal and state law to use false identification documents to conceal one's true citizenship, and asked that he be allowed to assert his Fifth Amendment privilege against self-incrimination outside the presence of the jury. 

Sierra began investigating the authenticity of the documentation Salas had provided, and thereafter filed a motion for summary judgment.  It argued that it was entitled to judgment as a matter of law under the doctrines of after-acquired evidence and unclean hands because Salas fraudulently used another person's Social Security number and card to gain employment.  When the court denied the motion, Sierra sought a writ of mandate from the Court of Appeal.  The Court of Appeal issued the writ and ordered the trial court to grant Sierra's motion.  Salas appealed the trial court's grant of Sierra's motion to the Court of Appeal, which affirmed.  Salas appealed, and the California Supreme Court reversed.   

The Supreme Court answered a specific question: whether the federal Immigration Reform and Control Act of 1986 (IRCA) preempts application of the FEHA to workers who are unauthorized aliens.  If so, Salas would not be able to bring his lawsuit. 

California Government Code section 7285 provides that for the purposes of enforcing state labor, employment, civil rights, and employee housing laws, a person's immigration status is irrelevant to the issue of liability.  It also provides that all rights and remedies are available to all individuals, regardless of immigration status, who have applied for employment or have been employed, with the exception of any reinstatement remedies prohibited by federal law. 

The Court analyzed whether the IRCA preempts or supersedes the California law.  First, the Court held that Congress did not expressly preempt California state law as set forth in section 7285.  Second, the Court decided that federal regulation was not so pervasive as to leave no room for state regulation and noted that there was no evidence submitted by the parties demonstrating Congress' intention to occupy the field on immigration so completely as to preclude the states from applying its own worker protection labor and employment laws to unauthorized aliens.

Finally, the Court looked at whether compliance with both the IRCA and section 7285 conflicted, thus making compliance with both laws impossible.  The Court held that under the IRCA, an employer may not continue to employ a worker known to be ineligible for employment, thus any state law that compensates an unauthorized alien for loss of employment after the employer's discovery of that ineligibility is prohibited by federal law.  However, the IRCA does not preclude an unauthorized alien from being entitled to wages earned during employment wrongfully obtained so long as the employer remains unaware of the employee's unauthorized status. 

The Court reasoned that if unauthorized workers were not able to obtain state remedies for unlawful discharge, employers could discriminate and retaliate against unauthorized workers without fear of consequences, thus encouraging employers to hire workers they knew or suspected to be unauthorized aliens. 

The Court then addressed whether Sierra was entitled to judgment based on the theories of after-acquired evidence and unclear hands.  The doctrine of after-acquired evidence refers to an employer's discovery, after an allegedly wrongful termination or refusal to hire, of information that would have justified a lawful termination or refusal to hire.  The Court of Appeal held that because Sierra discovered that Salas had used another person's Social Security number to obtain employment, the after-acquired doctrine completely barred Salas' claims.  The Supreme Court disagreed. 

Relying on a decision in which the U.S. Supreme Court held that the after-acquired doctrine could limit remedies but not bar all relief under the Age Discrimination in Employment Act of 1967, the Court held that the after-acquired evidence doctrine should not act as a complete bar to relief under the FEHA.  However, the Court stated that, as a general matter, the employee should not be allowed to recover compensation for loss of employment after the employer's discovery of evidence relating to the employee's misconduct, but should recover compensation for loss of employment from the date of the wrongful discharge to the discovery date.  The Court noted, however, that in an appropriate case, the doctrine would prevent an employee from recovering any lost wages if his or her wrongdoing was particularly egregious. 

The Court agreed with the trial court that, in this case, there was a triable issue of fact as to whether Sierra continued to employ Salas after being put on notice that his name did not match his Social Security number.  If true, that finding could affect application of the after-acquired evidence doctrine and the remedies available to Salas.

For the foregoing reasons, the Court reversed the Court of Appeal's judgment in favor of Sierra and remanded to the trial court for further proceedings.

Note:

The case offers a mixed bag for employers.  First, it is clear that undocumented workers are entitled to bring suit under California anti-discrimination laws, such as the Fair Employment and Housing Act.  However, if the employee obtains employment by use of fraudulent means, damages may cut off as of the time the employer discovers the misconduct.  The case highlights the importance of ensuring that employees comply with IRCA requirements concerning proof of right to work in the United States.  Agencies also must not continue to employ individuals who it discovers have fraudulently obtained employment.  Interestingly, the Court left open the question of what remedies an employee can recover under FEHA where an employer knows that an employee is undocumented but continues to employ him or her. 

Salas v. Sierra Chemical Co. (2014) __ Cal.4th __ [2014 WL 2883878].