Why it matters: An immigrant could bring a Fair Employment and Housing Act (FEHA) claim against his employer even though he falsified his employment status to obtain the job, the California Supreme Court recently decided. The court did limit the employee’s potential damages, however, only allowing recovery of lost wages for the time period prior to the employer’s discovery of the misconduct. Ruling that federal law criminalizes the falsifying of federal employment documents but does not prohibit the employee from protecting other rights by filing suit, the court emphasized the legislative goals of FEHA to safeguard workers from “invidious employment discrimination.” Allowing employers to dodge liability would encourage the use of illegal immigrants and subvert the intent of FEHA, the court said. A concurring and dissenting opinion took the position that the U.S. Supreme Court has spoken definitively that an illegal immigrant cannot recover lost wages even where other employment rights have been violated. Could high court review be in the future for the case?

Detailed Discussion

For three years, Vicente Salas worked as a seasonal employee of Sierra Chemical Co. The company takes on more employees in spring and summer as demand increases for its water treatment chemicals, used in swimming pools; the employer then lays off the workers in the fall.

In April 2003, Salas was first hired by Sierra. He provided a Social Security number and resident alien card and completed and signed, under penalty of perjury, Immigration and Naturalization form I-9, as well as the Internal Revenue Service’s W-4 form. Salas later suffered multiple work-related injuries. He was not hired again in the spring of 2007 and he filed suit against Sierra.

Salas made two allegations under California’s FEHA: that he was wrongfully denied employment in violation of the statute as retaliation for filing a workers’ compensation claim and that Sierra failed to make reasonable accommodations for his disability.

During discovery, Salas indicated that he would testify at trial and assert the Fifth Amendment privilege against self-incrimination if asked about his immigration status. In response, Sierra filed a motion for summary judgment (along with a declaration from a man in North Carolina whose Social Security number had been used by Salas without permission).

Based on the doctrines of after-acquired evidence and unclean hands, Sierra argued Salas’ fraudulent use of another person’s Social Security number to obtain employment prevented his lawsuit.

The court began its analysis with the federal Immigration Reform and Control Act (IRCA), which sets forth penalties for both employers and employees for immigration-related fraud. In response to the statute, California enacted Senate Bill 1818, which declared: “All protections, rights and remedies available under state law, except any reinstatement remedy prohibited by federal 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.”

Neither FEHA nor Senate Bill 1818 are completely preempted by IRCA, the court concluded, distinguishing a case from the U.S. Supreme Court, Hoffman Plastic Compounds, Inc. v. NLRB, as focused on the federal statute’s impact on a federal agency applying federal law.

The court divided the issue into two time periods: post-discovery and pre-discovery. “Because under federal immigration law an employer may not continue to employ a worker known to be ineligible, any state law award that compensates an unauthorized alien worker for loss of employment during the post-discovery period directly conflicts with the federal immigration law prohibition against continuing to employ workers whom the employer knows are unauthorized aliens,” the panel wrote.

While IRCA preempted state law for lost pay awards to unauthorized alien workers for the post-discovery period, the pre-discovery period was a different story. The statute “does not prohibit an employer from paying, or an employee from receiving, wages earned during employment wrongfully obtained by false documents, so long as the employer remains unaware of the employee’s unauthorized status,” the court said.

The opposite conclusion – 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 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,” according to the panel.

Employers would be encouraged to hire unauthorized aliens and create a black market for illegal labor while simultaneously frustrating the intent of FEHA by creating a loophole to liability for discrimination actions, the court said.

Analyzing the application of the doctrines of after-acquired evidence and unclean hands, the court held that equitable defenses like unclean hands may not be used “to wholly defeat a claim based on a public policy expressed by the legislature in a statute.”

However, the employee’s wrongdoing should be taken into account when fashioning a remedy under the after-acquired evidence doctrine. “Generally, the employee’s remedies should not afford compensation for loss of employment during the period after the employer’s discovery of the evidence relating to the employee’s wrongdoing,” the court explained.

In the case at hand, the employee presented evidence that a manager assured employees who received letters from Social Security questioning their documents that they would not be terminated if their work was satisfactory. If true, this evidence could support a finding that the employer looked the other way about employees’ unauthorized status and could make more remedies available to the employee, the court said.

Although the decision was unanimous, two judges filed a concurring and dissenting opinion, disagreeing with the majority’s holding on the issue of federal preemption as the U.S. Supreme Court “has made crystal clear that federal immigration policy, as set forth in IRCA, is critically undermined by the award of post-termination lost wages to an alien who is not legally present or authorized to work in this country, and who committed criminal immigration fraud to obtain the job, even when the alien was wrongfully terminated in violation of another law generally intended for the protection of workers’ rights.”

To read the decision in Salas v. Sierra Chemical Co, click here.