Employment & Labor Practice Case Alert

Salas v. Sierra Chemical Co. (June 26, 2014, S196568) ___ Cal. 4th ___

In Salas v. Sierra Chemical Co., the California Supreme Court recently held that an undocumented worker who obtained employment by using another individual’s Social Security number could still recover damages—including back pay damages—against his former employer under California’s Fair Employment and Housing Act (“FEHA”). The Court explained that neither federal immigration law nor the doctrines of “after-acquired evidence” or “unclean hands” completely barred the undocumented worker’s recovery; rather, they merely limited the worker’s back pay award to the period of time before the employer discovered the employee’s undocumented status. 

In so holding, the California Supreme Court distinguished this case from Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137, an earlier decision by the United States Supreme Court, in which that Court held that the National Labor Relations Board could not “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.” Although the Hoffman Court held that awarding back pay to an undocumented worker was contrary to the policies underlying federal immigration laws, the California Supreme Court in Salas held that the same reasoning does not apply to cases under California’s FEHA.

Facts of Salas v. Sierra Chemical Co.

Plaintiff Vicente Salas applied for a job with Sierra Chemical Co. (“Sierra”) in April 2003. He provided the company with a Social Security number and a resident alien card, and he completed and signed, under penalty of perjury, a Federal Immigration and Naturalization form I-9, on which he listed the same Social Security number he had given to Sierra. Salas also completed and signed a W-4, on which he again listed the same Social Security number.

Sierra manufactures and distributes chemicals for treating water, and often experiences an increase in demand during the summer months and a decrease in demand during the winter months. As a result, the company lays off some of its workforce during the winter months and rehires the employees when demand picks up again in the summer. Plaintiff Salas was laid off during the winter months in 2003 and 2004, but not in 2005. In 2006, Salas suffered two back injuries and eventually filed a workers’ compensation claim. After Salas was laid off during the winter months in 2006, he was allegedly not allowed to return to work until his doctor had cleared him of all restrictions. Consequently, in August 2007, Salas sued Sierra under FEHA for failing to reasonably accommodate his disability and for retaliating against him for filing a workers’ compensation claim and being disabled.

Around May 2009, while preparing for trial, Sierra discovered that Salas had fraudulently used another person’s Social Security number to obtain employment. Sierra filed a motion for summary judgment, arguing that it was entitled to judgment as a matter of law under the legal doctrines of after-acquired evidence and unclean hands. In support of its motion, the company submitted a declaration from its president stating that the company has a policy of not hiring anyone who is prohibited by federal law from working in the United States, and would immediately terminate an employee who is discovered to have used false documents to obtain employment.

Federal Immigration Law and Legislative History in California

The Federal Immigration Reform and Control Act of 1986 (“IRCA”) requires, among other things, that employers verify the identity and work eligibility of new employees (8 U.S.C. § 1324a(a)(1)(B)(i)), and that employers terminate employees upon discovering their unauthorized immigration status (8 U.S.C. § 1324a(a)(2)).

In 2002, the United States Supreme Court decided Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137, in which the Court held that IRCA prevented the National Labor Relations Board (NLRB) from awarding back pay to an undocumented worker who had fraudulently used his friend’s birth certificate to obtain a California driver’s license and a Federal Social Security card. The Hoffman Court noted that awarding back pay to undocumented workers who fraudulently obtained employment “runs counter to the policies underlying IRCA.”

In response to Hoffman, the California Legislature passed Senate Bill No. 1818, which states that “[a]ll 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.”

The Salas Court’s Reasoning

​1. The United States Supreme Court’s Decision in Hoffman Does Not Apply to California’s FEHA, Because Back Pay Awards Play a More Important Role in Achieving FEHA’s Legislative Goals

The Salas Court distinguished the United States Supreme Court’s decision in Hoffman, in part, on the basis that Hoffman concerned a back pay award issued by a federal agency in violation of federal immigration law, while Salas concerned a state’s anti-discrimination laws enforced largely by private causes of action. The Salas Court also distinguished the two cases based on the importance of back pay awards in achieving the goals of the legislative schemes at issue. According to the Court, the NLRB can achieve the goals of the National Labor Relations Act (“NLRA”) by issuing remedial orders enforceable by its power of contempt. In contrast, to achieve FEHA’s goal of eliminating invidious employment discrimination, FEHA “depends heavily on private causes of action in which compensatory damages, including lost pay, may be awarded.” Thus, the Salas Court concluded that the reasoning behind the United States Supreme Court’s decision in Hoffman does not apply to cases under California’s FEHA.

2. Undocumented Workers May Recover “Pre-Discovery” Back Pay, but Not “Post-Discovery” Back Pay

The Salas Court held that Salas could recover back pay up until the date that Sierra discovered his undocumented status, which the Court referred to as “pre-discovery” back pay. However, Salas could not recover “post-discovery” back pay, because federal law required that Sierra terminate Salas’s employment upon discovering his undocumented status.

The policies underlying California’s FEHA and federal immigration law were central to the Court’s reasoning. On the one hand, the Court reasoned that if Salas were not allowed to recover any back pay award, this “would effectively immunize employers” who violate California’s employment laws, and “would encourage employers to hire workers known or suspected to be unauthorized aliens.” This result would hinder FEHA’s purpose of eliminating employment discrimination, and would also impede federal immigration law’s purpose of eliminating employers’ economic incentives for hiring undocumented workers. On the other hand, a state law award of post-discovery back pay would directly conflict with federal immigration law, which prohibits an employer from continuing to employ workers whom the employer knows are undocumented.

3. The Doctrines of “After-Acquired Evidence” and “Unclean Hands” May Limit an Employee’s Remedies, but Are Not Complete Defenses to FEHA Claims

The doctrine of after-acquired evidence refers to information learned by an employer that, after an allegedly wrongful termination, would have justified the employer’s lawful termination of the employee. (See Finegan v. County of LA (2001) 91 Cal. App. 4th 1, 7¬–8).

The doctrine of unclean hands is closely related to the doctrine of after-acquired evidence and serves to limit or bar a plaintiff’s claims where the plaintiff has acted inequitably or in bad faith “relative to the matter in which he seeks relief, however improper may have been the behavior of the defendant.” (Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal. App. 4th 620, 638).

In Salas, Sierra argued that Salas’ undocumented status should completely bar his claims based on the doctrines of after-acquired evidence and unclean hands. The Court disagreed, however, holding that these doctrines may limit Salas’ remedies under FEHA, but do not serve as a complete bar to his claims. As the Court explained, “[t]o 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.” However, the Court noted that when the employer can show that after-acquired evidence would have led to the employee’s termination, the employee will no longer be entitled to remedies that were otherwise available, such as reinstatement and back pay for the period of time after the employer learns such information. Similarly, with regard to the doctrine of unclean hands, the Court noted that it may affect an employee’s remedies under FEHA, but could not be used to wholly defeat an action founded upon public policies established by the Legislature.

Steven Gatley, Partner
221 N. Figueroa Street, Ste. 1200
Los Angeles, CA 90012
Tel: 213.580.3977
Steven.Gatley@lewisbrisbois.com

Andrew Quigley, Associate
221 N. Figueroa Street, Ste. 1200
Los Angeles, CA 90012
Tel: 213.580.3971
Andrew.Quigley@lewisbrisbois.com