On June 26, 2014, in Salas v. Sierra Chemical Co., the California Supreme Court held that undocumented immigrants who fraudulently obtained employment still may pursue retaliation and discrimination claims under the California Fair Employment and Housing Act (FEHA).  In its decision, the Court also found that the affirmative defenses of unclean hands and after‑acquired evidence, which typically can limit an employee’s ability to obtain relief, are not complete defenses to FEHA claims brought by undocumented workers.  Under the Court’s ruling, employees who used false documentation to obtain employment not only may bring such a lawsuit but also can recover lost wages, emotional distress damages and attorneys’ fees, even if they actually were never legally entitled to work for the employer.

The Facts and Lower Court Decisions

Plaintiff Vicente Salas was a production-line employee with Sierra Chemical.  During his employment, Salas injured his back at work and filed a workers’ compensation claim for his workplace injury.  Thereafter, he was laid off during the Company’s annual seasonal reduction of workers and was not hired back during the following season’s hiring process.  Salas filed a lawsuit against Sierra Chemical alleging FEHA violations based on the fact that (1) he was disabled and Sierra Chemical had failed to reasonably accommodate his disability, and (2) Sierra Chemical had wrongfully denied him employment (when they were rehiring during the next season) in retaliation for his filing of the workers’ compensation claim.

In its successful motion for summary judgment, Sierra Chemical submitted evidence that Salas had fraudulently used another man’s social security number to apply for and obtain the job at Sierra Chemical.  The Court of Appeal affirmed the grant of summary judgment on the basis that Salas’ claims were barred by the doctrines of after-acquired evidence and unclean hands.  In so ruling, the Court of Appeal held that these doctrines applied here and were not barred by California Senate Bill (SB) 1818, which declares that “[a]ll 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.”  Stats. 2001, ch. 1071 § 1, p. 6913 (emphasis added).

The California Supreme Court Decision

At issue before the California Supreme Court was (1) whether federal immigration law preempts a state antidiscrimination law enforced through a private action for damages, and (2) whether the doctrines of after-acquired evidence and unclean hands are complete defenses to an action brought by an undocumented immigrant employee.

The California Supreme Court reversed the granting of summary judgment.  First, it held that SB 1818’s extension of employee protections and remedies “regardless of immigration status” is not preempted by federal immigration law – specifically, the Immigration Reform and Control Act of 1986 (IRCA).  Second, it held that the doctrines of after-acquired evidence and unclean hands are not complete defenses to a worker’s claims under FEHA.  However, those doctrines can limit the availability of certain types of remedies.

In its ruling, the Supreme Court discussed the context in which SB 1818 was passed.  It explained that SB 1818 was enacted in response to the United States Supreme Court’s decision in Hoffman Plastic Compounds, Inc. v. NLRB, which limited the recovery rights of undocumented workers who were fired in violation of federal labor law to obtain relief only for back pay.  Ultimately, the Bill aimed to provide broad access to California state employment law protections to undocumented immigrants, even after Hoffman.  The California Supreme Court did hold, however, that where an employer discovers the employee’s unauthorized status after firing or failing to rehire the employee, the employee may not recover lost pay damages for any time after the employer’s discovery.  The Court reasoned that, under Hoffman, awarding backpay to undocumented immigrants “‘runs counter to policies underlying’ the Immigration Reform and Control Act of 1986.”  But, undocumented workers still would be entitled to lost pay awards after the employee’s termination (or other adverse action) and before the employer discovered the worker’s undocumented immigration status, since the employee would have remained employed during that intervening time period (before the discovery) but for the alleged violative conduct by the employer.

Next, the Court considered the employer’s allegations of the plaintiff employee’s wrongful actions in submitting fraudulent paperwork to gain employment.  With respect to the doctrine of after-acquired evidence, the Court noted that Sierra Chemical had continued to employ Salas after being put on notice that his name and social security number did not match.  Accordingly, the Court explained that a finding that the employer deliberately ignored the unauthorized status could affect application of the after-acquired evidence doctrine and, as a result, this was a triable issue of material fact that could not be decided on summary judgment.  Meanwhile, with respect to the unclean hands defense, the Court found that, although this doctrine did not provide a complete defense to the plaintiff’s FEHA claims, “equitable considerations may guide the court in fashioning relief in cases involving legislatively expressed public policy.”  For example, such equitable principles might be used to reduce tort damages and the types of relief sought by the employee in this case.

Ultimately, this California Supreme Court decision potentially opens the door to more undocumented workers bringing lawsuits against their employers for employment-related claims.  Consequently, employers with operations in California should ensure that they are conducting all of the requisite background checks and obtaining necessary employment documents from their new hires.  In addition, such employers need to take action as soon as possible whenever they are put on notice that an employee might not be lawfully permitted to work in the United States.  By taking such prompt actions, employers potentially can limit their employment liabilities.

If you have any questions about this decision or how it could impact your employment practices and procedures in relation to developments in this area of the law, Sheppard Mullin’s labor and employment attorneys are able to assist you.  So, please do not hesitate to consult counsel for assistance.