As anyone paying attention to the news is aware, immigration is a politically charged and volatile issue. Employers as a result must sort through a morass of laws and regulations. There are specific laws and procedures applicable to the employment of non-citizens. It is illegal to employ and retain aliens who are unauthorized to work.

Obtaining authorization involves a labyrinth of laws, visas and the lawyers who love them. At the same time, the law strictly limits employers’ ability to determine whether an individual is authorized to work. And California law provides strong protection for those working illegally.

The significant tension among the laws governing the employment of non-citizens creates a confusing legal framework employers must apply to make business decisions. In two recent opinions applying California and federal law, the courts held that employers violated the rights of employees who were not authorized to work in the United States.

California Law Protects Aliens Not Authorized to Work in the U.S.

California Labor Code section 1171.5(a) clearly provides: “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.” The statute also says that a person’s immigration status is “irrelevant” to liability under California employment laws. Moreover, the law prohibits discovery regarding immigrant status, unless proven by clear and convincing evidence to be relevant to compliance with federal law.

Section 1171.5 appears to have disposed of cases such as Murillo v. Rite-Stuff Foods, decided before the statute was enacted. There, the California Court of Appeal held that an unauthorized worker was barred from litigating her wrongful termination claim because of the doctrine of “unclean hands.” The court reasoned that the employee did not have a right to her job in the first place because she was an alien without work authorization. Therefore, equity barred her claims arising from the termination of her employment. Of note, Murillo was permitted to proceed with her sexual harassment claim because it was unrelated to the termination of her illegally held employment.

Federal Law Prohibits Employment of Aliens Not Authorized to Work in the U.S.

Federal law regarding employment of unauthorized workers also is refreshingly clear: The Immigration Reform and Control Act of 1986 (IRCA) makes it unlawful for an employer “to continue to employ the alien in the United States knowing the alien is (or has become) an unauthorized alien with respect to such employment.”

Although the IRCA’s command is plain, Labor Code section 1171.5 grants significant state law remedies to unauthorized aliens who are discharged. The Ninth Circuit Court of Appeals considered whether the statutes conflict in Incalza v. Fendi North America, Inc.

Discharge of an Alien Unauthorized to Work Breached an Employment Contract

Giancarlo Incalza, an Italian, was working for Fendi in Rome. At Fendi’s request, he moved to the U.S. and worked (legally) for 10 years under an “E-1” visa that Fendi helped him obtain.

Fendi later was bought by a French company. Fendi’s lawyers told Incalza that the E-1 visa no longer would be valid. Fendi apparently could have sponsored Incalza for an H-1B visa, which would have authorized him to work. In fact, Fendi did so on behalf of another Italian holding an E-1 visa. However, Fendi declined to do so for Incalza. He asked for a leave of absence so he could marry his fiancí©e, a U.S. citizen. He would then obtain a green card and, with it, work authorization. Fendi declined to grant the leave and terminated Incalza’s employment because he was unauthorized to work in the U.S.

Incalza sued Fendi in Los Angeles Superior Court for discrimination and breach of contract not to terminate without “good cause,” among other claims. Fendi removed the case and unsuccessfully moved for summary judgment on the basis that Incalza’s discharge was required by the IRCA, and that California law was preempted. After trial, a jury decided in Fendi’s favor on the national origin discrimination claim. However, the jury decided Fendi breached an implied contract by discharging Incalza, and awarded him over $1 million.

On appeal, Fendi argued that the IRCA preempts California law because the laws conflict. Fendi argued the conflict arose because IRCA required Fendi to discharge Incalza when he became unauthorized to work. Fendi also argued that discharge of someone unauthorized to work amounted to “good cause.”

The Ninth Circuit decided that there was no conflict between IRCA and California law. Apparently troubled by Fendi’s harsh treatment of Incalza, the court held there was no conflict because Fendi could have complied with both laws by granting Incalza a “reasonable” leave of absence, so that Incalza could remedy his visa situation, either via the H1-B program or by marrying his fiancí©e. When Fendi pointed out that Incalza took five months to become authorized, the Ninth Circuit dismissed the argument because Fendi’s termination of Incalza increased the delay. The court also rejected Fendi’s (seemingly solid) argument that an employer “continues to employ” a worker on a leave of absence.

In reaching its conclusion, the Ninth Circuit had to distinguish Supreme Court authority and the IRCA statute itself. The court acknowledged “as a general rule, individuals who are indisputably not authorized to work must be discharged immediately.” The court then carved into this plain rule an exception: “An individual who has the opportunity to switch from an E-1 to an H1-B . . . is, however, another matter.”

The court did not provide any guidance as to what would constitute a “reasonable” leave. Nor did the court explain its authority to invent a new, legally required leave of absence to facilitate an employee’s continued employment. The court did not limit its holding to the immigration context either. So, if a truck driver loses his license, must the employer grant a leave to avoid a wrongful termination claim? If a lawyer does not comply with MCLE requirements and her license is suspended, does the employer have to consider a leave rather than discharge even though the employee is unqualified?

The answer to these questions is an unqualified, “Who knows?” The best way to avoid the Ninth Circuit’s human resource management is to maintain “employment at will” status. If Incalza had been an employee at will, then he would not have been successful in asserting a breach of implied contract claim and could have been discharged for any reason äóñ presumably including his lack of authorization to work.

California Court Agrees that Labor Code Section 1171.5 Is Not Preempted

The Ninth Circuit in Incalza noted that a leave of absence would be useless in the case where employees had no work authorization at all and obtained employment without any documentation. Because Giancarlo Incalza had a work visa and could obtain another one easily, the court of appeals believed his situation was not governed by the Supreme Court’s 2002 decision in Hoffman Plastic Compounds, Inc. v. NLRB. There, the Court held that the National Labor Relations Board cannot award the remedy of back pay to unauthorized aliens because to do so would subvert the IRCA and the U.S. immigration policy. But would an unauthorized employee’s claim for prevailing wages be preempted by the IRCA and Hoffman? The California Court of Appeal in Reyes v. Van Elk answered that question: No.

Reyes and other aliens without work authorization sued Van Elk, a construction company with contracts for public works projects. As a state contractor, Van Elk was required to pay a “prevailing wage.” Reyes claimed Van Elk did not pay prevailing wages to Reyes and other unauthorized aliens.

The court of appeal held that neither Hoffman nor the IRCA precluded Reyes’ claims. The court reasoned that prevailing wage laws are minimum wage statutes, and courts have held that even unauthorized aliens are entitled to be paid wages in accordance with the Fair Labor Standards Act. The court further noted that Hoffman did not require preemption, because requiring employers to pay prevailing wages was a disincentive to hiring employees without authorization to work. The court also relied on Farmer Bros. Coffee v. Workers’ Comp. Appeals Board, in which the court of appeal decided that the IRCA did not preempt California’s workers’ compensation laws with respect to unauthorized aliens.

Conclusion

The IRCA obviously prohibits employers from employing aliens who are unauthorized to work in the United States. Hoffman and the IRCA also preclude reinstatement of unauthorized aliens, as well as back pay during the period that the employee was unauthorized to work.

However, as shown above, businesses that employ illegal aliens cannot escape liability under laws applicable to legally employed workers. The applicability of prevailing wage, other wage and hour laws, anti-discrimination statutes, leave laws, etc. should remove payroll cost savings as a ground for employing unauthorized aliens.

Moreover, under Incalza, employers may not claim that termination of an unauthorized worker constitutes “good cause” for discharge where good cause is required if the employee could obtain authorization in a reasonable period of time. As stated above, employers should ensure that employment under work-authorization visas is clearly and unmistakably “at will.” Employers must ensure that visa applications do not contradict at-will policies and agreements.