Source: http://bryanschwartzlaw.blogspot.com/2014/06/
Timestamp: 2019-04-19 04:29:28+00:00

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Today, in Salas v. Sierra Chemical Co., the California Supreme Court addressed a longstanding question regarding undocumented workers’ rights. The opinion is available here. The ruling settles the question of whether or not the doctrines of unclean hands and after-acquired evidence, which focus on employee misconduct to limit relief, stand as a complete bar to relief for undocumented workers who bring claims under California’s employment and labor laws.
The plaintiff, Vicente Salas, was a seasonal worker in defendant’s company. Slip Op. at 3. He was injured while stacking crates in defendant’s production line and had to be taken to the hospital on two separate occasions. Slip op. at 4. After filing a Worker’s Compensation claim, he was laid off and not re-hired because of his disability, in violation of the Fair Employment and Housing Act (FEHA). Slip Op. at 5. After Mr. Salas brought claims for failure to accommodate and retaliation, the defendant moved for summary judgment. Slip Op. at 6. The trial court denied summary judgment, but it was later granted by the Court of Appeal, reasoning that plaintiff’s undocumented status barred him from relief under the doctrines of unclean hands and after-acquired evidence. Slip Op. at 6.
The history and applicability of the unclean hands and after-acquired evidence doctrines in California date back to a Supreme Court ruling in McKennon v. Nashville Banner Publishing Co. (1995) 513 U.S. 352 (the unclean hands doctrine does not apply where a private suit serves important private purposes, but after-acquired evidence doctrine provides a partial defense for backpay). A subsequent California Court of Appeal decision misapplied the McKcennon rule. See Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal. App. 4th 620 (unclean hands and after-acquired evidence doctrines are a complete defense). The California Legislature stepped in, in 2002, by enacting Senate Bill 1818, which extended employment and labor protections to all workers regardless of immigration status. For more on the history surrounding the unclean hands and after-acquired evidence doctrine, see the article co-authored by Bryan Schwartz Law’s principal, available here.
Today, the court held that Senate Bill 1818, which extends state law protections and remedies to all workers “regardless of immigration status,” is not preempted by the Federal Immigration Reform and Control Act of 1986 (8 U.S.C. §1101 et seq.) (IRCA), except to the extent it authorizes an award of lost pay damages for any period after the employer discovers the employee’s inability to work in the U.S. Slip Op. at 2. Further, the court held that the unclean hands and after-acquired evidence doctrines are not complete defenses to a worker’s claims under the FEHA, though they do affect the availability of remedies. Id.
Justice Kennard, writing for a majority including Justices Cantil-Sakauye, Werdegar, Corrigan, and Liu, held that IRCA did not preempt state law, rejecting the contention that federal immigration regulation imposed by IRCA had become so pervasive so as to leave no room for state employment laws that extend antidiscrimination protections to undocumented workers. Slip Op. at 14. The court reasoned that a conclusion that congress had “occupied the field” of employment and labor laws would dramatically inhibit critical state laws regulating workers compensation, minimum wage, working hour limits, and worker safety. Id.
The court also held that o the extent FEHA allows recovery of back pay for the period after the employer discovers a former employees’ undocumented status, that portion of California’s law conflicts with the IRCA’s provision against continuing to employ workers whom the employer knows to be undocumented, and thus is preempted by federal law. Slip Op. at 15. However, IRCA does not prohibit an employer from paying, or an employee from receiving wages already earned, so allowing recovery of lost wages in the period before the employer discovers the worker’s undocumented status does not produce an “inevitable collision between the two schemes of regulation.” Id. Thus, undocumented workers are entitled to lost pay award under the FEHA in the period before the employer’s discovery of the worker’s immigration status (including the post-termination period before discovery of immigration status). Id.
Significantly, the court’s preemption analysis is limited to employers who discover a plaintiff employee’s unauthorized status after the employee has been discharged or not re-hired. Slip Op. at 15, n.3. In situations where an employer knowingly hires or continues to employ an unauthorized worker, federal law does not preempt lost wages remedies for violations of state laws like the FEHA. Id. Presumably then, in these situations, the plaintiff employee is entitled to the same wage remedies as any other documented worker. This was the situation in Mr. Salas’ case. His employer received notice of Mr. Salas’ undocumented status far before taking adverse employment action, and yet continued to employ Mr. Salas. Slip Op. at 3-4.
Finally, California’s Senate Bill 1818 does not frustrate the purpose of the IRCA, and is thus not preempted. Slip Op. at 19. Employers would be immunized from liability for violations of important worker protections if undocumented workers were denied state remedies for unlawful discharge, including pre-discovery period lost wages. Slip Op. at 18. The resulting lower employment costs would encourage employers to hire undocumented workers, contrary to IRCA's purpose of eliminating employers’ economic incentive to hire undocumented workers. Slip Op. at 19. Thus, to the extent that the SB 1818 grants undocumented workers employment and labor law protections in the period before the employer discovers a worker’s undocumented status, the law is not preempted by federal law. Id.
The after-acquired evidence doctrine cannot be a complete defense to claims brought under the FEHA because if it were, it would impair the act’s antidiscrimination goal. Slip Op. at 24. In reaching this conclusion, the court adopted the Supreme Court's reasoning in McKennon 513 U.S. at 358-59 (held the after-acquired evidence doctrine does to bar all relief under the federal ADEA because allowing it to do so would be inconsistent with the federal statutory scheme and would impair the efficiency of the ADEA, although some bars to relief apply ). Slip Op. at 25. However, in an attempt to fashion equitable relief for both parties, remedial relief should compensate an employee from the dates of wrongful discharge or refusal to hire to the date the employer acquired information about the employee’s wrongdoing or ineligibility for work. Id. This bars the employer from violating the FEHA with impunity and the employee from obtaining lost wages compensation for a period which he or she may not have been employed. Slip Op. at 26.
With respect to the unclean hands doctrine, while the doctrine stands as a complete defense to legal as well as equitable causes of action, it may not be used to wholly defeat a claim based on public policy expressed by the legislature in statue. Slip Op. at 27. However, the courts should use equitable considerations in fashioning relief in cases involving a legislatively expressed public policy. Id.
Today’s decision, while not affording complete relief to California’s undocumented workforce, is a step in the right direction. The decision will slow down employers fishing for employee misconduct after a wrongful termination, to get off the hook for an improper action, which can make discovery costly and ineffective. Further, and more importantly, it gives undocumented workers the courage to step forward and speak of workplace violations that are contrary to public policy.
The Private Attorneys General Act of 2004, Labor Code §2698, et seq. (PAGA), allows an aggrieved employee to bring representative claims on behalf of the State of California, and all aggrieved employees, to recover civil penalties for Labor Code violations. This morning's California Supreme Court decision in Iskanian v. CLS Transportation Los Angeles, LLC, available here, labels a PAGA action a qui tam action, and as such, one that cannot be eliminated by a class/collective/representative action waiver in an arbitration agreement. The decision has tremendous consequences for California workers with wage claims - it means that there is still viable recourse for such claims, through PAGA, and that they cannot be erased almost entirely by the existence of a pre-dispute arbitration agreement. Where an employee has PAGA claims, these claims cannot be compelled to arbitration, and representative PAGA claims cannot be stripped because of an arbitration class waiver.
Citing Arias v. Superior Court (2009) 46 Cal.4th 969, 980-81, Justice Liu, writing for the majority (including Justices Corrigan, Kennard, and Chief Justice Cantil-Sakauye), emphasized that an employee bringing a representative claim under PAGA as the “proxy or agent of the state’s labor law enforcement agencies” has “the same legal right and interest” as the state agency. Slip Op. at 31. The Supreme Court held, unequivocally, that "a PAGA representative action is therefore a type of qui tam action" (Slip Op. at 33), in which a statutory penalty is paid largely to the state, with a portion paid to the relator, or informer, who brought the claim to light. Like the right to bring a qui tam action, an employee's right to bring a PAGA action is unwaivable. See Slip Op. at 34, discussing Civil Code section 1668 and Civil Code section 3513.
Among other reasons for prohibiting an arbitration agreement from waiving a PAGA representative action, allowing such a PAGA waiver would violate Civil Code Section 3513’s injunction which says that “a law established for a public reason cannot be contravened by a private agreement.” Slip. Op. at 35. Allowing the waiver would harm the State's interest in enforcing the Labor Code and receiving the proceeds of civil penalties used to deter violations. Id. PAGA was meant to augment the State Labor Workforce Development Agency’s (LWDA's) limited enforcement capacity by empowering employees to enforce the Labor Code as representatives of the LWDA, so any agreement that waives an employee’s ability to bring a PAGA representative action serves to disable one of the State's primary mechanisms for enforcing the Labor Code. Slip Op. at 35. Citing Arias, the Court held that enforced individual arbitration does not serve the purpose of PAGA. Slip Op. at 36.
Most significantly, the Court held that the 1925 Federal Arbitration Act (FAA), given an expansive new meaning by AT&T Mobility LLC. v. Concepcion (2011) 131 S.Ct. 1740 (Concepcion) and other recent U.S. Supreme Court jurisprudence, does not preempt PAGA. Examining the FAA's plain language, legislative history, and Supreme Court jurisprudence, the Court held that although “the FAA aims to ensure an efficient forum for the resolution of private disputes, [a] PAGA action is a dispute between an employer and the LWDA." Slip Op. at 37.
First, in examining the plain language of the statute, the court noted that the FAA's coverage of “a controversy thereafter arising out of such a contract or transaction” related to an arbitration agreement is most naturally read to mean a dispute about the rights and obligations of parties in a contractual relationship. Slip Op. at 37. The statute was meant to govern private disputes.
Second, the legislative history of the FAA indicates the FAA was meant to govern ordinary commercial disputes. There is “no indication that the FAA was intended to govern disputes between the government in its law enforcement capacity and private individuals.” Slip Op. at 37. When the FAA was enacted, qui tam actions were well established and “there was no mention of such actions in the [FAA's] legislative history, and no indication that the FAA was concerned with limiting their scope.” Slip Op. at 38.
Third, the Supreme Court’s FAA jurisprudence “consists entirely of disputes involving the parties’ own rights and obligations, not the rights of a public enforcement agency.” Slip Op. at 38.
The only case that has dealt with the enforcement of an arbitration agreement against the government is EEOC v. Wafflehouse, Inc. (2002) 534 U.S. 279, in which the U.S. Supreme Court held that the arbitration agreement did not prevent the Equal Employment Opportunity Commission (EEOC) from suing the employer on behalf of the employee. Slip Op. at 39. As with a discrimination claim prosecuted by the EEOC in Wafflehouse, a PAGA claim is a “dispute between the employer and the state.” Slip Op. at 40. “[N]othing in the text or legislative history of the FAA nor in the Supreme Court’s construction of the statute suggests that the FAA was intended to limit the ability of the states to enhance their public enforcement capacities by enlisting willing employees in qui tam actions.” Slip Op. at 41.
The state’s “public policy prohibiting waiver of PAGA claims, whose sole purpose is to vindicate the [LWDA’s] interest in enforcing the Labor Code, does not interfere with the FAA’s goals of promoting arbitration as a forum for private disputes.” Slip Op. at 43.
In his concurring opinion, Justice Chin (joined by Justice Baxter) agreed with the majority’s conclusion that a total PAGA waiver was unenforceable. Slip op., Chin conc. op’n. at 5. However, discussing Concepcion and American Express Co. v. Italian Colors Restaurant (2013) 133 S.Ct. 2304, inter alia, Justice Chin disagreed with the majority’s PAGA analysis, insofar as it held PAGA to be beyond the reach of the FAA. Slip op., Chin conc. op’n. at 5-8. Without stating what precise limits he believes an arbitration agreement can impose on PAGA claims, Justice Chin ominously professed that the FAA may limit “the ability of a state…to enhance its public enforcement capabilities by authorizing employees who have contractually agreed to arbitrate their statutory PAGA claims to ignore that agreement and pursue those claims in court as the state‘s representatives.” Id. at 8.
The court also considered whether the Supreme Court’s ruling in Concepcion abrogated the rule in Gentry v. Superior Court (2007) 42 Cal.4th 443, rejecting some class action waivers in employment contracts. In Concepcion, invoking the FAA, the Supreme Court invalidated Discover Bank v. Superior Court (2005) 36 Cal.4th 148, a California precedent holding class arbitration waivers presumptively unconscionable and unenforceable in a standard consumer contract. Slip Op. at 5. Concepcion reasoned that the Discover Bank rule interfered with a fundamental attribute of arbitration - apparently, as this blog has suggested before, that companies have a recent, U.S. Supreme Court-created right to force workers and consumers to fight for their rights alone, instead of on a level playing field, coming together with other victims of wrongdoing. See prior articles here and here.
In Iskanian, the Court held that the fact that the Gentry rule (about forced arbitration in the employment setting, where there is a fear of retaliation and career suicide), despite being narrower than the Discover Bank rule, could not survive Concepcion's notion of FAA preemption. Slip Op. at 7.
The court also rejected the argument that the class arbitration waiver was invalid under the National Labor Relations Act (NLRA) of 1935, which protects workers' rights to organize. Although Iskanian cited D.R. Horton Inc., & Cuda (2012) 357 NLRB No. 184 [2012 WL 36274] (Horton I) (NLRA prohibits contracts that compel employees to waive their right to participate in class proceedings), the Court sided with the Fifth Circuit’s conflicting opinion in D.R. Horton Inc., NLRB (5th Cir. 2013) 737 F.3d 344 (Horton II), which held that the NLRA was trumped by the earlier statute, the FAA. This view of the FAA was notwithstanding the FAA's "savings clause" (in 9 U.S.C. § 2) expressly holding that arbitration agreements are not to be enforced upon such grounds as exist at law or in equity for the revocation of any contract. Slip Op. at 11, 19.
Justice Werdegar concurred in the majority’s PAGA ruling but powerfully dissented to the majority’s abrogation of Gentry and rejection of Horton I. Justice Werdegar drew upon extensive Supreme Court jurisprudence pre-dating the Roberts Court, as well as the Norris-La Guardia Act (which outlawed “yellow dog” contracts, prohibiting employers from forcing workers to contract away their collective bargaining rights) and the NLRA (protecting workers’ rights to engage in concerted action). She called today’s class action waivers the “descendants of last century’s yellow dog contracts.” Slip Op., Werdegar dissent at 7. Justice Werdegar noted the absurd result that workers are protected if they engage in collective protest through strikes or walkouts, but precluded from resolving grievances through peaceable collective action in litigation. Id. at 10. She rejected CLS Transportation’s assertion that Concepcion edifies the class waiver against the NLRA and Norris-LaGuardia Act worker protections, making the FAA a “super-statute.” Id. at 13. Justice Werdegar poignantly cited Shakespeare (Julius Caesar): “[M]en may construe things after their fashion/Clean from the purpose of the things themselves.” Slip Op. at 13. The “right of collective action […] need not yield,” based upon the FAA, if the statute were being construed as it was intended. Id. at 14.
Werdergar’s dissent speaks truthfully about the improper recent elevation of the FAA over many decades of legislative and judicial protections for the right to collective action. Today's California Supreme Court holdings on Gentry and Horton disappoint workers' advocates, who hold out hope for this Court as the last bastion of a rational and balanced jurisprudence governing workplaces in America. Ultimately, though, today's decision on these precedents surprises no one - see a post on the Iskanian oral argument here.
Hopefully, the decision will avoid the inevitability of a U.S. Supreme Court grant of certiorari if California took a position narrowing Concepcion to the consumer context, or rejecting the Fifth Circuit Horton II precedent. The states-rights-friendly U.S. Supreme Court majority has no legitimate, vested interest in a California court's interpretation of a California-only statute, PAGA, which does not discriminate in any way against arbitration, but merely strengthens the State's qui tam protections.
June 12, 2014, Oakland – The United States Equal Employment Opportunity Commission (EEOC) affirmed a judge’s September 2010 decision certifying a class action brought on behalf of all disabled Foreign Service applicants against the U.S. State Department by San Francisco Bay Area attorney Bryan Schwartz (www.bryanschwartzlaw.com) along with Passman & Kaplan (www.passmanandkaplan.com) of Washington, DC. The action challenges the State Department’s so-called “worldwide availability” policy, under which an applicant cannot ordinarily be hired to America’s Foreign Service with any disability that could require ongoing medical care, since such might make him or her unavailable to work at any one of the hundreds of Department posts worldwide.
The EEOC decision found that the Class Agent in the matter, Doering Meyer, has had multiple sclerosis (MS) in remission for over a decade, without need for treatment, but was initially rejected outright for State Department employment anywhere in the world because the Department’s Office of Medical Services perceived that her MS might cause her problems in “a tropical environment.” This was notwithstanding a Board Certified Neurologist’s report approving her to work overseas without limitation.
Schwartz indicated that the case may ultimately have major implications not only for Foreign Service applicants, and not only in the State Department, but for all employees of the federal government abroad who have disabilities, records of disabilities, and perceived disabilities, and who must receive medical clearance through the Department’s Office of Medical Services. He noted that he has already filed other alleged class cases, also pending at the EEOC - one on behalf of applicants for limited term appointments (who need “post-specific” clearance, but are also denied individualized consideration), and another on behalf of employees associated with people with disabilities, who are denied the opportunity to be hired because of their family members who might need reasonable accommodations (or be perceived as disabled).
“I am sorry that the EEOC took years to finally move the case forward, but today’s decision means that justice delayed need not necessarily be justice denied,” Schwartz said.

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