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In about-face, court holds IRCA does not bar undocumented worker’s remedies for retaliatory discharge

By Lisa Milam, J.D.

On remand from the Sixth Circuit, the court found the worker was fired for filing a workers’ comp claim and that he was entitled to damages, IRCA notwithstanding.

The federal Immigration Reform and Control Act (IRCA) does not bar an undocumented worker from receiving back pay and other relief stemming from his discharge for filing a workers’ compensation claim, a federal district court in Tennessee held. Taking up the question on remand from the Sixth Circuit, which punted the issue, the district court’s chief judge reversed his earlier holding that the federal immigration law barred recovery. Rather, IRCA does not preempt employees from obtaining relief for retaliatory discharge in violation of the state’s workers’ compensation law. Moreover, the court reconsidered its earlier holding that “what essentially amounts to willful ignorance of immigration status and ignorance of the requirements of employers under IRCA excuses failure to comply with IRCA.” Thus, the court awarded the former employee, a construction worker now authorized to work in the U.S., a total award of $96,708.42 in relief—including $50,000 in punitive damages for the employer’s “clearly reprehensible” conduct (Torres v. Precision Industries, Inc., January 27, 2020, Anderson, S.T.).

This retaliatory discharge action originated in state court. In a 2014 decision, a Tennessee appeals court held the employee could maintain his suit (overturning a trial court’s grant of summary judgment to the employer) concluding the fact that he was not authorized to work in the U.S. did not deprive the employee of standing to bring such an action, even if his undocumented status would prevent him from obtaining other remedies. The case made its way to federal district court and, after a two-day bench trial, this court entered judgment in favor of the employer. The court didn’t make any factual findings as to the employee’s state-law claim; instead, it dismissed the action on federal preemption grounds. Specifically, it held that federal law and policy, as embodied in IRCA and articulated by the Supreme Court in Hoffman Plastic Compounds, Inc. v. NLRB, barred the employee from pursuing relief for a retaliatory discharge claim under Tennessee workers’ compensation laws.

The statutory question comes first. Next, the Sixth Circuit entered the fray. However, deferring on a constitutional question that it said it did not need to address, the appeals court refused to decide whether IRCA preempted the state-law wrongful discharge action. Courts should not tackle preemption if they can resolve a case on other non-constitutional grounds, it said, and here, the constitutional question may have been “entirely hypothetical.”

The district court should first have determined whether the employer violated state law before turning, if it must, to the federal preemption question, the appeals court said. Rejecting the lower court’s decision to put the constitutional cart before the statutory horse, the appeals court vacated the judgment disposing of the employee’s suit on preemption grounds. It remanded the matter for the district court to decide, first, whether the employer violated Tennessee law, and only then consider the IRCA preemption question, if it must. Only if a violation of state law is found will the court need to consider what remedy is available under Tennessee law for the breach—and only then would it need to resolve whether federal law preempts any of those remedies.

Retaliatory discharge. On remand, the district court readily found that the employer fired the employee in retaliation for filing a workers’ compensation claim. For one, there was temporal proximity: The employer decided to fire the employee within an hour of learning that he had retained counsel to pursue his workers’ compensation claim. A phone call to the company from the employee’s lawyer “catalyzed an uninterrupted chain of events that quickly resulted in” the employee’s discharge by the company president, by way of its production manager, the court recounted.

There also was evidence of “undeniable antagonism” toward the employee, including a lengthy and “heated” exchange (which the employee surreptitiously recorded) that transpired immediately after the attorney’s phone call was received. “Why’d you go to a lawyer? You think we have to pay for that?” the employee’s supervisor asked. He ended the conversation by saying, “When Terry [the company president] finds out about this shit, you’re in a world of hurt.” Moreover, “the swift change in attitude following Plaintiff’s decision to hire a lawyer marked a departure in Plaintiff’s otherwise stable work history with Defendant.”

On the day of the discharge, the office administrator completed a separation notice citing “lack of work” as the basis for termination. But that reason had never been given since. Rather, over the course of the litigation, the employer has cited the employee’s “general disruption and negativity, breaking up the marriage of two coworkers, arguing and fighting with coworkers, starting rumors, stealing aluminum stators, being arrested for theft in another state, lack of productivity, and perceived extortion.” Yet none of these reasons were substantiated by any negative notations in his personnel file (despite the company’s standard practice of issuing written warnings); nor had he previously faced any adverse employment action for these alleged offenses. In fact, in his sole formal work evaluation, he earned an “A” grade, including an “A+” on “behavior pattern.” The employer’s stated reasons were clearly pretextual, in the court’s view.

Cat’s paw. Also, as for that “perceived extortion” rationale, the court tied this back to the workers’ compensation claim via a “cat’s paw,” because company officials, upon hearing of the employee’s workers’ compensation claim, “immediately took it that him asking for the money was an extortion attempt.” The company president credibly testified to having had no knowledge the employee filed a workers’ compensation claim and had gotten an attorney involved. However, the production manager clearly had such knowledge, and there was direct evidence of his retaliatory animus, which could be imputed to the president. (The district court held, as a matter of law, that the cat’s paw theory applies to retaliatory discharge claims based on Tennessee workers’ compensation laws. Although the Tennessee Supreme Court had yet to weigh in on the question, the federal court saw no reason to think that the state high court wouldn’t adopt the U.S. Supreme Court’s reasoning in Staub v. Proctor Hospital in this context, if the shoe fits.) The chain of events here clearly showed that the production manager sought authorization to fire the employee in retaliation for his worker’s compensation claim. And, as the employee’s supervisor, his animus could be imputed to the employer.

A reversal on IRCA preemption. Having found a state-law violation, the court had to address IRCA preemption. Previously, the court ruled that matters of immigration policy fall squarely within the prerogative of the federal government, even when it intersects with labor law protection. This had led to the court’s ultimate holding that “an award of backpay for a lost job that Plaintiff was not permitted to have in the first place runs counter to IRCA and Hoffman.” But on further review, the court now rejected its earlier finding of field preemption, reporting that it was “unable to discern a clear and manifest intention of Congress to preempt state laws regulating labor, specifically workers’ compensation.” Thus, it held the employee was not precluded from obtaining backpay relief under Tennessee retaliatory discharge law.

No field preemption. Before the Sixth Circuit, the employee argued that Congress never intended IRCA to leave undocumented employees vulnerable to “unscrupulous” employers; rather, “the rights and remedies provided by the States were to continue unabated, in tandem with and, in fact, were a critical part of the effort to achieve IRCA’s goals.” For support, the employee cited several Congressional reports, including one from the House Judiciary Committee which states, “it is not the intention that the employer sanctions provisions of the bill be used to undermine or diminish in any way labor protections in existing law.”

For its part, the employer countered with Hoffman, as well as the High Court’s 2012 decision in Arizona v. United States, which stood for the proposition that “any state law that would conflict with forcefully combatting the employment of unauthorized aliens would be preempted by IRCA.” Neither were on point, though; Arizona did not address employment of unauthorized aliens, and Hoffman did not deal with a conflict between federal and state-laws. And the Congressional reports cited by the plaintiff rebutted any notion that Congress “clearly and manifestly intended” for IRCA to preclude backpay here (even though the Supreme Court, in Hoffman, refused to give weight to the reports).

No conflict preemption. Nor did the court find conflict preemption. Conflict preemption occurs when it is “impossible for a private party to comply with both state and federal requirements.” This was not the case here, as a Tennessee employer can fully comply with IRCA while refraining from firing an employee in reprisal for filing a workers’ compensation claim. The employee was not fired due to his undocumented status or for failing to provide proper documentation, or producing falsified documentation. Rather, he was terminated in reprisal for filing a workers’ compensation claim. According to the trial testimony, the employee’s immigration status didn’t factor into the equation (as all parties attested they were unaware of his immigration status).

Conflict preemption also is implicated when a state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” This scenario didn’t apply here either, as an “award of backpay to an undocumented worker that was fired in retaliation for filing a workers’ compensation claim does not stand as an obstacle to IRCA’s purpose of combatting the employment of illegal aliens.”

Employer’s IRCA violation was worse. The operative legal principle is that “so long as the employee did not violate IRCA, an award of backpay does not stand as an obstacle to Congress’s purposes and objectives.” And the court found the employee’s violation relatively slight. He said he told the production manager during his interview that he was not legally eligible to work. (There was a factual dispute on this point; allegedly his friend who worked for the company assured the production manager that the plaintiff was “legal.”) After he was hired, he produced a valid North Carolina driver’s license but signed a W-4 using a false Social Security number. However, the false Social Security number was used on an IRS withholding form, and so it was provided for tax purposes, not for purposes of securing employment or misrepresenting his work authorization under IRCA, the court reasoned. Indeed, a company official testified the information was gathered solely for payroll purposes and not as a requirement for gaining employment. These minimal lapses do not warrant preemption of recovery, the court concluded.

On the other hand, the employer never did not verify that the prospective employee was authorized to work in the U.S., or document that authorization with an I-9 form, as IRCA requires. And while the company president credibly testified that he was unaware of the employee’s immigration status until after he fired him, and was likewise unaware that it was required to document his employment authorization, the company’s willful ignorance would not save it. Under IRCA, the burden is on the employer to ensure its employees are authorized to work in the U.S., and the employer did not take the steps required. In light of this failure, the court said, its earlier focus on whether the employer knowingly violated IRCA, rather than whether it actually complied with IRCA, was misplaced. “Thus, this Court now holds that this matter is not conflict preempted and backpay is available as a remedy for Plaintiff’s termination in retaliation for filing a workers’ compensation claim.”

Backpay. Having held that a backpay award is not preempted by federal law, the court turned to the math. The employer argued that, under Hoffman, an undocumented worker is unable to mitigate damages without continuing to violate IRCA, but the employee was seeking backpay only from the point at which he obtained his work authorization, until the time he obtained comparable employment elsewhere. By his calculations, he would have earned about $89,440 during this period. The parties stipulated that he earned $43,731.58 during the period for which he seeks backpay; that is, he mitigated his backpay award from approximately $89,440, less $43,731.58, to $45,708.42. As for the employer’s contention he failed to exercise reasonable diligence in seeking comparable work, it offered no evidence to back up this assertion.

Compensatory damages. The employee testified at trial that he suffered emotional distress, in the form of stress and depression as a result of his termination and his interactions with the defendant’s officials. He also testified he sought counseling from a priest, and so convinced the court that he was detrimentally affected by the employer’s conduct. Yet he offered no specific proof to support his prayer for $75,000 in damages for emotional distress. Instead, the court found nominal compensatory damages in the amount of $1,000 was sufficient compensation for his emotional distress.

Punitive damages due. The employee also sought $70,000 in punitive damages, which are recoverable in cases of retaliatory discharge. And they were appropriate here, in the court’s view, in light of the employer’s egregious conduct. The employee was “berated” on the factory floor with expletive-laced comments in front of his coworkers, within minutes of their learning that he had retained an attorney to pursue a workers’ compensation claim. Further, their subsequent actions in procuring his termination were “intentional and malicious.” Wrote the court, “[t]erminating an employee in retaliation for pursuing a statutory right is clearly reprehensible. Defendant was in a position of power over Plaintiff, as the employer controls the economic fate of the employee, and Defendant’s actions—through its employees—left an injured employee without a way to generate income.”

Still, the offending conduct was short in duration, the court pointed out, and it realized no financial gain from its actions; what’s more, it was still on the hook for the workers’ compensation claim. Consequently, the court found that an award of approximately one-to-one ratio between the actual harm suffered by the employee and a punitive damages award appropriately punishes the employer for the egregiousness of its employees’ actions, “and effectively deters employers from acting in a similar manner.” Thus, an award of $50,000 was deemed appropriate.