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Undocumented workers may recover liquidated damages under the FLSA

By Ronald Miller, J.D.

Undocumented workers are not precluded from recovering liquidated damages under the FLSA, ruled a federal district court in Arizona. Although there is weight on both sides, in this instance, the court determined that statutory interpretation tipped in favor of recovery. Despite tension between immigration policy and enforcement of the FLSA, the court found that an employer may not rely on a worker’s deception to pay less than he should have paid. Additionally, the court determined that the common law in pari delicto defense could not serve as a bar to the plaintiff’s recovery of damages under the FLSA, but allowed the employer to put forth evidence as to its applicability to reduce damages (Vallejo v. Azteca Electrical Construction, Inc., February 2, 2015, Wake, N.).

The question presented in this case was whether undocumented workers with claims for unpaid wages and overtime are precluded from recovering liquidated damages under FLSA. Most courts that have addressed the issue have concluded that an employer who violates Sec. 206 or Sec. 207 of the FLSA is liable to an unauthorized worker in the amount of unpaid minimum wages and/or unpaid overtime compensation for work actually and already performed.

Immigration policy. The Supreme Court held in Hoffman Plastic Compounds, Inc. v. NLRB that the Immigration Reform and Control Act (IRCA) made battling the employment of unauthorized aliens central to the policy of immigration law. Thus, the broad discretion of the NLRB to fashion remedies for violations of the NLRA must yield when its chosen remedy “would unduly trench upon explicit statutory prohibitions critical to federal immigration policy. The question in Hoffman was not whether the NLRA’s definition of “employee” excluded unauthorized aliens, but whether the NLRB’s remedial power extended to awarding back pay to an unauthorized alien for work not performed.

Incentive to hire unauthorized workers. Some courts have reconciled the FLSA and IRCA. Requiring an employer to pay his unauthorized workers minimum wages prescribed by the FLSA for work already performed does not condone or continue an immigration law violation that has already occurred; it merely ensures that the employer does not take advantage of the immigration law violation. The FLSA’s coverage of unauthorized workers reduces the incentive to hire such workers and discourages illegal immigration, consistent with the purposes of the IRCA.

Other courts have acknowledged that the economic incentives underlying federal labor and immigration policy are in tension. “Indeed, every remedy extended to undocumented workers under the federal labor laws provides a marginal incentive for those workers to come to the United States. It is just as true, however, that every remedy denied to undocumented workers provides a marginal incentive for employers to hire those workers.”

In this case, the court acknowledged that each of these perspectives has merit. To some extent, the purposes of the FLSA and the IRCA clash, and no statutory text tells which prevails. However, the court here found that several considerations tip in favor of FLSA Sec. 216(b). Enforcing Sec. 216(b) undercuts the purpose of the IRCA by compensating work that is illegal and often gotten by criminal means. But it also serves the purpose of the IRCA by removing the wage advantage of unauthorized workers who will work for less than the legal minimum. There is no unfairness to the employer in paying a legal wage for all work. Finding that an employer may not rely on the worker’s deception to pay less than he should have paid to whomever he hired; the court concluded that unauthorized workers are not precluded, by that reason alone, from recovering unpaid and underpaid wages under Sec. 216(b).

Liquidated damages. However, the FLSA provides for both unpaid wages plus an additional equal amount of liquidated damages. “These liquidated damages represent compensation, and not a penalty.” Despite the mandatory language of Sec. 216(b), Sec. 260 grants courts discretion to limit or not award liquidated damages if the employer satisfies the court that its act or omission was in good faith and that it had reasonable grounds for believing its act was not a violation of the FLSA. An employer must present evidence it had an honest intention and took affirmative steps to determine what the FLSA requires and to ensure compliance with the Act.

Thus, liquidated damages are compensation for work actually and already performed and do not implicate Hoffman’s opposition to compensating unauthorized workers for work not performed. Moreover, Congress has mandated the award of liquidated damages for violations of the FLSA except where the employer establishes both subjective and objective good faith. Congress has not granted courts discretion to limit liquidated damages under the FLSA for any other reason. Thus, at trial, the employer could be excused from additional statutory liquidated damages only if it carries the burden of showing subjective and objective good faith.

Applicability of in pari delicto defense. Additionally, the court found the common law in pari delicto doctrine, which prevents a plaintiff who has participated in wrongdoing from recovering damages resulting from the wrongdoing, has limited applicability to federal law claims. The court pointed out that the Eleventh Circuit has considered the in pari delicto defense in the context of the FLSA, and was dubious about its applicability. At any rate, the doctrine of in pari delicto is a defense to liability, not to the amount of damages. In this instance, the plaintiff was already been granted summary judgment on liability for his claims for unpaid wages and overtime, and only the amount was yet to be proved.

The defendant did not show on summary judgment that the plaintiff actively and voluntarily participated in its failure to pay his wages and overtime compensation required by the FLSA, but the defense of in pari delicto was not briefed. Thus, the court ordered that the record be reopened to allow the employer to put on evidence of an in pari delicto defense, but it cautioned that the fact that the employee was an unauthorized worker, alone, did not establish that defense to the statutory damages.