Sierra Chemical Co. manufactures, packages, and distributes chemicals for treating water, including water in swimming pools. As the weather gets warmer in spring and summer, consumer demand for its products increases, while in fall and winter demand decreases, which in turn results in seasonal layoffs of many production line employees. Those laid-off workers generally are recalled to work when consumer demand rises.

In April 2003, Vicente Salas applied for a job with Sierra, providing a Social Security number and a resident alien card. He completed and signed, under penalty of perjury, federal Immigration and Naturalization form I-9, in which he listed the same Social Security number he had given to Sierra, and he attached to the form a copy of a Social Security card with that number. He also signed an employee’s Internal Revenue Service withholding form W-4, which had the same Social Security number he had given. In May 2003, Salas began working on Sierra’s production line.

In March 2006, Salas injured his back while stacking crates on Sierra’s production line. On August 16, 2006, he again injured his back while stacking crates and was taken to the hospital. Thereafter, he filed a workers’ compensation claim for his workplace back injury. He still came to work, performing modified duties, until December 15, 2006, when he was laid off during seasonal reduction of workers. In either late January or early February of 2007, Salas started working for another company. On May 1, Sierra sent Salas a letter stating that it was recalling laid-off employees and informing him to call or come to the office to make arrangements to return to work. The letter also told him to bring “a copy of your doctor’s release stating that you have been released to return to full duty.” Salas did not reported for work as he had not yet been released by his physician. But the employer indicated he would hold the job open until he was able to get a release.

In August 2007, Salas sued Sierra. The first cause of action alleged Sierra failed to provide reasonable accommodations for his disability, in violation of California’s FEHA. The second cause of action alleged a violation of the public policy expressed in the FEHA, by retaliating against him for filing a workers’ compensation claim and for being disabled.

Salas advised the court that he would testify at trial and assert his privilege against self-incrimination under the Fifth Amendment to the United States Constitution if asked about his immigration status. This information led the employer to investigate the authenticity of the employment documents that were given to Sierra which were discovered to be fraudulent. The employer moved for summary judgment based upon this information which was granted after appeal to the Court of Appeal. The Court of Appeal reasoned that the doctrine of after-acquired evidence barred Salas’ causes of action because he had misrepresented his eligibility under federal law to work in the United States. It also held that his claims were subject to the doctrine of unclean hands because he had falsely used another person’s Social Security number in seeking employment with defendant, he was disqualified under federal law from working in the United States, and his conduct exposed the employer to penalties under federal law.

The California Supreme Court reversed in the case of Salas v Sierra Chemical Company. It concluded that (1) Senate Bill No. 1818, which extends state law employee protections and remedies to all workers “regardless of immigration status,” is not preempted by federal immigration law except to the extent it authorizes an award of lost pay damages for any period after the employer’s discovery of an employee’s ineligibility to work in the United States; and (2) contrary to the Court of Appeal’s holdings, the doctrines of after-acquired evidence and unclean hands are not complete defenses to a worker’s claims under California’s FEHA, although they do affect the availability of remedies.

The California Legislature enacted Senate Bill No. 1818 in 2002 in response to the United States Supreme Court’s decision earlier the same year in Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137 (Hoffman). It said that the NLRB could not “award backpay to an illegal alien for years of work not performed, for wages that could not lawfully have been earned, and for a job obtained in the first instance by a criminal fraud.” (Id. at p. 149.) “[A]warding backpay to illegal aliens,” the high court held, “runs counter to policies underlying” the Immigration Reform and Control Act of 1986.

However, Hoffman, did not decide any issue regarding federal preemption of state law but instead addressed federal immigration law’s impact on a federal agency’s authority. A distinction is made between pre-discovery and post-discovery. remedies. Federal law preempts state Senate Bill No. 1818 to the extent that it makes a California FEHA lost pay award available to an unauthorized alien worker for the post-discovery period. In allowing lost wages for the pre-discovery period, state labor laws does not directly conflict with the federal Immigration Reform and Control Act of 1986, because compliance with both federal and state laws is not impossible. Federal law does not prohibit an employer from paying, or an employee from receiving, wages earned during employment wrongfully obtained by false documents, so long as the employer remains unaware of the employee’s unauthorized status.