United States: Supreme Court Strikes Down NLRB’S Back Pay Award to Illegal Alien

When an employer unlawfully discharges an employee for union-related activity in violation of federal labor law, one of the traditional remedies is the reinstatement of the employee with back pay. But what should the remedy be when the discharged employee is found to be an illegal alien? Although the National Labor Relations Board (NLRB), the federal agency that enforces the National Labor Relations Act (NLRA), has awarded back pay in this situation, a sharply divided Supreme Court recently held in Hoffman Plastic Compounds, Inc. v. NLRB that such a remedy is contrary to federal immigration law.

In Hoffman, the employer hired an employee, Jose Castro, who presented seemingly valid documents verifying his authorization to work in the United States. The employer later fired Castro and other employees for engaging in union-organizing activities. The NLRB determined that these terminations violated the NLRA. To remedy the violation, the NLRB issued a cease and desist order to the employer and ordered the employer to post a detailed notice of employee rights under the NLRA and offer reinstatement and back pay to the terminated employees. When the amount of back pay was being calculated, Castro admitted that he was an illegal alien and had given false identification documents to the employer. Despite this admission, the NLRB awarded Castro back pay from the date of his termination until the date he admitted being in the United States illegally. The NLRB justified its decision by claiming that the best way to accommodate and further federal immigration policies was to provide NLRA protection and remedies to undocumented workers in the same manner as other employees.

The Supreme Court, however, disagreed. In a 5-4 decision, the Court found that the back pay award to an undocumented alien who has never been legally authorized to work in the United States contravened federal immigration policy and thus, was impermissible. Although recognizing that the NLRB has broad discretion in fashioning remedies under the NLRA, the Court stated that awards of reinstatement and back pay are routinely set aside when employees have committed serious illegal conduct in connection with their employment. Here, the Immigration Reform and Control Act (IRCA), which provides a comprehensive scheme prohibiting the employment of illegal aliens in the United States, directly prohibited Castro’s employment. Thus, the NLRB’s back pay award to Castro gave him payment for wages that could not have been lawfully earned in a job that was obtained by criminal fraud. The Court concluded that back pay awards to illegal aliens unduly interfere with explicit IRCA prohibitions and encourage and condone violations of federal immigration laws. Additionally, the Court noted that the employer was not getting off scot-free because it was still subject to the cease and desist order as well as the notice order.

By barring the NLRB from awarding back pay to an illegal alien, the Supreme Court indicated in Hoffman that undocumented workers should not be "made whole" for lost employment when they fraudulently obtained that employment in the first place. Although the Supreme Court addressed only remedies under the NLRA, the principles of the Hoffman decision are likely to be applied to remedies for violations of other laws as well. Thus, the potential financial exposure of employers for such claims as employment discrimination and wrongful discharge may be substantially reduced when the claimant is found to be an illegal alien who falsified identification documents to obtain employment. Employers should remain alert to this possibility when defending claims for lost wages and benefits. For further information about these matters, please contact any of our labor and employment attorneys.