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U.S. Supreme Court Holds that NLRB Cannot Award Backpay to Undocumented Aliens as a Remedy for Violations of National Labor Relations Act


The Employment and Labor Law Alert

June 28, 2002

In a 5-4 decision, the United States Supreme Court determined that the National Labor Relations Board (“NLRB”) was precluded from awarding backpay as a remedy to undocumented aliens for violation of the National Labor Relations Act (“NLRA”) by federal policy reflected in the federal immigration laws. The opinion of the Court in Hoffman Plastic Compounds, Inc. vs. the National Labor Relations Board, (U.S., No. 00-1595, 3/27/02), delivered by Chief Justice Rehnquist, found that although the NLRB has broad discretion to fashion remedies for violations of the federal labor laws, this discretion is not unfettered, and must yield when it trenches upon a federal statute or policy outside the NLRB’s area of expertise. Here, the Supreme Court found that the Immigration Reform and Control Act of 1986 (“IRCA”) which made employment of undocumented aliens illegal, would be undermined by awarding backpay to aliens who could not legally be employed in the first place.

The alien in the case, Jose Castro, was a Mexican national who used a friend’s United States birth certificate to obtain employment in 1988 with Hoffman Plastic Compounds, Inc. (“Hoffman”), a company that custom-formulates chemical compounds for businesses. The use of another’s documents to obtain employment is a clear violation of IRCA. In December 1988, Castro and several other employees supported a union-organizing effort at Hoffman. In January 1989, Hoffman laid off Castro and other employees who had engaged in the union organizing activities. The NLRB later found that this layoff violated the NLRA, section 8(a)(3). As part of the remedy ordered by the NLRB, Hoffman was ordered to pay Castro backpay for the timeframe from the layoff to the date of the discovery that Castro was an undocumented worker, approximately 3? years. Although reinstatement had initially been ordered as well, the NLRB recognized that Mr. Castro could not lawfully be reinstated. However, the NLRB asserted that backpay would be the most effective way to further the immigration policies in IRCA by insuring that the NLRA’s protections and remedies extended to undocumented workers in the same manner as to other employees.

In reversing the NLRB, the Supreme Court relied on a line of cases following Southern S.S. Co. v. NLRB, 316 U.S. 31 (1942) a case in which the Supreme Court held that the NLRB’s broad remedial powers were circumscribed in the face of serious illegal conduct by employees in connection with their employment. The employees in Southern S.S. Co. had been involved with a shipboard strike that amounted to a mutiny in violation of federal law. In the Court’s view, allowing the NLRB remedy of reinstatement and backpay would have contravened the policy of another federal statute.

The Court’s decision in Hoffman resolved a split in the Circuit Courts of Appeal which followed the decision in Sure-Tan, Inc. vs. NLRB, 467 U.S. 883 (1984), a factually similar case in which the NLRB tried to order the remedies of backpay and reinstatement to illegal aliens who had been subjected to NLRA violations by their employer. In Sure-Tan, the Supreme Court affirmed the NLRB’s determination that the NLRA and its protections applied to undocumented aliens. The decision in Sure-Tan preceded the enactment of IRCA, so the employment of illegal aliens was not against the law at the time. However, the aliens had voluntarily left the U.S. during the proceedings and were not authorized to return. The Court held that reinstatement could not be accomplished without violating the immigration laws and that backpay was tolled during any period when they were not lawfully entitled to be present and employed in the United States. Some courts interpreted Sure-Tan as only prohibiting backpay where the undocumented alien had left the U.S, while others used it as support that backpay was never authorized for illegal aliens. The decision in Hoffman makes it clear that a remedy of 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” is beyond the discretion and authority of the NLRB.

The dissent, written by Justice Breyer, and joined by Justice Stevens, Justice Souter and Justice Ginsburg, finds there is no conflict between the NLRA and the immigration laws. The dissent points out that none of the statutory language in IRCA precludes an award of backpay, one of the more important and effective remedies available to the NLRB. Recognizing that backpay awards serve as a deterrence, the dissent notes that denying the NLRB the power to award backpay may increase employment of illegal aliens, by lowering the cost to employers of an initial labor law violation. Although Hoffman did not involve an employer who knowingly employed undocumented aliens, the dissent raises it as a prospective problem, suggesting that the economic incentive would be “obvious and serious” if the Board were forbidden to assess backpay as a remedy in cases of knowing employment. Moreover, the dissent worries that the Hoffman ruling will encourage employers in “borderline” cases to take risks and “hire with a wink and a nod those potentially unlawful aliens whose unlawful employment?ultimately will lower the costs of labor law violations.”

As pointed out by the dissent, the Hoffman opinion leaves open the issue of what happens in situations where IRCA collides with other labor laws, such as the Fair Labor Standards Act (“FLSA”). It will not be long before these situations are tested. In Liu v. Donna Karan International et al., 00 Civ. 4221, (SDNY 6/18/02 ) defendant Donna Karan sought records relating to the immigration status of the named plaintiffs in a putative class action brought under the FLSA and New York Minimum Wage Act (New York Labor Law ? 650), relying on the Hoffman decision. The district Court denied the discovery finding that it raised the possibility of intimidation. Moreover, the court distinguished Hoffman on the ground that Hoffman precluded back pay as a remedy, calculating back pay on work that had not been performed, whereas an FLSA and wage claim was for wages for work actually performed. Accordingly, the court stated “In fact, courts addressing the issue of whether defendants should be allowed to discover plaintiff-workers’ immigration status in cases seeking unpaid wages brought under the FLSA have found such information to be undiscoverable.” Given the Hoffman Court’s reliance on the importance of the immigration policies of IRCA, even in the face of a blatant NLRA violation, it is not all clear where it would come down on a perceived FLSA-IRCA policy conflict.