After-acquired evidence is a broader concept, in that the focus is on whether the employer would have denied employment to the employee, had the employer known about the misconduct during the hiring process or before termination. As the Supreme Court explained:
The doctrine of after-acquired evidence refers to an employer‟s discovery, after an allegedly wrongful termination of employment or refusal to hire, of information that would have justified a lawful termination or refusal to hire.Unlike unclean hands, the after-acquired information may not have to cut to the heart of the employee's case. But the employer must prove that the employee would not have been hired or would have lost his or her job.
In the employment law context, for example, a California court once held that someone who lied on his employment application, that he was not convicted of a crime, was not permitted to sue for martial status discrimination under the Fair Employment and Housing Act. The court reasoned the employee was not entitled to the job in the first place because of his misconduct, because he never would have been hired. (Camp v. Jeffer Mangels et al.) Another court held that an employee who was unauthorized to work in the U.S. could not proceed on termination-based claims because she was not entitled to the job in the first place. (Murillo v. Rite-Stuff Foods).
Under federal employment laws, such as Title VII, however, these defenses can limit damages available, but are not complete bars to liability. McKennon v. Nashville Banner Publishing Co. (1995) 513 U.S. 352. That is, if the employer proves it would have fired an employee had it known about information acquired after the termination, the employer can argue that damages should be reduced, but cannot assert a complete defense.
The California Supreme Court just decided in Salas v. Sierra Chemical that the federal rule is the better one.
Vicente Salas intentionally and repeatedly used someone else's social security number to obtain employment with Sierra Chemical Company. He signed an I-9 form under penalty of perjury, attesting to the documents he submitted in support of his eligibility to work in the U.S. Because his job with Sierra was seasonal, Salas repeatedly misrepresented his social security number, every time he re-applied for seasonal work.
Mirabile dictu, the social security bureaucracy figured out that Salas's social security number was bogus. Of course, that was the social security office of many years ago; the one that issued "no-match" letters and required an explanation from the employees whose numbers did not match their names. Sierra Chemical apparently didn't do anything about the employees with no-match letters. They allowed Salas and the other employees to continue working.
Meanwhile, in 2006, Salas injured himself He returned to work the next day, with restrictions, which Sierra honored. He returned to full duty a couple of months later, in June. But in August, he hurt himself again, and required modified duty until December, when he was laid off for the season (as he had been in the past).
Salas went to work for another company after the layoff. But then his Sierra managers called him and asked if he wanted to return to work. They then told him he would have to have a release from his doctor - to full duty - before he could return. (Spot the issue, accommodation mavens).
Salas told his boss he would try to get the release by June 2007. The boss said he would hold open Salas's job. But Salas did not contact the boss again. Instead, he sued. He claimed denial of reasonable accommodation under the Fair Employment and Housing Act, and retaliation for filing a workers' compensation claim, in violation of public policy.
As the trial date approached, both parties filed motions in limine regarding evidence. Salas acknowledge it is a crime (illegal) under federal and state law:
for a person to use false identification documents to conceal the person‟s true citizenship or resident alien status. Plaintiff stated 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. He asked that he be allowed to assert the privilege outside the jury's presence and that the court and counsel not comment at trial on his assertion of the privilege.So, Salas' disclosure for the first time prompted the defense to investigate the bona fides of Salas' immigration status. The defendant found out that Salas' social security number actually belonged to a person on the East Coast.
Sierra moved for summary judgment on the ground that Salas falsified his employment authorization paperwork. The company submitted a sworn statement from the real owner of the social security number and of the company's president, who said they would have fired Salas had they known of his deception.
Yet the trial court denied Sierra's motion for summary judgment. The Court of Appeal, on the other hand, held Salas's claims were barred. Per the Supreme Court:
The Court of Appeal reasoned that the doctrine of after-acquired evidence barred plaintiff‟s causes of action because he had misrepresented to defendant employer his eligibility under federal law to work in the United States. It also held that plaintiff‟s 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 defendant to penalties under federal law.The lower court's decision was entirely consistent with California law up to this point.
But the California Supreme Court disagreed with the Court of Appeal and held that "after-acquired evidence" or "unclean hands" defenses are not complete bars to liability under FEHA. Rather, the Court decided, these defenses in some cases may be used only to limit damages. As a result, summary judgment based on the defenses no longer is an option.
California law protects immigrant workers who are unauthorized to work by guaranteeing them access to the same employment laws that protect those legally entitled to work. So, Salas argued, if late-discovered unauthorized status resulted in application of unclean hands, these worker would be barred from bringing wrongful termination claims.
The Court agreed with Salas. First, the Court decided that federal immigration laws do not preempt California's laws preserving illegal aliens' employment-based claims. If federal law preempted California law, the California statutes would not impede the application of unclean hands. The Court engaged in a lengthy analysis of federal preemption jurisprudence, concluding that California was free to pass laws guaranteeing illegal aliens the right to benefit from employment law on the same terms as authorized workers.
The Court could have limited its discussion to whether unclean hands / after acquired evidence may be applied to hose who lie about their immigration status / identification documents. But no.
The Court then examined, and gutted, the application of after-acquired evidence / unclean hands in FEHA cases generally. The Court decided that the defenses are not complete bars in Fair Employment and Housing Act cases because employers should not be insulated from liability for making unlawful employment decisions, even those taken against employees who should never have been employed in the first place. The Court reasoned that the employer made the challenged decisions without knowing of the employee's misconduct that would have led to termination or refusal to hire.
The Court then decided that, like under the federal rule, employees found to have engaged in misconduct that would have disqualified them from employment should be limited in their potential remedies:
Generally, the employee's remedies should not afford compensation for loss of employment during the period after the employer‟s discovery of the evidence relating to the employee‟s wrongdoing. When the employer shows that information acquired after the employee‟s claim has been made would have led to a lawful discharge or other employment action, remedies such as reinstatement, promotion, and pay for periods after the employer learned of such information would be “inequitable and pointless,” as they grant remedial relief for a period during which the plaintiff employee was no longer in the defendant‟s employment and had no right to such employment. (McKennon, supra, 513 U.S. at p. 362.)
The remedial relief generally should compensate the employee for loss of employment from the date of wrongful discharge or refusal to hire to the date on which the employer acquired information of the employee‟s wrongdoing or ineligibility for employment. Fashioning remedies based on the relative equities of the parties prevents the employer from violating California‟s FEHA with impunity while also preventing an employee or job applicant from obtaining lost wages compensation for a period during which the employee or applicant would not in any event have been employed by the employer. In an appropriate case, it would also prevent an employee from recovering any lost wages when the employee's wrongdoing is particularly egregious.
The significance of the Court's no-preemption holding now becomes clear. If preemption applies, it is likely that federal law would preclude any post-termination or back pay to an employee who falsifies employment documents to obtain employment. Given the California Supreme Court decided state law is not preempted, its holding under state law is viable. But if the U.S. Supreme Court hears this case and decides federal immigration law applies, it could be that unauthorized workers are entitled to no post-termination pay, but could still recover for pre-termination damages due to unlawful harassment, for example.
The Court then separated the "unclean hands" defense from the "after-acquired evidence" analysis. But then the Court simply said that the defense of unclean hands, normally a complete bar, would not apply in FEHA cases either, but again authorized trial courts to fashion appropriate equitable remedies. It's hard to tell, but it seems like the courts will apply the same analysis whether the defense is expressed as "unclean hands" or "after-acquired evidence." Again, "unclean hands" likely will apply only when the misconduct relates to serious application fraud, but it appears not to matter anymore.
Retired Justice Joyce Kennard wrote the opinion for 5 justices; her final gift to the plaintiffs' bar. Retiring Justice Baxter wrote a concurrence/dissent, joined by Justice Ming Chin, the editor of the "leading employment law treatise" in the words of a recent court opinion. Justice Baxter opined that federal immigration law indeed precludes any remedy to employees who falsify eligibility to work in the U.S. And Justice Baxter pointed out that the "unclean hands" defense, when applicable, generally is a complete bar to a plaintiff's access to court.
The opinion in Salas v. Sierra Chemical Co. is here.
