First, California employment law does not make distinctions between employees working lawfully or illegally. Labor Code 1171.5 plainly declares:
(a) All protections, rights, and remedies available under state law, except any reinstatement remedy prohibited by federal law, are available to all individuals
regardless of immigration status who have applied for employment, or who are or
who have been employed, in this state. (b) For purposes of enforcing state labor and employment laws, a person's immigration status is irrelevant to the issue of liability,and in proceedings or discovery undertaken to enforce those state laws no inquiry shall be permitted into a person's immigration status except where the person seeking to make this inquiry has shown by clear and convincing evidence that the inquiry is necessary in order to comply with federal immigration law.
In Reyes v. Van Elk, the California Court of Appeal held that section 1171.5 is not preempted by federal immigration laws. Reyes and others accused Van Elk of failing to pay the "prevailing wage." The Superior Court held that federal immigration law preempted section 1171.5 and that Reyes could not seek unpaid prevailing wages because he was an illegal immigrant. The court of appeal reversed, holding that federal law (IRCA) does not preempt section 1171.5, and that Reyes had standing to sue for unpaid wages.
Second, in a case having broad implications for employers hiring workers under immigration visas such as H1-B's, the Ninth Circuit Court of Appeals held that an employer could be held liable for wrongfully discharging an employee who was not authorized to work in the U.S. The case is Incalza v. Fendi. Incalza worked for Fendi under an E-1 visa. When a French company bought Fendi, the E-1 visa no longer was valid. Fendi, which did apparently not want to retain Incalza anyway, discharged him because he was not lawfully working in the U.S. Incalza asked for a leave of absence to obtain a visa or to marry his fiance, a U.S. citizen.
Incalza sued for breach of contract not to terminate without good cause, among other things. Fendi argued that "good cause" was established because Incalza was not lawfully allowed to work, and Fendi was not obligated to wait until Incalza became authorized to work. A jury found in favor of Incalza. Fendi appealed and ran right into Stephen Reinhardt.
The Court of Appeals said that IRCA does not require employers to terminate workers who may resolve immigration status if they are granted a leave of absence. Does the law require granting a leave of absence? No, but this did not stop the Court of Appeals. The Court said that an employee on leave is not actually "employed" under IRCA. (This is news to employers who must provide all sorts of leaves with guaranteed reinstatement.) Because the employee is not really "employed" while on leave, the court reasoned, the employer can comply with IRCA and not discharge the worker.
Distinguishing Supreme Court authority and the IRCA statute itself, the Court announced this rule: "as a general rule, individuals who are indisputably not authorized to work must be discharged immediately. An individual who has the opportunity to switch from an E-1 to an H1-B . . . is, however, another matter."
Incidentally, the court also held that IRCA does not conflict with Lab. Code section 1171.5, just as the state court in Van Elk did. So, that issue is settled unless the Supremes take up Fendi.
In light of this case, employers seeking to discharge employees must carefully examine whether to use the expiration of a visa as the sole justification for termination. The courts may well say that it was not "necessary" to discharge the worker merely because he or she no longer was authorized to work in the U.S.