APRIL 2007

LEGISLATIVE / REGULATORY UPDATES

The Immigration Reform and Control Act Does Not Preempt California Labor Laws That Forbid Employers From Firing an Employee Without Good Cause

Incalza, a native and citizen of Italy with two years of business education, began working as a sales associate for Fendi North America in Italy. He was then offered a position in the New York City store, where he worked for ten years, until 2000. His visa was renewed several times during this period. Also during this time, the company made various assurances to him about his job security, stating that his job would be secure as long as he continued to perform well. In 2000, he was promoted to manager of the Beverly Hills store. During his time there, he consistently received positive performance reviews. However, his supervisor, King, did not like him and wanted to replace him.

For various reasons, the E-1 visas issued to Incalza and another Italian national who worked for the company were no longer valid beginning in 2002. Fendi’s immigration attorney informed the company that H1-B visas were available to both of the Italian employees. Because the other employee had some post-secondary education, it was believed that he would have a slightly easier time obtaining an H1-B visa. Fendi requested that its counsel file an H1-B petition on behalf of that employee, but not on behalf of Incalza. In January 2003, King fired Incalza, telling him falsely that nothing could be done to remedy his visa problems. Incalza requested an unpaid leave of absence, explaining that he was planning on marrying his fiancé, who was an American citizen; therefore, he would become eligible for a green card. A month or two later Incalza wrote to Fendi to request his job back once his visa issue was resolved. However, Fendi informed him that he would not be rehired. A month after that, Incalza married his fiancé and received work authorization as the spouse of an American citizen. By that time, Fendi had not filled his position.

Incalza sued Fendi, claiming that he was wrongfully terminated, in violation of an implied contract that he would be fired only for good cause, and because of his Italian heritage, in violation of the FEHA. (Fendi removed the case to federal court based on diversity of jurisdiction.) Fendi argued that the Immigration Reform and Control Act of 1986 (“IRCA”) compelled the company to discharge Incalza when it discovered that his E-1 visa was no longer valid. The company also argued that, to the extent that California law required a different result, such law was preempted by IRCA.

After a trial, the jury found in favor of Incalza on the implied contract claim, but not on the discrimination claim, and awarded him nearly $1.1 million. On appeal, the Ninth Circuit Court of Appeals rejected Fendi’s arguments to have the verdict overturned. California law gives rights to employees who are discharged in violation of an express or implied agreement that they will not be fired without good cause. California law protects employees regardless of immigration status. (Civil Code section 3339(a), Labor Code section 1171.5(a) and Government Code section 7285(a)). On the other hand, federal law prohibits employers from knowingly employing unauthorized aliens.

The question in this case was whether IRCA preempts California laws. “Conflict preemption” occurs when it is not possible to comply with the state law without triggering federal enforcement action, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of the federal law. Preemption will be found by a court only in situations where conflicts will necessarily arise, not simply where there is some tension between federal and state law.

In this case, Incalza was not discharged because of his unauthorized employment status. Moreover, Fendi could lawfully have taken action other than discharge and still been in compliance with IRCA. For example, Fendi could have granted Incalza’s request for temporary, unpaid leave so that he could resolve his work authorization problems. The court noted that this would not have been in violation of IRCA because an employee who is suspended or on unpaid leave is not “working” for the employer without proper work authorization.

Issues involving work authorization and immigration status are active on both state and federal levels. Employers must analyze such situations carefully to ensure they are in compliance with federal and state laws.

If you would like to discuss these or any other employment law matters, please do not hesitate to contact any member of Klinedinst's Employment Law Department.