You would think that employees who violate federal immigration and income tax laws could not turn around and sue their employer on a wage dispute — right? If you answered “yes” to that question, you would be wrong, as Safe Hurricane Shutters, Inc. recently learned.
Installers win damages
Nine installers sued Safe Hurricane Shutters, as wells as its president/CEO and two directors, under the Fair Labor Standards Act (FLSA). In the lawsuit, the installers claimed the employer had failed to pay overtime which they were owed. At trial, the jury found in favor of the installers and awarded them lost overtime pay, as well as liquidated damages. Under the FLSA, liquidated damages result in a doubling of an employee’s actual damage award.
Employees’ unlawful acts not a problem
During the trial, Safe Hurricane Shutters established that some of the plaintiffs were undocumented aliens not authorized to work in the United States. One employee had used a false Social Security number when applying for work. Two of the successful plaintiffs had not accurately reported income they had earned from their employer to the Internal Revenue Service. Safe Hurricane Shutters argued that, if a plaintiff violates the Immigration Reform and Control Act of 1986 (IRCA) and IRS income tax requirements — both federal laws — they should not be able to collect an award under the FLSA. Safe Hurricane Shutters relied heavily on a 2002 U.S. Supreme Court decision, Hoffman Plastics Compound, Inc. v. the NLRB, where the Supreme Court held the National Labor Relations Board could not award back pay to undocumented aliens terminated for union activity in violation of the National Labor Relations Act.
When it came to IRCA, the court chose not to follow the Hoffman Plastics Compound decision. According to this court, IRCA does not exclude undocumented aliens from the protection of the FLSA and their entitlement to overtime pay for hours worked in excess of 40 during a workweek. In the case of these FLSA claims, the plaintiffs were seeking to recover unpaid wages for work they had already performed, as opposed to claiming they were unlawfully prevented from working at jobs. Despite their own violations of immigration and income tax laws, the installers were allowed to recover FLSA damages against their employer.
To add insult to injury, the court upheld the personal liability of the president/CEO and two directors. Under the FLSA, officers and directors may be held personally liable, provided they exercised sufficient operational control over the employer. Here, the evidence demonstrated President/CEO Edward Leiva and directors Steve Heidelberger and Francis McCarroll were significant equity owners in Safe Hurricane Shutters. Leiva, Heidelberger and McCarroll also exercised sufficient operational control regarding payroll to justify their individual liability under FLSA to the nine installers and their overtime claims.
As a starting point, employers should be diligent and careful when completing I-9 forms and making sure they are only hiring individuals who are authorized to work in the United States. If for one reason or another a company inadvertently employs an unauthorized individual, that employee nevertheless is entitled to protection and overtime pay, as set out in the FLSA.