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Distinguishing the United States Supreme Court’s decision in Hoffman Plastic Compounds Inc. v. National Labor Relations Board, wherein the Court prohibited an award of back pay to an undocumented alien because such an award conflicts with the federal Immigration Reform and Control Act, on February 11, 2006, a divided New York Court of Appeals declined to have federal law preempt New York’s Labor Law and permitted two undocumented aliens working illegally in the state to recover lost wages in their respective state tort actions.

Gorgonio Balbuena entered the U.S. without permission, and in April 2000 was employed by third party defendant Taman Management Corp. at a site owned and managed by defendants IDR Realty LLC and Dora Wechler. In his action against defendants, Balbuena alleged he fell from a ramp while pushing a wheelbarrow, sustaining debilitating injuries, leaving him unable to work. He and his wife sued defendants for 1) common law negligence and 2) violations of Labor Law ‘’240(1) and 241(6). Defendant Taman argued that federal law, as construed in Hoffman, preempts New York’s Labor Law, inasmuch as an award of lost wages to Balbuena would undermine national immigration policies. The Supreme Court denied defendants’ collective motion for partial summary judgment, finding Hoffman inapplicable to tort actions brought under the state law. The Appellate Division, First Department modified the decision by granting Taman’s motion for partial summary judgment, indicating that Hoffman required the Court to dismiss Balbuena’s claim to the extent he sought damages based on wages he might have earned in the United States. Nonetheless, the Court determined Balbuena may seek lost wages based on income he might have earned in his native country. 

Stanislaw Majlinger came to the U.S. on a travel visa but remained in the country to work after his visa expired. In January 2001 he was employed by J&C Home Improvement, subcontractor to a project developed by defendants. In his complaint, he alleged he fell from scaffolding approximately 15 feet off the ground, sustaining injuries which left him incapacitated. He brought suit under Labor Law ‘’200, 240(1) and 241(6). The Supreme Court granted partial summary judgment to defendants and dismissed Majlinger’s claim for lost wages on constraint of Hoffman. The Appellate Division, Second Department, reversed and reinstated Majlinger’s claim for lost wages, concluding that state tort law is not preempted by federal immigration law because neither federal statutes nor Hoffman prohibit an undocumented alien from recovering lost wages in a personal injury action.

The central question before the Court of Appeals was whether an undocumented alien working illegally in the U.S. and injured on the job as a result of his employer’s state Labor Law violations is precluded from recovering lost wages due to the alien’s illicit immigration status; the Court answered in the negative.

The power to regulate immigration rests exclusively with the federal government. In 1986 Congress adopted the Immigration Reform and Control Act (IRCA), which created an employment verification system, requiring an employer, before hiring an alien, to verify the alien’s identity and work eligibility. An employer who knowingly violates the employment verification requirements, or who unknowingly hires an illegal alien but subsequently learns the alien’s status and fails to immediately terminate the employment relationship, is subject to civil or criminal prosecution and penalties. IRCA also made it a crime for an alien to provide a potential employer with documents falsifying the alien’s eligibility for employment, although IRCA does not penalize an alien for attaining employment without having proper work authorization, so long as the alien does not engage in fraud, such as presenting false documentation to secure the employment. Congress expressly provided that IRCA would preempt any State or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ, or recruit or refer for a fee for employment, unauthorized aliens.

In the wake of IRCA the United States Supreme Court decided Hoffman Plastic Compounds Inc. v. National Labor Relations Board (535 U.S. ___, 2002). In Hoffman, the Court considered whether an illegal alien, who, in violation of IRCA, gained employment by presenting falsified work authorization documents, could be awarded back pay by the National Labor Relations Board (NLRB) after the worker was terminated for engaging in union-organizing activities. The Court concluded such an award was prohibited because it would conflict with the purpose of the IRCA. The Court determined that awarding back pay in a case like this not only trivializes the immigration laws, it also condones and encourages future violations because the alien would qualify for an NLRB award only by remaining inside the United States illegally and could not mitigate damages ... without triggering new IRCA violations, either by tendering false documents to employers or by finding employers willing to ignore IRCA and hire illegal workers.

Balbuena’s and Majlinger’s defendants argued that IRCA, as construed in Hoffman, precludes an undocumented alien from recovering lost wages in a state personal injury action inasmuch as such an award is a penalty upon the employer, expressly preempted by IRCA. Plaintiffs argued that an undocumented alien should be allowed to recover for earning capacity lost as a result of defendants’ failure to adhere to the work place safety requirements established by the state’s Labor Law. Plaintiffs suggested that precluding an illegal alien’s lost wages claim would make it more financially attractive to employers to hire illegal aliens, thereby undercutting the central goal of IRCA, and also would provide less of an incentive for employers to comply with state labor requirements, contrary to the purposes of Labor Law ‘’200, 240 (1) and 240 (6).

The majority concurred with plaintiffs’ argument, suggesting any award under the Labor Law represented merely compensation to the plaintiff, rather than a penalty upon the defendant-employer. In distinguishing plaintiffs’ cases from Hoffman, the majority held that in the absence of proof an illegal alien presented false work authorization documents to obtain employment, IRCA does not bar his claim for lost wages. The majority suggested any conflict with IRCA’s purposes that may arise from permitting an illegal alien’s lost wages claim may be alleviated by permitting a jury to consider the alien’s illegal status as one factor in the jury’s determination of the damages, if any, warranted under the Labor Law.

Dissenting Judge Robert S. Smith identified any such recovery as barred by the rule of New York law forbidding courts to aid in achieving the purposes of an illegal transaction, and instructed, in the alternative, that if New York law does permit such a recovery, it is preempted by federal immigration law as interpreted in Hoffman.

Citing multiple New York decisions, to include Szerdahely v. Harris (67 N.Y.2D 42, 1986) and Stone v. Freeman (298 NY 268, 1948), Judge Smith observed that it is the settled law of New York that a party to an illegal contract cannot ask a court of law to help him carry out his illegal object. Judge Smith described the Stone decision as based on the premise that courts show insufficient respect for themselves and for the law when they help a party to benefit from an illegal activity. He dismissed as inappropriate the majority’s inclination to balance the benefit and harm, either to public or private interests, that would follow from such an award, and instructed that the law required the court to dismiss any claim in which the plaintiff seeks the benefit of an illegal bargain, though doing so may give a windfall to a defendant who has also acted illegally. Judge Smith described Balbuena’s and Majlinger’s claims to recover lost wages from employment barred by IRCA as claims to obtain the benefit of illegal bargains, and concluded New York law bars recovery.

Judge Smith conceded an exception to the rule that courts do not award the benefit of illegal bargains, noting, “if the statute does not provide expressly that its violation will deprive the parties of their right to sue on contract, and the denial of relief is wholly out of proportion to the requirements of public policy ... the right to recover will not be denied.” He declined, however, to apply the exception to permit Balbuena and Majlinger to recover lost wages. Judge Smith suggested the argument in favor of plaintiffs’ recovery might be persuasive if plaintiffs sought to recover wages for work for which their employers had refused to pay them, and made reference to decisions both in New York and in federal courts holding that undocumented aliens may recover at least some compensation for work they have actually performed. He noted, however, that neither Balbuena nor Majlinger sought compensation for work actually performed, nor did either even sue his employer but instead sued third parties—the construction site owner and/or general contractors—who had no involvement with any violation of the immigration laws. Thus, Judge Smith insisted, dismissing Balbuena’s and Majlinger’s claims would hardly have given a windfall to any defendant at least as guilty of wrongdoing as the plaintiffs.

Quoting Hoffman, Judge Smith instructed, “Under the IRCA regime, it is impossible for an undocumented alien to obtain employment in the United States without some party directly contravening explicit congressional policies. Either the undocumented alien tenders fraudulent identification, which subverts the cornerstone of IRCA’s enforcement mechanism, or the employer knowingly hires the undocumented alien in direct contradiction of its IRCA obligations, subjecting the employer to civil or criminal prosecution and penalties under federal law.” Judge Smith advised that Hoffman makes clear that prohibiting the employment of undocumented aliens is the critical policy of IRCA, and the wrong for which Balbuena and Majlinger sought compensation in the form of lost earnings is that their injuries prevented them from working in the United States - exactly the result that IRCA was intended to accomplish.

Judge Smith criticized the majority’s suggestion to instruct a jury that it may consider plaintiffs’ immigration status as one factor in the jury’s determination of damages. He cautioned that such an instruction sends the message, “The plaintiff ’s damages depend on his chances of getting caught; the more likely he is to evade the authorities, the more damages you may award.” Judge Smith also observed, “if the jury is supposed to decide how much weight to give the IRCA policies, then the message is: A violation of the law is only as important as you want it to be.” He concluded, “The only instruction that is not, as best, a bit embarrassing to the system is one that says in substance: You may not award any damages for lost earnings from employment that would have violated the immigration laws.”

As an award of lost earnings based on employment prohibited by IRCA would carry out the purpose of an illegal transaction and, therefore, be impermissible under the principles of New York law, Judge Smith determined the majority’s discussion of preemption to be unnecessary. He addressed the issue nonetheless, dismissing the majority’s attempts to save the Labor Law from preemption by depicting Hoffman as dependant on it facts and distinguishing Hoffman on the grounds that Hoffman’s employee, unlike plaintiffs Balbuena and Majlinger, presented his employer with documents falsifying his ability to work legally in the United States. Judge Smith conceded the Hoffman court emphasized the fact that the employee used falsified documentation, but noted the Court “conspicuously” failed to indicate that it would or might have ruled differently if Hoffman’s employee had not presented falsified work authorization.

Judge Smith concluded that preemption depended not on whether plaintiffs committed criminal violations of IRCA (such as by presenting falsified documentation) but on whether awarding them lost earnings undermined IRCA’s policy. He maintained that Hoffman made clear that an award of back pay—indistinguishable from an award for lost wages—undermines that policy. He ultimately concluded Hoffman indeed controlled the Court’s decision with respect to plaintiffs’ cases, and federal immigration law preempted any New York law otherwise permitting a lost earnings award to either plaintiff.

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