California Supreme Court Isn’t Completely Offended by Your Dirty Hands.

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There is a legal doctrine called “unclean hands.”

“[Un]Clean hands, sometimes called the clean hands doctrine or the dirty hands doctrine, is an equitable defense in which the defendant argues that the plaintiff is not entitled to obtain an equitable remedy because the plaintiff is acting unethically or has acted in bad faith with respect to the subject of the complaint—that is, with “unclean hands”. The defendant has the burden of proof to show the plaintiff is not acting in good faith. The doctrine is often stated as “those seeking equity must do equity” or “equity must come with clean hands”. This is a matter of protocol, characterized by A. P. Herbert in Uncommon Law by his fictional Judge Mildew saying (as Herbert says, “less elegantly”), “A dirty dog will not have justice by the court”.”

Clear as mud, huh?  Ok, without all the legal jargon, the doctrine of unclean hands basically says that you can’t already have done something wrong if you’re going to sue someone for doing something wrong, if those two wrongs are related.

I can’t sue you for breach of contract, if I got you to sign the contract by using fraud.

The doctrine of unclean hands has, historically, been a complete bar to a case…resulting in a dismissal.  But that is no longer the case in California.

Before we go into that, we must also first discuss the doctrine of “after acquired evidence,” which can be related to unclean hands.  After acquired evidence is a defense wherein a defendant (the guy being sued) says that he shouldn’t be found liable because he discovered evidence (after he’d already done his wrong deeds) that would have made him innocent if he’d found it earlier.

The after-acquired evidence rule is broader than the unclean hands doctrine because its 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.”

Is anything legal ever simple?

Look at it this way: If your employer fires you illegally, but then discovers that you lied on your employment application and you really do have a long list of felonies on your record (including killing your old boss), then your employer would assert the defense of ‘after acquired evidence’ and show that he wouldn’t have even hired you if you’d told the truth.

Capiche?

Again, in California the after acquired evidence rule generally acted as a complete defense to a lawsuit.

Until now.

Up until this point, California courts have been of a single mind.  In Camp vs. Jeffer Mangels, a California court held that someone who lied on his employment application (that he was not convicted of a crime), was not permitted to sue for marital 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. 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).

The Federal government does things differently, however.  Under Title VII and other employment laws the defenses of unclean hands and after acquired evidence do not protect a defendant from liability.  They do however, limit damages.  In other words and employer can argue that damages should be reduced, but will not get a dismissal.

In the case of Salas vs. Sierra Chemical Co., the California Supreme Court issued a ruling that the feds have it right.

The California Supreme Court recently ruled in Salas vs. Sierra Chemical that the doctrines of unclean hands and after acquired evidence would not act as a complete bar to the bringing of a wrongful termination suit.

Vincente Salas held a seasonal job with Sierra Chemical.  As such, he filled out application paperwork each season.  On that paperwork he used a Social Security Number that did not belong to him.  In fact, he did not even have a Social Security Number, being an undocumented worker.  He also signed and submitted an I-9 attesting to the fact that he was eligible to work in the United States.

The Social Security Administration finally caught up to him after learning that the Social Security Number he was using belonged to someone on the east coast.  True to the Administration’s habit of not really doing anything, they issued a ‘no-match’ letter to the employer, requesting information as to why Mr. Salas’ SSN did not match his name.  Sierra Chemical, apparently in the habit of ignoring such letters, did nothing and continued to hire Mr. Salas every season.

Sometime in 2006, Mr. Salas injured himself on the job.  He returned to work the next day, under restriction from his doctor, which restrictions Sierra Chemical followed.  Shortly thereafter, Salas returned to full duty.  He hurt himself again in August and was placed on restrictions again until December when he was laid off (as was the case every year before that).

After he was laid off, Salas went to work for another company.  While working, he was contacted by his supervisors at Sierra who asked if he could return to work.  They said he would have to get a release from his doctor and could only return if he was released to full duty.

He told his boss he would try to get the release but sued for failure to accommodate instead…proceeding under the Fair Employment and Housing Act, adding a claim for retaliation for filing a worker’s compensation claim, as well.

As the trial date approached, both parties filed motions in limine regarding evidence.  Salas acknowledged 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.

The defense finally decided to pursue an investigation into Salas’ immigration status, discovering 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 he would have fired Salas had he known of his deception.

Yet the trial court denied Sierra’s motion for summary judgment.  The Court of Appeals, on the other hand, held Salas’s claims were barred. Per the Supreme Court:

“The Court of Appeals 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.

The California Supreme Court, apparently unhappy with a bright line rule, and giving a nod to plaintiff’s attorneys across the state, held that the defenses of unclean hands and after acquired evidence could not act as a bar to claims under FEHA, but could only serve to limit damages, making summary judgment in these cases inappropriate.

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 workers would be barred from bringing wrongful termination claims.

The Court agreed with Salas. First, they 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, interesting only to immigration attorneys who will never read this opinion, concluding that California was free to pass laws guaranteeing illegal aliens the right to benefit from employment laws on the same terms as those workers who are legally authorized.

But the Court didn’t stop with the immigration cases.  It went on to hold that the doctrines of unclean hands and after acquired evidence are not complete bars in any FEHA claim.  Employers, the decision stated, should not be shielded from liability for illegal employment decisions even when those decisions are against those employees who wouldn’t have been employed anyway, except for their unlawful actions.

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, and therefore should not be rewarded in spite of the fact that they have committed an illegal employment move.

The Court also decided to follow the rest of the federal rule, stating that the defenses, if properly asserted and proven, could serve to limit damages.

The Court held that an employee against whom an after acquired evidence defense has been proven should only be allowed to recover damages for the time period from when he or she was originally wrongfully terminated up until the time that the employer discovered the evidence of wrongdoing.  The Court reasoned that employees should not be allowed to recover damages for time periods in which they wouldn’t have been employed had they not engaged in wrongdoing, and that employers should still suffer some consequences for making illegal employment decisions.

“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 Court did not take the chance to define “appropriate case” or “egregious,” leaving those ambiguous terms for lower courts to interpret and for we plaintiff’s attorneys to litigate over.

The Court also went off on a tangent, separating the “unclean hands” defense from the “after-acquired evidence” analysis for a little while then finally holding that the defense of unclean hands, normally a complete bar, would not apply in FEHA cases either, authorizing trial courts to fashion appropriate equitable remedies.  Apparently lower courts should 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.

So there you go…hundreds of years of jurisprudence dumped on its head in one decision.  This is why you need an experienced employment law attorney (ahem…like me).

The opinion in Salas v. Sierra Chemical Co. is here.