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Settlement Agreements With Employees Should Avoid IRCA Compliance Contingency

    Client Alerts
  • September 29, 2017

Under the Immigration Reform and Control Act of 1986 (IRCA), employers are prohibited from hiring persons not authorized to work in the U.S. In order to resolve some employment disputes, employers agree to reinstate an employee who was terminated or otherwise separated from employment. Despite this straightforward IRCA requirement, a decision earlier this year from the Ninth Circuit Court of Appeals cautions employers against settlement agreements that condition reinstatement on immigration verification.

In Santillan v. USA Waste of Cal., Inc., the plaintiff was a garbage collector who was terminated after 32 years of employment. He filed an internal grievance, and the company agreed to reinstate him on the condition that he provide work documentation under IRCA. He declined and was denied reinstatement. He sued, alleging age discrimination and public policy wrongful discharge. The district court dismissed the claim on summary judgment.

On appeal, the Ninth Circuit reversed this decision, remanding the case for a jury trial. The court held that the immigration verification condition of the reinstatement agreement was retaliatory because it appeared to impose this condition to avoid reinstating the plaintiff. The defendant’s IRCA arguments failed because (1) reinstatement was a continuation of prior employment and not a new hire; (2) the plaintiff fell under a pre-1986 hire exception under IRCA; and (3) the settlement agreement provision making reinstatement contingent on immigration status was void because it violated public policy.

This third criteria provides caution to other employers. The Ninth Circuit clearly viewed the immigration requirement as a ruse by the employer to avoid reinstating the plaintiff. Although the public policy determination here involved California law, other states could similarly conclude that employers cannot use a plaintiff’s immigration status to avoid redressing violations of employment laws. Other federal circuits may decide that IRCA overrules these policy concerns, but for now including these immigration status conditions in settlement agreements raises legal risks for employers.