Mark Goldstein contributed to the content of this post.

As Washington debates immigration reform, a New York federal court has addressed an issue that presents itself with increasing frequency: whether undocumented workers can seek back pay and reinstatement when they are improperly terminated for participating in protected labor activities. The Second Circuit has held that undocumented workers cannot recover back pay, but it left unresolved the critical question of whether they can seek reinstatement.

In Palma, et al. v. NLRB, a group of undocumented workers alleged that they were discharged in 2003 in retaliation for their complaints about hostile and abusive workplace conduct. They argued that their complaints amounted to concerted activity protected by the National Labor Relations Act, and they sought, among other things, back pay and reinstatement. The employer argued that undocumented employees cannot, regardless of the impropriety of their discharge, recover back pay. In a 2011 decision reversing the holding of an administrative law judge, the National Labor Relations Board adopted the employer’s position and denied relief.

The Second Circuit agreed with the NLRB and rejected the workers’ back pay request. Specifically, the court concluded that awarding back pay to undocumented workers would effectively condone a violation of federal immigration law and encourage future violations.  Nevertheless, it remanded the case to the NLRB to reconsider whether reinstatement is an appropriate remedy under the circumstances. Significantly, it suggested that an award of reinstatement, “conditioned upon [the employees’] presentation [of] compliant documentation to show that they are lawfully present in, and authorized to work in, the United States,” might be permissible. The NLRB is expected to render a decision concerning reinstatement in the coming weeks.

How Does This Affect My Company?

The Second Circuit’s decision is a mixed result for employers. On the one hand, the ruling is certainly a victory insofar as the court held that undocumented workers cannot recover back pay. On the other, the remand is somewhat disconcerting. Moreover, irrespective of the decision, hiring and employing undocumented workers still entails a number of risks, including potential I‑9 and other immigration-related violations.  Although they may be barred from recovering back pay, undocumented workers are still entitled under New York law to collect workers’ compensation benefits, and are protected by both federal and state wage and hour laws. For now, employers should review with counsel their policies and practices concerning the employment of foreign and, if applicable, undocumented workers. The goal for all employers should be to avoid such litigation in the first place.