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Any Employer Faced with an Employee’s
Expired Visa Should Take a Closer Look
Before Rushing to Terminate

Many employers know that federal law forbids employers from knowingly employing unauthorized aliens. (The Immigration Reform and Control Act [“IRCA”], 8 .S.C. § 342a(a)(2).) So, how is it that a long-term Italian employee of Fendi North America obtained a jury verdict in excess of $1 million for being terminated shortly after his work visa expired?

The Court in Incalza v. Fendi North America, Inc., --F.3d--(2007) WL 656355, explains that this principle, applicable to unauthorized workers, is not so clear when the visa status of the worker is unclear or disputed.

Factual Background

In 1990, Ginacarlo Incalza, a native of Italy, began working for Fendi North America (“Fendi”) as a sales associate in Rome, Italy. Shortly thereafter, Fendi offered him a sales position in its New York store, assuring him his job would be secure as long as he performed well. Incalza accepted and moved to the United States on an E-1 visa, obtained with the company’s assistance. He worked in the New York store for 11 years with the company renewing his work visa and providing job security assurances on several occasions.

In 2000, the company promoted him to manager of Fendi’s Beverly Hills store. While he consistently received positive performance reviews, there was ample evidence that his supervisor, Robert King, did not like him and wanted to replace him. In 2002, French nationals purchased a majority interest in Fendi. The following year, immigration counsel informed the company that E-1 visas were no longer valid, affecting two employees: Incalza and Mauricio Graziani. In order for the two to continue working legally in the United States, they would both need H1-B visas.

Fendi declined the immigration counsel’s offer to investigate whether the company could terminate the employees. The company opted to help Graziani with his H1-B visa petition but not Incalza. Instead, in January 2003, Fendi fired Incalza. His Manager, along with the human resources director, told him that the company could do nothing to remedy his visa problems. Incalza then asked for an unpaid leave to address his visa issues. He explained that he was planning to marry his fiancée, an American citizen, the following month and would be eligible for a green card. He was once again told that the visa issue could not be resolved and that a leave of absence was not an option.

In February 2003, Incalza wrote Fendi asking if he could get his job back once his visa issue was resolved, to which he was told “no.”

Incalza then sued Fendi for wrongful termination (1) in violation of an implied contract that he would be fired only for good cause, and (2) because of his Italian heritage, in violation of the Fair Employment and Housing Act (Cal. Gov. Code § 2900, et seq.)

IRCA Does Not Always Mandate Termination

California law provides remedies to workers who are terminated in violation of express or implied agreements that they will not be discharged without good cause. (Guz v. Bechtel Nat’l, Inc., 24 Cal.4th 317 (2000)). In this case, Incalza worked for Fendi for more than a decade and had received oral promises that he would not be terminated without cause, all supporting an argument that an implied agreement governed their relationship.

Seeking to defend its decision to terminate, Fendi argued that it had good cause to terminate Incalza because IRCA mandates it to terminate alien workers upon the expiration of a work visa. It further argued that California law, to the extent it required a different result, was preempted.

IRCA states that it is “unlawful for a person or other entity, after hiring an alien for employment in accordance with [the Act], to continue to employ the alien in the United States knowing the alien is (or has become) an unauthorized alien with respect to such employment.” (8 U.S.C. § 1324a(a)(2).) So, why was Fendi not justified in terminating Incalza?

The Ninth Circuit draws a distinction between the employment of a clearly unauthorized alien and the employment of an alien whose visa status is unclear or disputed. In the former case, termination would be appropriate in order to comply with IRCA. In the latter case, termination may not be required. The Incalza Court explains

IRCA requires that an employer not ‘continue to employ’ workers if it discovers that they are unauthorized, but does not bar an employer from suspending an employee or placing him on unpaid leave for a reasonable period while he remedies the deficiency in his status. . . .[A]n entity does not ‘continue to employ’ an alien. . . unless that individual is continuing to perform a service or labor for the employer for which it is providing remuneration. The employment status of an employee placed on leave without pay is, in effect, suspended during the period that he is neither working nor receiving pay.

The IRCA rule of terminating unauthorized alien workers applies to undocumented aliens working without any basis for, or prospect of, obtaining legal status. In contrast, an individual who has an opportunity to switch from an E-1 visa to an H1-B visa, or some other form of work authorization, like Incalza, is an individual whose status is either unclear or disputed. Termination would not be mandated by IRCA and, instead, a leave of absence could satisfy the provisions of IRCA, pending resolution of the visa status.

In this case, Fendi could not argue that IRCA provided it a good faith reason for terminating Incalza given that, according to the Ninth Circuit, IRCA does not require termination. Fendi’s second argument of IRCA preemption also fails because preemption would only apply if federal law is in direct conflict with California law. Fendi argues that it could not comply with the California law upholding implied agreements not to terminate without good cause when faced with IRCA’s mandate that it terminate unauthorized alien workers. Stated differently, to comply with IRCA, Fendi would have to violate California law. Accordingly, the two laws were in conflict, requiring IRCA to preempt California law.

The Ninth Circuit disagreed with Fendi’s argument and found, instead, that the two laws were not in conflict given that Incalza’s visa status was unclear or disputed, Fendi could have granted a leave of absence, instead of termination, pending resolution of the visa status. Since termination was not required, Fendi would now have to establish that it had good cause to terminate Incalza to avoid liability.

On that issue, the jury found that Fendi’s termination of Incalza was not done with good cause and therefore violated the implied agreement not to terminate without cause.

What Does This Mean For Employers?

1. Adverse Employment actions against alien workers should always be done in consultation with a qualified immigration employment attorney. As the Incalza case illustrates, what may seem like a justified action can prove costly.

2. Be careful to avoid express promises (oral or written) to employees that they will only be terminated for good cause – unless you intend that to be the case.

3. Even in the absence of express promises not to terminate without cause, implied contracts having the same weight can arise out of the circumstances of the employment, including the longevity of the employee’s employment. As a general rule, even where employment is truly “at-will,” it is always preferable to terminate with “good cause” and document that fact in the personnel file.