Murillo v. Rite Stuff Foods, Inc.

Facts

The Fair Employment and Housing Act (FEHA) and title VII of the Civil Rights Act of 1964 both “prohibit sexual harassment in the workplace.” (Murillo v. Rite Stuff Foods, Inc. (1998) 65 Cal.App.4th 833, 841; see Gov. Code, § 12940, subd. (h).) The FEHA, the court emphasized, “offers greater protection and relief to employees than does title VII”: an employer is “strictly liable for damages an employee incurs as a result of a supervisor’s or agent’s sexual harassment,” and “the courts may award unlimited compensatory and punitive damages.” (Id. at pp. 841–842; see Gov. Code, §§ 12940, subd. (h)(1), 12965, subd. (c)(3).)

Isela Murillo was an undocumented worker who commenced employment with Rite Stuff Foods, Inc., as an assembler on February 6, 1995; her claims arose from her three-month tenure. (Murillo, supra, 65 Cal.App.4th at p. 839.) Throughout that period, Murillo alleged, her immediate supervisor, Efren Atilano, “touched her inappropriately and made crude sexual propositions and lewd remarks to her,” “isolated her from other employees to facilitate his predations,” and “insulted her in front of her coworkers,” all “against plaintiff’s will.” (Ibid.)

The detail the court later recited makes plain how severe the alleged conduct was. Atilano “would grab, hug and attempt to kiss [her] without her consent” and “place his hands on [her] breasts and buttocks while making sexually suggestive remarks.” (Murillo, supra, 65 Cal.App.4th at p. 847.) When other male employees spoke to her, he “became angry and told them she was his ‘“piece of meat.”’” (Ibid.) Murillo alleged she became “‘fearful, nervous, angry and vulnerable’” and suffered “‘severe mental, psychological, and physical injuries.’” (Id. at p. 848.)

Murillo complained of Atilano’s conduct to the plant manager, Jose Orlando Tobar, “[o]n two separate occasions”; Tobar “assured her that he would take care of the matter,” but the company “did nothing to investigate or remediate the situation.” (Murillo, supra, 65 Cal.App.4th at p. 839.) Instead, on May 4, 1995, Rite Stuff suspended her for one week, and on May 15 “terminated her employment.” (Ibid.)

The fact that gave rise to the defense surfaced in discovery. At her deposition Murillo “acknowledged that she was an undocumented alien.” (Murillo, supra, 65 Cal.App.4th at p. 839.) “At the suggestion of Atilano,” she had “purchased false resident alien and Social Security cards” and “used these documents to secure her employment.” (Ibid.) Critically, the very supervisor she accused of harassing her was the person who, by her account, “told her how and where to obtain false documents and to use these documents to secure employment with defendant.” (Id. at p. 840.)

Murillo also adduced evidence that the company tolerated undocumented hiring. A coworker, Claudia Valadez, testified that the company “knew its workers were undocumented but took no steps to discharge them”; when she checked resident-alien cards while completing insurance forms, “[s]he could tell that the documents they had submitted were false,” and she told the general manager, Larry Bates, “the company was employing mostly undocumented aliens.” (Murillo, supra, 65 Cal.App.4th at p. 840.) Bates once “responded that the undocumented employees got their resident alien cards in Tijuana,” and the president, Thomas Madden, “commented once that most of his employees were undocumented.” (Ibid.) Against that, Madden declared the company “would not have hired plaintiff had it known of her illegal status” and “would have fired her immediately” had it learned afterward, and Tobar stated “it was company policy that every worker have government authorization to work in this country.” (Ibid.)

Procedural history

Murillo sued Rite Stuff and its agents on January 3, 1996, for a broad array of claims arising from her employment, including “sexual harassment, wrongful termination, breach of contract … invasion of privacy, assault, battery, false imprisonment and the intentional and negligent infliction of emotional distress.” (Murillo, supra, 65 Cal.App.4th at pp. 838–839.) After her deposition revealed the document fraud, Rite Stuff moved for summary judgment, “asserting plaintiff’s claims were barred by the doctrine of after-acquired evidence.” (Id. at p. 839.) In response, Murillo “promptly dismissed … her claims related to her discharge” — her “wrongful termination, contract and wage-related claims.” (Id. at pp. 839, 841.) What remained were her harassment, privacy, and tort claims arising from conduct during the employment.

The trial court (Hon. James Allen Bascue) granted summary judgment, accepting that the after-acquired-evidence doctrine barred all of Murillo’s claims because it was “undisputed that plaintiff obtained false resident alien and Social Security cards and then used them to obtain her employment.” (Murillo, supra, 65 Cal.App.4th at p. 837 [official summary].) The Court of Appeal stressed the narrowness of the record it was reviewing: “[i]n moving for summary judgment, defendant relied solely on the after-acquired-evidence doctrine,” submitting “six facts pertaining to that defense,” and “did not seek to adjudicate summarily any other issue.” (Id. at p. 841.) The court therefore was “not concerned with any of the evidentiary issues underpinning plaintiff’s claims” — only with whether the single defense barred them as a matter of law. (Ibid.)

Division One of the Second District reversed. The opinion, filed June 30, 1998, was initially unpublished; the court “Changed [its publication status] from Unpublished to Published July 23, 1998.” (Murillo, supra, 65 Cal.App.4th at p. 836 [subsequent history].) Presiding Justice Spencer wrote for a unanimous panel; Justice Masterson and Judge Dunn — a Long Beach Municipal Court judge sitting on assignment under article VI, section 6 of the California Constitution — concurred. (Id. at pp. 837, 853.) The judgment was reversed and Murillo awarded her costs on appeal. (Id. at p. 853.)

Issue

The case presented one controlling question, framed by Murillo’s own contention: she “contend[ed] the trial court erred in granting summary judgment on the ground that the after-acquired-evidence doctrine bars all of her claims.” (Murillo, supra, 65 Cal.App.4th at p. 840.) Embedded in that contention were several discrete sub-questions the court had to resolve. First, whether the after-acquired-evidence doctrine — and the related doctrine of unclean hands — bar a FEHA sexual-harassment claim and ancillary tort claims that arise from conduct during employment, as opposed to claims tied to the discharge. Second, whether, on the summary-judgment record, the employer had even established the doctrine’s factual predicate — that it would have fired Murillo as a matter of settled company policy had it known her status. And third, whether an employee’s status as an undocumented alien who obtained the job by document fraud strips her of the protections of California employment law altogether.

Holding

Reasoning

The summary-judgment posture confined the appeal to one legal question. Reviewing de novo, the court restated that a moving defendant must “show that under no possible hypothesis within the reasonable purview of the allegations of the complaint is there a material question of fact which requires examination by trial.” (Murillo, supra, 65 Cal.App.4th at p. 840.) Because the defendant “relied solely on the after-acquired-evidence doctrine,” the court was “not concerned with any of the evidentiary issues underpinning plaintiff’s claims” — only with whether that one defense disposed of them. (Id. at p. 841.) The employer had not tried to disprove the harassment itself, so the entire appeal turned on the reach of the defense.

The court grounded its analysis in McKennon’s rejection of an absolute after-acquired-evidence bar. The doctrine “serves as a complete or partial defense to an employee’s claim of wrongful discharge,” coming into play “when, after an employee’s termination, the employer learns of employee wrongdoing that would have resulted in the employee’s discharge in any event.” (Murillo, supra, 65 Cal.App.4th at p. 842.) But the controlling authority was McKennon v. Nashville Banner Publishing Co. (1995) 513 U.S. 352, which reasoned that “while employee misconduct may be a supervening cause for termination, inquiry into whether the employer discriminated against the employee does not thereby necessarily become irrelevant,” because antidiscrimination statutes serve a “‘broad public purpose — to eradicate discrimination in the workplace.’” (Murillo, supra, at p. 842.) The decisive principle: “‘[i]t would not accord with this scheme if after-acquired evidence of wrongdoing that would have resulted in termination operates, in every instance, to bar all relief for an earlier violation’ of an antidiscrimination statute.” (Id. at p. 843.) In McKennon itself the wrongdoing merely “limit[ed] the remedies available, eliminating the right to recover future pay and to gain reinstatement,” but “would not bar all relief.” (Ibid.) The court added that McKennon likewise rejected an unclean-hands bar, which “does not apply ‘where Congress authorizes broad equitable relief to serve important national policies,’” though the employee’s wrongdoing remained relevant to “‘the lawful prerogatives of the employer … and the corresponding equities,’” a balance that “will vary from case to case.” (Ibid.)

The court distinguished its own prior decision in Camp — and conceded the discharge claims. Rite Stuff leaned on Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, where the same court barred wrongful-discharge claims by law-firm employees who concealed felony convictions, reasoning their misrepresentations “‘went to the heart of their employment relationship.’” (Murillo, supra, 65 Cal.App.4th at pp. 843–844.) The court agreed Camp’s logic governed Murillo’s discharge-related claims. Because the Immigration Reform and Control Act of 1986 makes work authorization “a government-imposed employment qualification” and required Rite Stuff to submit an I-9 form attesting under penalty of perjury to her documents, Murillo’s fraud “created a risk that defendant could be sanctioned,” and “went to the heart of the employment relationship and related directly to her wrongful discharge and contractual claims.” (Id. at pp. 845–846.) Murillo herself “conceded” as much in dismissing those claims. (Id. at p. 845.) That concession is the hinge of the case: document fraud defeats claims premised on losing a job the employee was never lawfully entitled to hold, while saying nothing about claims for mistreatment while employed.

The factual predicate for the defense was itself a jury question. Even setting the doctrinal line aside, the court held the employer had not earned summary judgment on the defense’s own terms. To invoke after-acquired evidence, “the employer must establish ‘that the wrongdoing was of such severity that the employee in fact would have been terminated on those grounds alone if the employer had known of it,’” as “a matter of ‘settled’ company policy.” (Murillo, supra, 65 Cal.App.4th at p. 846.) Madden’s and Tobar’s declarations asserted such a policy, but Valadez’s testimony — that the company knew most of its workforce was undocumented and did nothing — “is enough to raise a question as to whether defendant actually would have refused to hire or fired plaintiff immediately upon learning of her undocumented status.” (Id. at pp. 846–847.) Those were “all factual questions … which cannot be resolved on summary judgment,” so the employer “failed to establish as a matter of law that, as a matter of settled company policy, it would have fired plaintiff immediately.” (Id. at p. 847.)

The core holding: harassment claims do not depend on the discharge. The court then explained why the doctrines could not reach the surviving claims at all. Unlike the husband in Camp, “whose discrimination claim arose from his discharge,” Murillo’s “discrimination and tort claims arise from acts occurring during her employment.” (Murillo, supra, 65 Cal.App.4th at p. 847.) Sexual harassment is a stand-alone wrong: “[w]hen the workplace is permeated with discriminatory intimidation, ridicule and insult that is ‘“sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment,”’ the law is violated,” and “the wrong and the injury occasioned by it are complete even though the plaintiff does not lose any tangible job benefit.” (Id. at pp. 847–848.) The court’s memorable formulation: “the plaintiff need not resign or be discharged to have a cause of action for sexual harassment. Plaintiff therefore need not hitch her sexual harassment wagon to the wrongful discharge star.” (Id. at p. 848.)

Undocumented status does not forfeit employment-law protection. The court squarely rejected Rite Stuff’s contention that Murillo’s immigration status placed her outside the FEHA. Citing federal authority construing title VII and the Fair Labor Standards Act against the IRCA, the court held “the employment discrimination statutes apply to undocumented alien employees notwithstanding the illegality of employing them,” because Congress “did not intend the IRCA to amend or repeal any previously existing statutory labor and employment practices,” and coverage advances immigration policy by “reduc[ing] the incentive to hire such workers.” (Murillo, supra, 65 Cal.App.4th at p. 849.) The court dispatched the argument that a non-citizen cannot sue under the FEHA, noting that Campbell v. Arco Marine, Inc. (1996) 42 Cal.App.4th 1850 held “only that a Washington state resident could not sue a California-based employer.” (Murillo, supra, at p. 850.) “[W]hile plaintiff was employed, she was entitled to all the protections available under employment law.” (Id. at pp. 849–850.) A broad bar, the court warned (citing Mardell v. Harleysville Life Ins. Co. (3d Cir. 1994) 31 F.3d 1221), would produce “underenforcement” and “underdeterrence,” because “[d]enying compensation to a plaintiff for injuries suffered during the employment relationship does not leave the plaintiff in the same position … but for the employer’s wrong.” (Murillo, supra, at p. 850.) The precise accommodation: “the equities between employer and employee can be balanced by barring all portions of the employment discrimination claim tied to the employee’s discharge” — but not those tied to harassment during employment. (Ibid.)

The tort claims and the unclean-hands causation defect. The doctrines likewise could not bar the tort claims, because the “tortious conduct alleged, occurring as it did before plaintiff’s discharge, did not result in injury caused or justified by conduct attributable to her,” and “no sort of ‘resume fraud’ could justify an employer’s discriminatory abuse of an employee.” (Murillo, supra, 65 Cal.App.4th at pp. 850–851.) Unclean hands failed for the same causation reason: whether it bars recovery “depends upon … the relationship of the misconduct to the claimed injuries,” and here “plaintiff’s alleged injuries are not the consequences of her fraud but of Atilano’s despicable conduct and her employer’s tolerance of that conduct.” (Id. at pp. 851–852.) There was “no direct connection between her wrongdoing and the harm she suffered,” and refusing relief “would permit her employer to escape the consequences of very serious allegations.” “Aiding plaintiff,” the court concluded, “is the lesser evil.” (Id. at p. 852.)

Rejecting the respondeat-superior gambit. Rite Stuff argued the assault, battery, and false-imprisonment claims must fail because “sexual harassment is not within the scope of employment even where the harassing employee is the plaintiff’s supervisor.” (Murillo, supra, 65 Cal.App.4th at p. 852.) The court agreed with the premise but not the conclusion: Murillo “need not necessarily rely upon … respondeat superior,” because “[a] principal is liable when it ratifies an originally unauthorized tort,” and an employer that “continues the wrongdoer in service” after learning of his misconduct “may become an abettor and may make himself liable in punitive damages.” (Id. at pp. 852–853.) Because Murillo “allege[d] facts which, if proved, could be viewed as establishing defendant’s ratification,” the tort claims survived. (Id. at p. 853.) The panel was unanimous; there was no concurrence or dissent.

Significance

Murillo is the leading California authority importing McKennon’s after-acquired-evidence framework into the FEHA and applying it to the immigration-document context. Its doctrinal contribution is a clean two-part rule that practitioners still use. First, after-acquired evidence is never a complete defense to a FEHA harassment claim; at most it limits remedies tied to the discharge, and even that requires the employer to prove the employee would in fact have been fired as a matter of settled policy. (Murillo, supra, 65 Cal.App.4th at pp. 846–847, 850.) Second, an undocumented worker enjoys the full protection of California employment law for mistreatment suffered while employed; her immigration fraud reaches only the claims premised on the job she was never entitled to hold. (Id. at pp. 849–850.) The case sits at the intersection of the discharge-focused line (Camp v. Jeffer, Mangels, Butler & Marmaro, supra, 35 Cal.App.4th 620) and the harassment line, and it polices the boundary between them with the vivid image of not hitching the harassment “wagon to the wrongful discharge star.” (Id. at p. 848.)

The decision’s reach is bounded by Murillo’s own concession. By dismissing her wrongful-discharge and contract claims and conceding unclean hands as to them, she presented the court with a clean separation: discharge claims gone, harassment claims preserved. (Murillo, supra, 65 Cal.App.4th at pp. 845–846.) The opinion therefore does not resolve how the equities balance when a plaintiff presses a discharge claim and the after-acquired-evidence predicate is genuinely disputed — there, Murillo teaches only that the predicate is a jury question. (Id. at p. 847.) Its immigration holding has since been reinforced by statute (Lab. Code, § 1171.5; Gov. Code, § 7285), and California courts have generally declined to extend the backpay limits of Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137 to FEHA damages for harm suffered during employment.

Key quotes

“In short, the plaintiff need not resign or be discharged to have a cause of action for sexual harassment. Plaintiff therefore need not hitch her sexual harassment wagon to the wrongful discharge star.” (Murillo v. Rite Stuff Foods, Inc. (1998) 65 Cal.App.4th 833, 848.)

“[T]he employment discrimination statutes apply to undocumented alien employees notwithstanding the illegality of employing them. … [W]hile plaintiff was employed, she was entitled to all the protections available under employment law.” (Id. at pp. 849–850.)

“Here, plaintiff’s alleged injuries are not the consequences of her fraud but of Atilano’s despicable conduct and her employer’s tolerance of that conduct. There thus is no direct connection between her wrongdoing and the harm she suffered. … Aiding plaintiff is the lesser evil.” (Id. at p. 852.)

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Practice pointer

Open questions

The court left the precise remedial consequences of the after-acquired-evidence doctrine for trial. It held only that the defense could not bar the surviving claims and that “the equities between employer and employee can be balanced by barring all portions of the employment discrimination claim tied to the employee’s discharge.” (Murillo, supra, 65 Cal.App.4th at p. 850.) How a factfinder should sort “discharge-tied” damages from “during-employment” damages — and whether and how the document fraud cuts off back pay or front pay even on the surviving harassment claim — was not decided. The opinion’s repeated invocation of McKennon’s case-by-case equitable balancing (id. at p. 843) signals that this allocation is fact-bound and unresolved on this record.

Because Rite Stuff “relied solely on the after-acquired-evidence doctrine” and “did not seek to adjudicate summarily any other issue,” the court never tested “the evidentiary issues underpinning plaintiff’s claims,” and expressly found it “unnecessary” to reach Murillo’s own evidentiary objections. (Murillo, supra, 65 Cal.App.4th at pp. 841, 853.) Whether her allegations would survive a properly supported motion attacking the merits of the harassment, ratification, or causation elements thus remained entirely open on remand.