On March 19, 2026, in Lopez v. Marmic, the New Jersey Supreme Court held that employers who hire an undocumented worker in violation of the Federal Immigration Reform and Control Act (IRCA)—which bars employers from hiring or employing unauthorized workers—must still compensate the individual for any work actually performed in a manner consistent with New Jersey’s Wage and Hour Law and Wage Payment Law.
The Court’s decision makes clear that immigration compliance does not excuse wage violations—the failure to pay is still unlawful, even if the hiring itself violated federal law. You cannot cure one violation by committing another!
Background
In 2015, Sergio Lopez was hired by a realty management company to work as the superintendent of two buildings in exchange for $400 per week and the use of an apartment for which Lopez was to “reimburse” the company for $800 per month. Two weeks later, the company discovered that Lopez provided an invalid Social Security number (SSN) on his W-4 form and informed him that they could not pay him “because that would be ‘against the law.’” Instead, the company arranged for Lopez to live in the apartment rent-free in exchange for his services.
Thereafter, Lopez worked between 30 to 60 hours per week performing various maintenance tasks, including picking up garbage, sweeping and mopping floors, painting apartments, and helping tenants with repairs. Throughout the duration of employment, the company maintained no records relating to Lopez’s employment. This arrangement continued until 2018 when Lopez filed a claim for unpaid wages with the U.S. Department of Labor. After the parties reached a $250 settlement, the company terminated Lopez. Lopez then sued under the state’s wage and hour laws alleging minimum wage and overtime violations, and the failure to pay full wages on a timely basis.
Procedural History
The trial court dismissed Lopez’s claim finding that:
- Lopez was not credible because he applied for the job using an invalid SSN;
- Lopez failed to produce sufficient evidence of the number of hours worked; and
- Lopez “knew full well he wasn’t qualified to earn . . . [or] be paid those wages legally because he . . . was an undocumented alien.”
The Appellate Division affirmed agreeing that:
- Because Lopez is “an undocumented alien” who “was not eligible to work” under federal law, there was no employment relationship between the parties and, thus, Lopez was barred from relief or recovering damages; and
- A barter arrangement was created, which established a relationship beyond the employer-employee relationship contemplated by the state’s wage and hour laws.
NJ Supreme Court Decision and Analysis
The Court reversed holding that “if an employer hires an undocumented worker in violation of federal law, the employer is required to compensate the person in a manner consistent with state law for work they actually perform.” Among other things, the Court found that Lopez was considered an employee under the laws and, therefore, entitled to appropriate wages for work performed; and that “[n]either his immigration status nor the barter arrangement with his employer provided ground to deny his wage claim for work already performed.”
Employers Who Violate the IRCA Must Still Comply with NJ Wage and Hour Laws
The Court found that the IRCA does not conflict with or preempt the state’s wage and hour laws, and that while IRCA makes it unlawful to hire an “unauthorized alien,” it does not prohibit paying wages to undocumented individuals for work already performed. The Court reasoned that to conclude otherwise “would incentivize employers to hire undocumented immigrants and pay reduced wages despite laws to the contrary”—such an outcome would undermine the “IRCA’s primary goal to prevent the hiring of undocumented immigrants.”
Barter Arrangements Do Not Replace Wage and Hour Requirements
The Court found that the barter arrangement neither satisfied nor voided the state’s wage and hour laws. The Court noted that the state’s laws restrict the use of alternative arrangements and make clear that such arrangements cannot substitute for the law’s requirements. While certain in-kind payments may satisfy an employer’s obligations to pay wages, arrangements for employment “at an oppressive and unreasonable wage” that are used to circumvent wage and hour requirements are void under state law.
Employers Bear the Burden of Timekeeping
The Court held that “employers, not employees, have an obligation under state law to keep records of hours worked and wages paid to their employees[,]” and when they fail to do so, “a rebuttable presumption applies against them in wage claim cases.” Because the company failed to produce any timekeeping records, the Court remanded the case to determine the appropriate amount of damages.
Evidence of Invalid SSN Not a Valid Reason for Dismissal
The Court found that the trial erred in considering evidence of Lopez’s use of an invalid SSN in the manner it did “[b]ecause the use of an invalid SSN can serve as a proxy for a person’s immigration status[.]” Instead, courts must carefully assess such evidence prior to trial, and if “there is no legitimate purpose other than to provide a link to a person’s immigration status,” it must be excluded. The Court further noted that if such evidence is used in a jury trial, courts must provide cautionary instructions on how the evidence may be used.
Employer Takeaways
In the past year, U.S. Immigration and Customs Enforcement activity has intensified significantly, including heightened I-9 scrutiny and audits. However, the Court’s decision makes clear that employers can—and must—comply with both federal immigration requirements and state wage and hour laws. In particular, employers are required to compensate workers for all work performed, regardless of immigration status. To minimize the risk of dual liability under the IRCA and state wage and hour laws, employers should consider the following:
- Ensure I-9s are completed and verified timely and correctly;
- Avoid informal or alternative compensation arrangements, such as housing, cash payments, or other barter-type exchanges;
- Maintain lawful and compliant pay practices;
- Ensure that workers are properly paid for all hours worked;
- Maintain accurate and complete timekeeping and payroll records; and
Upon termination, ensure all earned wages are fully paid in compliance with applicable law.
If you have any questions related to the Court’s decision, or need assistance reviewing hiring and pay practices, please feel free to reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100