IRCA Does Not Bar Payment for Work Performed: Undocumented Workers May Recover NJ Wages; Employer Recordkeeping Presumption and N.J.R.E. 403 Limits on “Invalid SSN” Evidence

Case: Sergio Lopez v. Marmic LLC (A-27-24) (089632)  |  Court: Supreme Court of New Jersey  |  Date: March 19, 2026  |  Author: Chief Justice Rabner (unanimous)

I. Introduction

Sergio Lopez v. Marmic LLC addresses a recurring tension in employment litigation: federal immigration law bars employers from hiring and continuing to employ unauthorized workers (IRCA, 8 U.S.C. § 1324a(a)(1)(A), (a)(2)), while state wage-and-hour law requires employers to pay minimum wage and overtime for work actually performed (WHL, N.J.S.A. 34:11-56a4; WPL, N.J.S.A. 34:11-4.2).

Plaintiff Sergio Lopez worked from 2015 to 2018 as superintendent of two Newark buildings owned by Marmic LLC and its principal, Mike Ruane. Lopez initially supplied an invalid Social Security number (SSN) on a W-4. Ruane testified that, once he discovered the SSN was invalid, he stopped paying wages and instead provided a rent-free apartment (and utilities) in exchange for Lopez’s labor. Marmic kept no time or wage records. After Lopez sued under New Jersey wage statutes, the trial court dismissed his claims, finding him not credible due to the invalid SSN and faulting him for lack of hour-by-hour proof. The Appellate Division affirmed, concluding there could be no employee-employer relationship because Lopez was undocumented, and declining to apply burden shifting.

The Supreme Court granted certification to resolve whether IRCA blocks state wage remedies for work performed, whether a “barter” arrangement can defeat WHL/WPL protections, how the recordkeeping burden operates when employers keep no records, and how courts should handle “invalid SSN” evidence that may function as a proxy for immigration status.

II. Summary of the Opinion

The Court reversed and remanded. It held that federal and state law do not conflict in this context: even if an employer violated IRCA by hiring an undocumented worker, the employer must still compensate the worker consistent with state law for work actually performed. The Court further held:

  • No “barter arrangement” escape hatch: a rent-free apartment exchanged for labor does not, as a general rule, satisfy or displace WHL/WPL requirements.
  • Employer recordkeeping drives proof and presumptions: where the employer fails to keep legally required records, N.J.S.A. 34:11-58(d) creates a rebuttable presumption in favor of the employee’s alleged hours/wages; and the Anderson v. Mt. Clemens Pottery Co. burden-shifting principle applies.
  • “Invalid SSN” evidence requires careful N.J.R.E. 403 screening: because it can serve as a proxy for immigration status and inject undue prejudice, courts must assess such evidence under N.J.R.E. 403 before trial; exclude it if its real function is to link to immigration status; and, if admitted in a jury case, provide limiting instructions.

The Court remanded for a damages determination, authorized consideration of a potential credit for fair value of lodging, and directed that the remand proceed before a different judge due to the trial court’s heavy reliance on the invalid SSN in credibility findings.

III. Analysis

A. Precedents Cited and Their Role

1. Federal immigration/labor interplay and preemption framework

Although Marmic disclaimed reliance on “preemption,” the Court addressed it for completeness, grounding the analysis in classic Supremacy Clause doctrine:

  • Gonzales v. Raich (federal law prevails in case of conflict) and English v. Gen. Elec. Co. (categories of preemption).
  • Altria Grp., Inc. v. Good and Rice v. Santa Fe Elevator Corp. (presumption against preemption in areas of historic state police power).
  • Fort Halifax Packing Co. v. Coyne and Bedoya v. Am. Eagle Express Inc. (wage regulation as a traditional state police-power domain).
  • Fla. Lime & Avocado Growers, Inc. v. Paul (state law survives where it is possible to comply and it does not obstruct federal objectives).

These cases framed the Court’s conclusion that the WHL/WPL do not conflict with IRCA because paying owed wages for work performed neither requires continued unlawful employment nor frustrates IRCA’s deterrent aims.

2. IRCA, remedies, and the “backpay vs. earned wages” line

The key federal precedent was Hoffman Plastic Compounds, Inc. v. NLRB. The Court treated Hoffman Plastic as a remedial-limitation decision about backpay for work not performed (and reinstatement), not a bar to recovering wages for work already completed. The Court’s reading tracked the majority view in federal and state courts, citing:

  • Patel v. Quality Inn S. and Lamonica v. Safe Hurricane Shutters, Inc. (undocumented workers may recover unpaid minimum wages/overtime for work performed; Hoffman Plastic does not eliminate FLSA wage remedies).
  • Lucas v. Jerusalem, LLC (FLSA permits recovery of unpaid/underpaid wages regardless of work authorization).
  • Madeira v. Affordable Hous. Found., Inc. (payment for work performed does not “condone” IRCA violations; it prevents employer exploitation).

For state-law analogs rejecting preemption, the Court cited a wide cross-jurisdictional consensus (workers’ compensation and labor protections remain available): Madeira v. Affordable Hous. Found., Inc., Sanchez v. Dahlke Trailer Sales, Inc., Design Kitchen & Baths v. Lagos, Dowling v. Slotnik, Cont'l PET Techs., Inc. v. Palacias, and Coma Corp. v. Kan. Dep't of Labor. It also cited policy-alignment decisions emphasizing that denying wage protections would incentivize hiring unauthorized workers: Salas v. Sierra Chem. Co., Flores v. Amigon, and again Patel v. Quality Inn S..

New Jersey’s own trajectory mattered: Serrano v. Underground Utilities Corp. and Crespo v. Evergo Corp. had already drawn the same line—undocumented workers cannot recover certain prospective or “lost work” remedies barred by Hoffman Plastic, but they can recover compensation for work already performed, including wage claims.

3. Wage-and-hour remedial scope, definitions, and FLSA guidance

The Court relied on New Jersey’s wage-law jurisprudence to emphasize breadth and remedial purpose:

  • Hargrove v. Sleepy's, LLC (WHL/WPL are remedial, liberally construed; “suffer or permit to work” is broad; and the ABC test governs employee vs. independent contractor disputes).
  • Musker v. Suuchi, Inc. and Maia v. IEW Constr. Grp. (WPL governs time/mode of wage payment; remedial framing).
  • Garcia v. Freedom Mortg. Corp. and Marx v. Friendly Ice Cream Corp. (NJWHL patterned on FLSA; FLSA regulations guide interpretation).
  • Sec'y of Labor v. Lauritzen (broad sweep of “suffer or permit to work”).
  • Reich v. Gateway Press, Inc. (FLSA wage claims require proof of work performed without proper compensation).

4. Proof, uncertainty, and burden-shifting when employers keep no records

On proof of hours and damages, the Court invoked:

  • Anderson v. Mt. Clemens Pottery Co. (once the employee proves work performed and offers a “just and reasonable inference” as to amount/extent, the burden shifts to the employer to negate the inference or show precise work performed; damages may be approximate).
  • Story Parchment Co. v. Paterson Parchment Paper Co. (it is unjust to deny all relief merely because the wrongdoer’s conduct makes precision difficult).

The Court used these precedents to reject the Appellate Division’s view that burden shifting applies “only where damages are certain.” Under Mt. Clemens, certainty is about the fact of damage (work performed without proper pay), not mathematical precision as to the amount.

5. Evidence, credibility, and immigration proxies

On evidentiary limits, the Court drew from:

  • State v. Sanchez-Medina (undocumented status can inflame prejudice and distract factfinders).
  • State v. Parker (limits on using specific instances of conduct to attack truthfulness, consistent with N.J.R.E. 608).
  • Montoya v. S.C.C.P. Painting Contractors, Inc., Galaviz-Zamora v. Brady Farms, Inc., and Flores v. Amigon (SSN/immigration discovery and proof can be minimally probative yet highly prejudicial in wage cases).

Those authorities supported the Court’s core procedural directive: treat “invalid SSN” proof as potentially prejudicial proxy evidence and require robust N.J.R.E. 403 balancing pretrial.

B. Legal Reasoning

1. No conflict between IRCA and paying wages for completed work

The Court’s central rule is functional: IRCA forbids hiring/continuing employment of unauthorized workers, but it does not create a wage-free zone for employers who violate IRCA. Paying owed wages for completed work does not require “continuing to employ” someone; it is a remedial obligation that prevents employers from profiting from unlawful hiring. Denying wages would invert IRCA’s deterrence logic by making undocumented labor cheaper and thus more attractive.

2. The “barter arrangement” is not a separate legal relationship that defeats WHL/WPL

The Court rejected the notion that providing housing in exchange for labor places the relationship “outside” wage law. The WPL expressly declares agreements to pay wages “otherwise than as provided” unlawful and “null and void” (N.J.S.A. 34:11-4.7). The WHL also voids agreements to work for oppressive and unreasonable wages (N.J.S.A. 34:11-56a3). While the WHL permits limited “food or lodging” credits toward wages (N.J.S.A. 34:11-56a1(d); N.J.A.C. 12:56-8.6, -8.8), that mechanism is not a wholesale substitute for hourly minimum wage and overtime obligations.

3. Recordkeeping defaults: presumption and burden-shifting

The Court corrected the trial and appellate courts’ approach to proof. The WHL and WPL impose recordkeeping duties on employers (N.J.S.A. 34:11-56a20; N.J.S.A. 34:11-4.6(e)). When the employer fails to provide sufficient records, N.J.S.A. 34:11-58(d) creates a rebuttable presumption that the employee worked the period/time and wages alleged in the claim. Consistent with Anderson v. Mt. Clemens Pottery Co., once work is conceded and the employee offers a reasonable inference as to hours, the employer must rebut with evidence; if not, damages may be approximate.

Practically, Lopez shifts the litigation center of gravity: employers who keep no records face statutory and common-law-style evidentiary consequences. The decision discourages a defensive strategy of “no records, no recovery.”

4. Invalid SSN evidence: relevance is not the end of the inquiry

The Court acknowledged that Lopez’s W-4 and the employer’s payment change made the invalid SSN part of the narrative (N.J.R.E. 401), and it did not declare such evidence categorically inadmissible. But it held that the trial court’s use of the evidence—treating it as a global credibility destroyer and effectively as a route to deny wage relief—was improper because it functioned as a proxy for immigration status, a highly prejudicial issue in wage claims for work performed.

Going forward, trial courts must conduct an N.J.R.E. 403 analysis before trial: if the only “legitimate purpose” is to link the claimant to immigration status, exclude it. If admitted (rarely) in a jury trial, courts must provide cautionary instructions describing permissible uses without commenting on immigration status. In bench trials, courts must articulate on the record why admission is warranted despite prejudice risks.

C. Impact

1. Substantive wage-rights clarity for undocumented workers

The decision cements a clear New Jersey rule: undocumented status does not negate “employee” coverage under the WHL/WPL for purposes of recovering unpaid wages and overtime for work already performed. This aligns New Jersey decisively with the dominant national view post-Hoffman Plastic Compounds, Inc. v. NLRB while harmonizing with Serrano v. Underground Utilities Corp. and Crespo v. Evergo Corp..

2. Employer incentives and compliance

Lopez removes any perceived economic advantage of unlawfully hiring undocumented labor and then invoking IRCA to avoid paying wages. The Court explicitly recognized the perverse incentive structure that would arise from the opposite rule, reinforcing that wage law enforcement and IRCA deterrence can be mutually reinforcing.

3. Litigation and trial management: records and evidentiary gatekeeping

  • Recordkeeping: employers should anticipate that missing time/wage records will trigger N.J.S.A. 34:11-58(d)’s presumption and Mt. Clemens burden shifting, increasing exposure even where an employee’s hour estimates are imperfect.
  • Housing credits: the remand instruction to consider a “credit for the fair value of the lodging” signals that in-kind benefits may reduce damages, but only through lawful valuation methods rather than wholesale substitution for wage compliance.
  • SSN/immigration proxies: courts are now on notice that “invalid SSN” proof can distort wage trials; defendants should expect pretrial motions in limine and careful N.J.R.E. 403 balancing.

IV. Complex Concepts Simplified

  • IRCA (8 U.S.C. § 1324a): a federal law that penalizes employers for hiring or continuing to employ unauthorized workers. It regulates employment authorization, not whether wages are owed for work already done.
  • Backpay vs. unpaid wages: “Backpay” (as in Hoffman Plastic Compounds, Inc. v. NLRB) is compensation for wages a person would have earned in the future absent an unlawful firing. “Unpaid wages/overtime” are for work the person already performed.
  • “Suffer or permit to work”: a broad employee definition capturing people an employer allows to work for its benefit, even without formalities (written contract, perfect paperwork).
  • Rebuttable presumption (N.J.S.A. 34:11-58(d)): if the employer fails to keep required records, the law presumes the employee’s claimed hours/wages are correct unless the employer proves otherwise.
  • N.J.R.E. 403 “undue prejudice”: even relevant evidence can be excluded if it is likely to cause unfair bias or distract from the legal issues. An “invalid SSN” can unfairly steer the case toward immigration-status judgments rather than wage compliance.

V. Conclusion

Sergio Lopez v. Marmic LLC establishes three practical rules for New Jersey wage-and-hour litigation: (1) IRCA does not bar recovery of minimum wages and overtime for work actually performed by undocumented workers; (2) “barter” arrangements like rent-free housing generally do not displace WHL/WPL obligations, though fair-value lodging credits may be considered within the statutory framework; and (3) employers’ recordkeeping failures trigger presumptions and burden shifting, while “invalid SSN” evidence must be tightly screened under N.J.R.E. 403 to prevent immigration-status prejudice from defeating wage rights.

In broader context, the decision reinforces the remedial aims of New Jersey wage statutes and aligns wage enforcement with—rather than against—IRCA’s deterrent purpose: employers cannot convert unlawful hiring into a mechanism for wage theft.