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The U.S. Court of Appeals for the Eleventh Circuit has
found that workers who alleged that their employer conspired with
recruiting agencies to hire and harbor undocumented workers in order to
keep the employer's labor costs low have alleged sufficient facts to
state a claim under federal and state Racketeer Influenced and Corrupt
Organizations Act (RICO) statutes.
The plaintiffs, current and former employees
of a major carpet and rug manufacturer, Mohawk Industries, Inc., filed a
class action lawsuit alleging that Mohawk violated the RICO statutes by
engaging in a practice of knowingly hiring and harboring undocumented
workers, which allowed Mohawk to reduce wages for its
employment-eligible hourly employees and to discourage the filing of
worker's compensation claims. The plaintiffs also alleged that as a
result of this practice Mohawk was unjustly enriched.
According to the complaint, the company
conspired with recruiting agencies and Mohawk employees to hire and
harbor undocumented workers. Mohawk employees allegedly traveled to the
United States border to recruit workers, whom they transported from
border towns to northern Georgia to work for Mohawk. Mohawk paid these
employees and other recruiters for locating the workers. The employees
who served as recruiters, as well as other outside recruiters, housed
the undocumented workers and helped them find employment with Mohawk.
The plaintiffs allege that in order to employ the workers thus
recruited, Mohawk knowingly or recklessly accepted fraudulent documents
from them.
In federal district court where this case was
filed, Mohawk filed a Rule 12(b)(6) motion to dismiss the case, but the
district court found that the plaintiffs had stated sufficient facts in
the complaint to state a claim under federal and state RICO statutes.
The district court also held that the plaintiffs had a claim under state
law that Mohawk had unjustly enriched itself by using the lower wages it
paid undocumented workers as a pretext for lowering the wages of
employment-eligible workers. However, the lower court dismissed the
unjust enrichment claim that was based on the reduced number of worker's
compensation claims that Mohawk paid. The defendant, Mohawk, appealed
the district court's ruling to the Eleventh Circuit.
The circuit court affirmed in part and
reversed in part the district court's denial in part and granting in
part of Mohawk's Rule 12(b)(6) motion to dismiss allegations in the
complaint for failure to state a claim.
The circuit court first addressed the federal
RICO claims. Under 18 USC sec. 1962(c), it is illegal "for any person
employed by or associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign commerce, to conduct
or participate, directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering activity. . . ."
To establish that the defendant committed a federal civil RICO
violation, the plaintiffs must show the following four elements: (1)
conduct (2) of an enterprise (3) through a pattern (4) of racketeering
activity. In addition, under 18 USC sec. 1964(c), civil RICO claims
require that plaintiffs also show (1) the requisite injury to "business
or property" and (2) that such injury was "by reason of" the substantive
RICO violation.
The court found that the plaintiffs properly
alleged a pattern of racketeering activity based on Mohawk's alleged
violations of (1) knowingly hiring at least 10 individuals, with actual
knowledge that the individuals are unauthorized to be employed in the
U.S.; (2) concealing, harboring or shielding from detection undocumented
individuals who have illegally entered the U.S.; and (3) encouraging or
inducing an undocumented individual to come to, enter, or reside in the
U.S., knowing or in reckless disregard of the fact that such coming,
entry or residence is a violation of the law.
The appellate court
also found that the plaintiffs' allegations that Mohawk and the third
party recruiters engaged in a conspiracy to bring undocumented workers
into the country for Mohawk's benefit were sufficient to allege an
"enterprise" under RICO. The court held that the "common purpose"
requirement had been met because the complaint alleged that Mohawk and
the recruiters, under Mohawk's direction, worked together to recruit
undocumented workers to come to Georgia, and that they had the common
purpose of providing "unauthorized workers" to Mohawk so that the
company could reduce its labor costs and the recruiters could get paid.
As to the
requirement under RICO that the plaintiffs show that the defendant's
actions resulted in injury to their business or property interests, the
court held that the plaintiffs clearly alleged an injury to their
business relationship with their employer, and thus to a business
interest. The court similarly found that the plaintiffs had alleged
sufficient proximate cause and standing to state a federal RICO claim.
Based on a similar
analysis, the court also found that the plaintiffs had alleged
sufficient facts to state a claim under the Georgia RICO statute. The
court, however, found that the plaintiffs could not state a claim for
unjust enrichment related to Mohawk's supposed savings from lower wages
because unjust enrichment under Georgia law applies when there is no
legal contract. Here, because the plaintiffs had an employment contract
with Mohawk, the court ruled that there could be no unjust enrichment
and held that the unjust enrichment claim should have been dismissed.
Finally, the circuit court agreed with the district court's dismissal of
the unjust enrichment claim related to the plaintiffs' allegation that
Mohawk, due to its practice of recruiting and hiring undocumented
workers, had been subject to fewer worker's compensation claims on the
grounds that the plaintiffs did not have standing to assert this claim,
since the increased profits Mohawk gained by lowering the amount of
worker's compensation claims it paid were not related to the amount of
wages paid to the plaintiffs.
This decision by
the Eleventh Circuit is the latest in a series of cases in which
employers have been sued under the RICO statutes for allegedly
depressing wages and working conditions by knowingly hiring undocumented
workers in violation of federal immigration laws (see, e.g., "Appellate
Court Dismisses RICO Claim Against Employer for Allegedly Hiring
Undocumented Workers," Immigrants'
Rights Update, April 2, 2004, p. 6; and "9th Circuit Allows
Work-Authorized Employees to Proceed with RICO Lawsuit against
Agricultural Employers," IRU, Oct. 21, 2002, p. 12). It has been only
recently that this strategy has been used against employers, since RICO
was created primarily to target organized crime. Most of these lawsuits
have been brought by employees or former employees of companies that
allegedly hire undocumented workers. However, Canyon County in Idaho
recently filed a lawsuit in the U.S. district court in Boise under RICO
against local businesses that the county alleges have knowingly hired
undocumented workers.
Williams v. Mohawk Industries
Inc., 411 F.2d 1252 (11th Cir 2005).
--By
Monica Guizar, NILC
employment policy attorney
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