New Wave or Flash Flood: 11th Circuit Allows RICO/Immigration Lawsuit to Proceed


New test cases claim that it is not just coincidence when a large pool of illegal immigrants migrate to an area while an employer, without fear of liability, blithely accepts a series of bogus identification documents from workers. By using the Racketeer Influenced Corrupt Organizations Act (RICO) statute, plaintiffs are trying to prove that an illegal criminal enterprise composed of employers, recruiters, and staffing companies are together benefiting from the increased illegal population brought to the area through the criminal acts of some members of the enterprise. If successful, these large class actions would create a wholly new source of potential liability for employers struggling to deal with the current patchwork of immigration and Social Security laws.

In Williams v. Mohawk Industries, the Eleventh Circuit Court of Appeals joins four other federal circuits in allowing a class of employees to proceed against their employer under RICO for allegedly violating the immigration laws in a scheme to bring illegal workers to a North Georgia carpet mill in order to suppress the wages of legal workers. No. 04-13740 (11th Cir. June 9, 2005). Although in earlier cases the plaintiffs initially lost motions to dismiss and obtained reversals on appeal, the plaintiffs in Mohawk are the first to have survived a preliminary motion to dismiss at the trial court level, which the Eleventh Circuit has now affirmed.

I. BACKGROUND

In Mohawk, the plaintiffs accuse Mohawk Industries ("Mohawk") of conspiring with recruiters and temp agencies to recruit illegal workers along the Mexican border of the United States, to encourage and aid them in relocating to Northern Georgia, and recklessly hire them knowing that a high percentage will ultimately be determined not to have valid I-9 credentials.

The trial court found that the plaintiffs' federal and Georgia RICO claims survived Mohawk's motion to dismiss. The Eleventh Circuit's opinion focuses on the technical requirements of the RICO statutes including whether a criminal "enterprise" existed and whether the plaintiffs alleged sufficient facts to establish that the underlying criminal predicate offenses under the federal immigration laws proximately caused damage to the plaintiffs in the form of depressed wages in the area.

II. Alleged RICO Violations

Criminal Acts of a RICO Enterprise

To establish a federal civil RICO violation, plaintiffs must prove (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. The alleged enterprise in this case consisted of Mohawk and the recruiters and temp services with which Mohawk conducted business. At least two criminal acts are required to constitute a pattern. Key to the survival of plaintiffs' claims was the allegation that Mohawk "directed" the immigration violations by un-named recruiters. In order for RICO to apply, plaintiffs allege that Mohawk "direct[ed] the affairs of the criminal RICO enterprise."

In particular, Mohawk is accused of directing an enterprise engaged in three types of criminal acts under the immigration laws: (1) knowingly hiring at least 10 individuals with actual knowledge that the individuals are aliens during a twelve month period;[1] (2) concealing, harboring, or shielding from protection aliens that have illegally entered the U.S.,[2] and/or (3) encouraging an alien to enter or reside in the U.S. "knowing or in reckless disregard of the fact that such coming to, entry or residence is or will be in violation of law."[3]

The alleged "common purpose" of the criminal enterprise was to provide illegal workers to Mohawk so that Mohawk could reduce its labor costs and increase business for the recruiters. Employees legally permitted to work were found to have a "sufficiently direct injury" to provide standing to sue for injuries proximately caused by the immigration violations. These legal Mohawk employees claimed to be damaged because (a) the broader worker pool resulted in more applicants for all jobs so that lower wages were sufficient to fill Mohawk's needs and/or (b) "deprive[ed] Mohawk's hourly workforce of any individual or collective bargaining power."

II. PRACTICAL PROBLEMS FOR EMPLOYERS

These criminal prohibitions seem particularly thorny given the common scenario faced by many employers. It is not uncommon for employers to receive notification from the Social Security Administration (SSA) that some workers provided incorrect social security numbers. These employers must then respond to the SSA without violating either the immigration law's retaliation provisions or restrictions that prevent an employer from demanding a particular form of identification or challenging facially valid identification. Many employers forced to tread this minefield have workers who merely supply yet another, apparently valid, social security card when asked to respond to the Social Security notice. Previous Littler ASAPs have addressed an employer's obligations,[4] but the increasing number of immigrant workers, legal and illegal, makes the creative pleading of the Mohawk type of case a new and qualitatively different liability risk for the employer with a large immigrant workforce.

Could Your Facility Be a Target?

How difficult would it be for a class of plaintiffs to generate similar allegations against other employers located in areas experiencing a large influx of illegal workers? Not as hard as you might believe.

The Mohawk complaint contains specific allegations that recruiters traveled to Texas for Mohawk, knowingly recruited suspected illegal workers to relocate, and helped illegal workers hide during inspections by authorities. While these allegations may be less common, it is not uncommon for rumors to circulate that someone, possibly a low level supervisor or lead person, spread the word of an IRS visit at the workplace to warn illegal workers. Can the employer be held liable under RICO because one of its supervisors assisted illegal workers in evading detection from the INS? Many employers also face rumors that supervisors or local staffing agencies are distributing forged social security cards. Although these allegations may not strike most employers as accusations that could be brought against them, there are troublesome allegations in Mohawk attributing a sinister purpose to much more common arrangements between companies, recruiters and staffing agencies.

For example, the plaintiffs in Mohawk alleged that the temp agencies and recruiters were paid bonuses for temps who were ultimately hired as Mohawk employees. The plaintiffs further alleged that recruiters worked closely with Mohawk to provide a pool of illegal workers who could be dispatched quickly to a Mohawk facility on short notice, and implied that recruiters may have helped illegal workers with relocation and housing costs. In this way, many of the normal arrangements for recruiters and staffing agencies may become criminal acts of the enterprise if the steps are taken for the illegal purpose of providing a pool of illegal workers.

III. A NATIONAL SEARCH FOR FAVORABLE JURISDICTIONS

In what may result in the next great wave of employment-based class actions, employers are closely watching test cases in the Second, Sixth, Seventh, Ninth, and now Eleventh Circuits, that accuse employers of engaging in a criminal enterprise under RICO by directing criminal violations of the immigration laws. In these other cases, the plaintiffs have faced mixed success. In the Seventh Circuit, the plaintiff class was lost when the trial court granted a preliminary motion to dismiss that was affirmed on appeal.[5] In the Second, Sixth and Ninth Circuit cases, the plaintiffs similarly lost at the trial court level on motions to dismiss, but those decisions were reversed by the appeals courts and the cases remanded for discovery and further proceedings.[6] Not only have these test cases been brought in different districts to test the RICO and criminal standards, but one of the plaintiff's attorneys has been hired by an Idaho county and instructed to help its county attorney draft criminal RICO complaints against local businesses that are making that county an attractive source of jobs for allegedly illegal workers.

Obviously, these plaintiff classes still must overcome significant obstacles in proving the underlying criminal acts including that the named defendants "directed" the criminal acts of others, as well as showing that the scheme proximately caused a lowering of wage rates in the local area. Will employers be found guilty of "directing" such acts merely by funding the economic climate that makes them profitable while suspecting that they occur? Creative economic experts for the plaintiffs may try to pattern proof of damages after anti-trust class actions where consumers have claimed that prices were inflated as a proximate cause of illegal actions or cases where consumers have argued that RICO fraud schemes have affected retail prices. Regardless of the relative difficulty of proof, the litigation will undoubtedly be expensive for employers.

Although no plaintiffs' class has yet successfully pushed one of these test cases to a trial and judgment, employers may see a rash of such lawsuits brought by the plaintiffs' bar looking for the next revenue generating area of employment-related class actions given the potential awards of treble damages and attorneys' fees available to prevailing plaintiffs in RICO lawsuits. The potential class of present and former legal employees could be quite large, with the dollars at stake quickly reaching significant amounts.

Employers located in areas with growing immigrant worker pools may be potential targets for these types of RICO class actions. Clearly, the activities of staffing agencies and recruiters one or two stages removed from the employer may still be alleged to constitute the criminal acts of a RICO enterprise directed by the employer. Employers who work with reputable staffing and recruiting firms will be somewhat assured. However, the development of these cases will be watched closely to see if employers can benefit from becoming more closely informed by those involved in the recruitment and staffing process, or whether further involvement merely makes it easier for plaintiff classes to allege conspiratorial actions. In all likelihood, employers will be forced to counter this new assault by exploring proactive dialogue with their vendors to establish the type of policies, contract terms and communications that can be used as evidence that the employer and staffing agencies are doing everything possible to abide by the law.


[1] 8 U.S.C. § 1324(a)(3)(A).

[2] 8 U.S.C. § 1324(a)(1)(A)(iii)

[3] 8 U.S.C. § 13234(a)(1)(A)(iv).

[4] The Significance of the Social Security Administration's "No Match" Letters for Employers, at http://www.littler.com/nwsltr/asap_ss_nomatch.html.

[5]Baker v. IBP, 357 F.3d 685 (7th Cir. 2004).

[6] Commercial Cleaning v. Colin Serv. Sys. Inc., 271 F.3d 374 (2d Cir. 2001); Trollenger v. Tyson Foods, Inc., 370 F.3d 602 (6th Cir. 2004); Mendoza v. Zirkle Fruit Co., 301 F.3d 1163 (9th Cir. 2002). The Second Circuit case ended in a stipulated dismissal. Commercial Cleaning v. Colin Ser. Sys. Inc., no. 3:99-cv-0019-09-CFD , docket entry 74 (D. Conn. July 30, 2002).