The Racketeer Influenced and Corrupt Organizations Act (RICO) permits plaintiffs to act as private prosecutors and sue for injuries arising out of alleged conspiracies to commit specified types of felonies. In 1996, Congress amended RICO to add workplace immigration crimes to the list, including knowingly hiring 10 or more undocumented workers in a 12-month period.
A class of current and former hourly employees of carpet manufacturer, Mohawk Industries, sued the company in 2004 alleging that the company had conspired with recruiters and temporary help agencies to locate and transport large numbers of undocumented workers from the Brownsville, Texas, area, to Mohawk’s plants in Georgia, for the purpose of driving down the wages of its U.S. workers. The complaint recited violations of various immigration crimes taking place over a five-year period, including knowingly hiring more than 10 illegal workers in 12-month increments, harboring said workers though employment and shielding them from detection by federal authorities, and accepting fraudulent documents to satisfy I-9 requirements.
Mohawk publicly denied these allegations and responded legally with a preliminary dismissal motion. The company lost its motion fight in the district court, but convinced the court to stay discovery pending the outcome of an appeal to the U.S. Court of Appeals for the Eleventh Circuit. There, Mohawk lost as well, but it also convinced the appeals court to continue the stay for Mohawk’s appeal to the Supreme Court. The Supreme Court agreed to accept the case and to decide whether a corporate defendant, in combination with non-employee recruiters and temporary help agencies, may constitute a RICO enterprise if formed to locate and place undocumented aliens for employment with Mohawk.
Ultimately, the Supreme Court did not decide that issue, even though the issue was fully briefed and argued. Instead, the Supreme Court dismissed the appeal and remanded the case to the Eleventh Circuit with directions to reconsider its ruling in light of the Supreme Court’s ruling in an unrelated RICO case which the Court dismissed for failure to state a RICO claim. The unrelated case, Anza v. Ideal Steel Supply Corp., involved a dispute between business competitors, one of whom claimed that defendant’s failure to pay state income taxes gave it an enhanced competitive position in the market that plaintiff lacked, causing plaintiff’s business to suffer. In Anza, The Supreme Court held that the alleged injury was too indirect to satisfy the proximate cause test required to state a RICO claim. In remanding the Mohawk case, the Supreme Court signaled that employees should not be able to sue their employers under RICO for immigration hire violations because the employees’ alleged wage injuries were not directly caused by defendant’s immigration infractions.
In the aftermath of the Supreme Court’s remand decision in the Mohawk Industries case, some commentators predicted that RICO class actions were dead in the immigration/employment arena. That obituary appears to have been prematurely delivered. In hearing the case on remand, after reaffirming its prior decision with respect to other RICO requirements, the Eleventh Circuit turned to the proximate cause issue and held that at the pleading stage the Mohawk employees’ complaint was sufficient to justify keeping the case alive for discovery. The complaint alleged that Mohawk had recruited, hired and harbored thousands of undocumented workers for its facilities in Georgia, undermining the individual and collective bargaining power of plaintiffs and their union to press for higher wages. The court rejected Mohawk’s arguments that myriad factors could account for low wage rates other than the alleged unlawful conduct, and therefore the proximate cause test could not be met. Mohawk also argued that the injury ran to the federal government that enforces workplace immigration laws, not individual employees. The court also rejected this argument, stating: "It is consistent with civil RICO’s purposes-to expand enforcement beyond federal prosecutors with limited public resources-to turn victims (here, Mohawk’s legal workers) into prosecutors as private attorneys general seeking to eliminate illegal hiring activity by their own employer."
The Sixth and Ninth Circuits agree with the Eleventh Circuit’s reasoning on the proximate cause issue; the Seventh Circuit does not. That split suggests that one day this issue will return to the Supreme Court, where the Court will be required to face it head-on. Until that happens, Mohawk and many other employers are likely to be called to defend their hiring practices against RICO claims. The incentive for bringing such civil actions is huge: treble damages and the prospect of recovering attorney’s fees and costs as well.