By Stanley Mailman and Stephen Yale-Loehr**

A recent federal court decision against the second-largest rug and carpet manufacturer in the United States spotlights an emerging sanction against companies that pay substandard wages to undocumented immigrants. Williams v. Mohawk Industries, Inc., 314 F.Supp.2d 1333 (N.D. Ga. 2004), a class action, is one of several suits that have sought to tag such employers with the draconian provisions of RICO, the Racketeer Influenced and Corrupt Organizations Act. Plaintiffs have included competitors and their employees, as well as employees of the defendant. Employers must now give serious consideration to the possibility of a RICO suit in calculating the relative benefits and drawbacks of exploiting undocumented workers.

The RICO Act

In addition to criminal penalties, RICO provides civil sanctions, namely, triple damages and attorney’s fees to plaintiffs who can establish that: (1) the defendant violated RICO by participating in a pattern of racketeering activity through its association with an enterprise affecting interstate commerce; (2) plaintiffs sustained an injury to their business or property; and (3) the violation caused the injury. Racketeering activity is defined under 18 U.S.C. § 1961(1) to include various crimes. Among them are several felonies under the immigration laws, including section 274 of the Immigration and Nationality Act (INA). To succeed under this provision, the plaintiff must prove a pattern of racketeering activity, namely, an open and ongoing pattern of certain violations of law involving at least two racketeering acts, the most recent violation occurring within ten years after an earlier racketeering act. Note that, while two prohibited acts are necessary, they may not be enough to support a RICO claim if they don’t amount to a pattern. To prove a pattern of racketeering activity, the predicate acts must be related and involve a threat of continuing criminal activity.

U.S. law did not prohibit the simple employment of undocumented personnel until the enactment of the Immigration Reform and Control Act of1986 (IRCA), discussed below. However, INA § 274, on the books since 1952, has made it a felony to encourage a noncitizen to enter or reside the United States knowing that entry or presence will violate our law, or to harbor or conceal such a person knowing his entry or presence has violated our law. It also penalizes those who transport a noncitizen knowing that person has entered the United States or remained here, in furtherance of that violation. And it reaches an employer that hires at least ten noncitizens in a year knowing they were unauthorized to work and brought here in violation of the statute.

To state such a case of unlawful hiring, plaintiffs must meet several conditions. Not only must they show the employment, but that the noncitizens hired were unauthorized to work and brought here in violation of law. This means, according to one court, that plaintiffs have to show that the defendant knew how the workers had been brought into the United States “and that they were brought into the United States in violation of this employment provision.” The court referred also to the provision added in 1986 that made it unlawful to hire an alien “knowing the alien is an unauthorized alien . . . with respect to such employment.” But, as the court noted, this simple hiring prohibition is not captured in RICO as a predicate act. (Nor is the immigration provision that imposes a jail term of up to six months for a pattern or practice of such employment. )

As to the prohibition against knowingly transporting a noncitizen who is in the United States in violation of law, most courts of appeal have held that “merely transporting illegal aliens to and from an employment site is insufficient to establish ‘furtherance’ of illegal presence.” A district court has held that this provision was designed to punish those “who assist in the aliens’ evasion of authorities by knowingly transporting them further away from places where they are likely to be caught or to a place where they can find employment. Thus, transportation that is entirely incidental to an employment relationship [like simply bringing an employee to one of several of its worksites] seems not to fit into the statutory scheme.”

In Mohawk Industries, plaintiffs withstood a motion to dismiss their RICO claim – that the defendant engaged in racketeering activity by encouraging foreign workers to enter the United States and work in violation of law, and by otherwise transgressing INA § 274. Those acts, as well as document fraud, according to the plaintiffs, were numerous, regular, and pervasive.

Recruiter Issue

The prohibited “enterprise” was the defendant’s association with two types of recruiters. Allegedly, some recruiters hired the workers and loaned them to the defendant for a fee; other recruiters found the workers near the border and transported them to defendant’s worksites in Georgia. The connection of this enterprise to international and interstate commerce, according to plaintiffs, was primarily the travel of the foreign workers to the defendant’s facilities and the depressing effect on the wages of its legal workers. Indeed, plaintiffs claimed they were damaged because the alleged racketeering activities lowered their wages below the level they would have been had the labor pool consisted only of legal workers.

On June 3, 2004, the U.S. Court of Appeals for the Sixth Circuit reversed the dismissal of a similar RICO lawsuit. There, the plaintiffs alleged that Tyson Foods, one of the country’s larges poultry processors, violated RICO by engaging in a scheme with several employment agencies to depress the wages of its hourly employees by hiring undocumented immigrants. While finding enough of a causal relationship to resist a motion to dismiss, the appeals court noted that plaintiffs might have to establish something more than an “attenuated” relationship between the acts complained of and the lowered wages to survive a motion for summary judgment. Plaintiffs must establish that connection not only factually but “proximately,” the Ninth Circuit had said two years earlier in a RICO suit brought by a defendant’s employees. An indirect injury is not enough.

Direct Injury

Moreover, as RICO requires, the direct injury must be to “business or property.” The Ninth Circuit has held that a plaintiff’s conviction and incarceration because of false evidence was not an injury to his business or property even though it resulted in his loss of employment and business opportunities. It likened such losses to economic losses alleged in a wrongful death action, in contrast to those suffered by farmworkers who were “targeted because they were farmworkers and were injured in their farmworking.”

Note the requirement discussed in Mohawk Industries that the defendant’s violation must involve racketeering activity through an “enterprise,” occurring in that case by association with certain recruiters. In a decision handed down on Feb. 4, 2004, another court of appeals held that RICO does not apply if the employer acts unilaterally; acting without others it is not involved in an “enterprise.”

As the cases demonstrate, seeking damages against the employers of undocumented immigrants is hardly a slam-dunk affair; it is studded with impediments. Yet, the filing of RICO suits may proceed apace so long as undocumented workers remain vulnerable to exploitation at the workplace.

The enactment of IRCA in 1986 signaled a governmental effort to impede the flow of undocumented immigrants by making it unlawful to hire them. Its main features are a drill requiring every employer to check the work authorization of every employee, and a bar against the knowing employment of noncitizens unauthorized to work, both backed by the threat of civil fines. It is now no secret that that effort has failed. President Bush has so much as said so earlier this year in announcing the need to reform our immigration laws.

For reasons that are complex and arguable, the flaws in IRCA may be conceptual. But it is clear that the effort to enforce IRCA has been at best spotty, varying it seems to some with the political climate, the economy, and the amount of funding available at a given time. It is a situation that understandably causes few complaints from employer groups or pro-immigration advocates. At the same time the status quo permits some employers to hire and exploit undocumented workers, depressing the wages of other workers and harming the business opportunities of competing companies. So long as that situation prevails, the injured parties will be tempted to seek a remedy in RICO.

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* This article originally appeared in the August 23, 2004 issue of the New York Law Journal. Copyright © 2004 New York Law Publishing Company. The authors thank the Journal for permission to reprint this article.

** Stanley Mailman and Stephen Yale-Loehr are co-authors of Immigration Law and Procedure, published by LexisNexis Matthew Bender. Mr. Mailman is of counsel to Satterlee Stephens Burke & Burke in New York City. Mr. Yale-Loehr is of counsel at Miller Mayer in Ithaca, N.Y., and teaches immigration law at Cornell Law School.

Footnotes

See Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968.
See also Commercial Cleaning Services, L.L.C., v. Colin Service Systems, Inc., 271 F.3d 374 (2d Cir. 2001) (reversing dismissal of a RICO suit on a finding that the loss of wages to plaintiff employees and to a plaintiff competitor would be proximately caused by racketeering activity if allegations proved).
See RICO, supra note 1, at § 1962(c) (listing in part “prohibited activities”), at § 1964 (permitting an action for triple damages and attorney’s fee to any person “injured in his person or property by reason of a violation of § 1962).
See INA § 274, 8 U.S.C. § 1324. The term “racketeering activity” also embraces fraud, including fraud in relation to identification documents generally,
See 18 U.S.C. §§ 1961(5) (defining “pattern of racketeering activity”), 1962(a), (c) (listing in part “prohibited activities”).
See System Management Inc. v. Loiselle, 303 F.3d 100, 104-106 (1st Cir. 2002) (reversing and remanding for dismissal because of failure to establish a “pattern”).
INA § 274, 8 U.S.C. § 1324, was amended in 1986 in part to remove the “Texas Proviso,” a provision that explicitly exempted simple employment from the prohibition of harboring. See Immigration Reform and Control Act of 1986 (IRCA), Pub. L. No. 99-603, § 112, 100 Stat. 3359 (1986). See also generally 1 Charles Gordon, Stanley Mailman & Stephen Yale-Loehr, Immigration Law and Procedure, Chapter 7 (2004).
System Management, Inc. v. Loiselle, 91 F.Supp.2d 401, 408 (D. Mass. 2000) (dismissing claims other than those based on mail fraud), judgment at 138 F.Supp.2d 78 rev’d on other grounds, see supra at note 6. 303 F.3d 100 (1st Cir. 2002).
Citing 8 U.S.C. § 1324a(a)(1)(A) (INA § 274A(a)(1)(A)).
See INA § 274A(f), 8 U.S.C. § 1324a(f).
System Management, Inc. v. Loiselle, supra note 8, 91 F.Supp.2d at 409 (D. Mass. 2000) (surveying the authorities).
Id. (emphasis in original).
See Trollinger v. Tyson Foods Inc., 370 F.3d 602, 612-620, 622 (6th Cir. 2004).
Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1169-71 (9th Cir. 2002) (holding that defendants were direct victims of alleged racketeering), class certification granted, 2004 U.S. Dist. LEXIS 13027 (E.D. Wash. July 13, 2004). See also Commercial Cleaning Services L.L.C. v. Colin Service Systems, Inc., supra note 2, 271 F.3d at 800-804 (sustaining RICO complaint).
Diaz v. Gates, 354 F.3d 1169, 1172 (9th Cir. 2004), referring to plaintiff-farmworkers in Mendoza, see supra note 14.
See Baker v. IBP, Inc., 357 F.3d 685 (7th Cir. 2004) (holding as well that a designated union was an indispensable party in such a class action); cf. Trollinger v. Tyson Foods Inc., supra note 13, 370 F.3d at 620-622 (rejecting the position that the National Labor Relations Act implicitly gives the union at least the right to participate in the RICO proceeding).
See INA § 274A(a)(1)(A) (knowing hire of unauthorized alien), (B) (paperwork requirements), (e) (providing civil fines), 8 U.S.C. § 1324a(a)(1)(A), (B), (e), sometimes referred to collectively as “employer sanctions.”
See Stanley Mailman & Stephen Yale-Loehr, Sanity for the Southwest Border, N.Y. Law J., Feb. 24, 2004, at 3.
See, e.g., Lori A. Nessel, Undocumented Immigrants in the Workplace, The Fallacy of Labor Protection and the Need for Reform, 36 Harvard C.R.-C.L. L. Rev. 345, 355-61 (2001).