RICO Liability For Those Who Recruit Illegal Workers? Oral Arguments in the Supreme Court, April 28, 2006
by Sarah C. Chernish
The U.S. Supreme Court this week heard oral arguments about whether a corporation that works with recruiting agencies to hire undocumented workers can be sued under RICO, a statute aimed at eradicating organized crime for its illegal activities. To establish a civil RICO claim, plaintiffs must show that the defendant participated in the conduct of an enterprise through a pattern of racketeering (i.e. illegal) activity. An enterprise is defined RICO to include “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." (Mohawk Industries Inc. v. Williams, U.S., No. 04-465, oral argument 4/26/06).
The case came out of the 11th Circuit and involved Mohawk Industries, the second largest carpet and rug manufacturer in the United States. Several employees sued, alleging Mohawk’s practices of hiring and employing illegal immigrants created lower wages for all workers and made collective bargaining almost impossible. Specifically, the employees claimed that Mohawk accepted false documents, such as fake driver's licenses as proof of eligibility for employment, allowed illegal alien employees who left the company to return under different names and sought the services of third-party recruiting firms to hire illegal workers in U.S. border towns such as Brownsville, Texas. They also alleged Mohawk and the recruiting firms provided Social Security cards for prospective employees and existing illegal alien employees who needed to establish their identities.
The employees claimed these activities violated RICO. The Eleventh Circuit agreed, finding there was evidence showing Mohawk and the recruiters worked together to bring illegal workers to Georgia and that they had the "common purpose" of providing illegal workers so that Mohawk could reduce costs.
The U.S. Supreme Court granted certiorari to decide whether a company and its agents can meet the definition of an enterprise for RICO liability, in light of the settled rule that a RICO defendant must "conduct" or "participate in" the affairs of some larger enterprise and not just its own affairs. This issue has proven contentious over the past half-decade. Federal courts have been unable to establish any clear precedent and recent RICO enterprise cases have both affirmed and cast doubt on the concept of an enterprise as a loose association between two companies, legal or illegal.
In oral arguments, Mohawk asserted that the relationship between it and the recruiting firms did not satisfy the “enterprise” definition because two corporations could not combine to create a "group of individuals," and the relationship between the two companies did not create a separate, independent enterprise. The employees countered saying that the two corporations were like individuals under RICO's definition of enterprise and thus when they joined together to engage in illegal activities, they were acting as an association of individuals and were subject to RICO.
The Court questioned Mohawk and the employees on a number of issues:
- Justice Souter asked Mohawk- how, when a company goes so far beyond its normal business activities, can that conduct be considered part of its business? And that if the activity is not part of its business, when that company joins with another company or individual for an illegal purpose, doesn’t that joining create a separate entity whose function is to commit illegal acts (violating RICO)? Mohawk responded that even if the company had acted illegally in its hiring and recruiting of illegal aliens, hiring and recruiting employees is what Mohawk and the recruiting firms do as part of their normal businesses. Therefore, these activities would not create a new enterprise and should not subject them to liability under RICO.
- Justice Scalia questioned whether it would be advisable to set a precedent that would cause the lower courts to get caught up in deciding what is and is not part of an employer’s business. Mohawk responded that it was "a little late in the day" to worry about the burden of making those determinations since it is already an essential part of the determination of whether a company was involved in a RICO enterprise.
- Chief Justice Roberts questioned the employees why it was even necessary to use RICO if the actions of Mohawk and the recruiting firms created a criminal conspiracy. The employees responded that the activities by Mohawk and the recruiting firms were not "a mere criminal conspiracy" which involves just a single act of illegality, but instead was an ongoing act that may have happened hundreds or thousands of times. Because of the size of the act, a criminal conspiracy would be insufficient. Additionally, a criminal conspiracy charge would fail to attack the ongoing pattern of illegal activity alleged by the workers and therefore it would be more difficult to show the impact that ongoing pattern had on the workers.
- Justice Breyer, noted that to extend RICO beyond its focus on the mafia and corrupt labor unions to the more expansive definition proposed by the employees, had the potential to " 'RICO-ize' vast amounts of corporate and criminal activity." Breyer pushed the employees to explain how "groups of individuals" in the statute could include two corporations, especially if corporations are not "individuals" under the definition. The employees suggested that the definitions, because they had been created with the intention of dealing with the Mafia and criminal gangs, did not reflect the true intent of the statute, and that the list of types of associations that could constitute an enterprise provided in the statute was not exclusive. Therefore, according to the employees, two corporations joined together to act illegally, could constitute an enterprise under RICO.
A decision from the Court is expected by late June.
Even a Bagful of Non-discriminatory Reasons for Laying Off an Employee May Not be Enough for Summary Judgment, April 24, 2006
by Sarah C. Chernish
The Third Circuit recently held that an employee alleging age discrimination under the Age Discrimination in Employment Act (ADEA), and the Pennsylvania Human Relations Act (“PHRA”) could avoid summary judgment by offering sufficient evidence that the most relevant of the employer’s “bagful” of age-neutral explanations for selecting him for lay-off during a reduction in force (RIF) were pretext for age discrimination. Tomasso, v. Boeing Co., 2006 WL 1008839 (3rd Cir. 2006).
Joseph Tomasso was laid off from Boeing at age 59 after working there for almost 40 years. His lay-off was the result of a RIF implemented to reduce operating costs and overhead by 20%. Who would be laid-off was decided based on managers’ ratings of employees in nine areas: organizational skills, problem solving, quality of work, quantity of work, technical competence, leadership, attitude, communications, and teamwork. Tomasso’s supervisor gave him a score of 21, making him the lowest ranking employee in his department. He was one of the 7 lowest-ranking employees who were selected for layoff. All of the individuals laid-off were over the age of 40 and all of the employees under forty were retained. A few employees who were over 40 were also retained.
The Third Circuit reversed summary judgment holding Tomasso had raised questions as to whether the legitimate nondiscriminatory reasons offered by Boeing for the RIF were in fact pretext for age discrimination. Low evaluation scores may be a pretext for discrimination, especially where an employer uses subjective criteria such as “attitude” and “teamwork” to rate its employees. Employers must have age-neutral reasons for deciding to lay off certain employees, and employees can challenge these reasons as pretextual.
In this case, Boeing had two major reasons justifying Tomasso’s low evaluation score and lay-off; (1) that he was uninterested in implementing a new inspection process the department was using to monitor its subcontractors; and (2) that he was unwilling to share his technical knowledge with other Boeing employees. Boeing listed sundry other rationales to explain some of the low scores in specific categories, but these rationales would not have accounted for Tomasso’s low total score. Tomasso disputed Boeings two major allegations, and offered contradictory evidence showing his willingness to embrace the new inspection process and share his knowledge, but did not address the other rationales.
The court found that because Tomasso’s evidence related to the “core facts” Boeing claimed caused the low evaluation score and termination, it was immaterial that he had not demonstrated Boeing's entire “bagful” of reasons were pretextual. His evidence, if believed, showed Boeing's explanations contained “such weaknesses, implausibilities, inconsistencies, incoherencies, or contradictions” in as to deem it ‘unworthy of credence” that a reasonable factfinder could rationally find them ‘unworthy of credence,’ and hence infer ‘that the employer did not act for [the asserted] non- discriminatory reasons.” Therefore, summary judgment was inappropriate.
Board of Education Permitted To Withhold Earned But Unpaid Wages From Maryland Teachers, April 21, 2006
In 2003 two Talbot County public school teachers failed to provide proper notice they would not be returning for the next school year. They were contractually required to provide notice by May 1, 2003, so the school system would have adequate time to find qualified replacements. These teachers submitted their resignations on July 16, 2003 and August 4, 2003, respectively. Upon receiving these late resignations, the Talbot County Board of Education (“County Board”) invoked a clause in the teachers’ employment contracts providing “[i]f any of the conditions of this contract shall be violated by the certificated employee named herein, salary already accrued will be forfeited, in the discretion of the Local Board of Education.” So, the County Board withheld accrued but unpaid salary for the school year from August 2002 through August 2003. There was salary to be withheld because although the teachers worked the entire school year, their paychecks were spread over a longer twelve month period. The decision to withhold salary was affirmed in three administrative appeals, concluding with a decision by the State Board of Education, which found the forfeiture provision valid and enforceable.
The teachers appealed to the Circuit Court for Talbot County. The Circuit Court determined the forfeiture clause was illegal, because it violated Section 3-505 of Maryland’s Wage Payment and Collection Act (the “Act”), which provides that an employee who earns wages must be paid those wages regardless of whether his or her employment has been terminated. The Circuit Court’s decision certainly seemed in accord with previous case law striking down employment contracts calling for the forfeiture of earned but unpaid wages as inconsistent with the Act and public policy. The County Board appealed to the Court of Special Appeals, but the Court of Special Appeals did not get a chance to decide the case.
The Court of Appeals issued a writ of certiorari to consider whether the forfeiture provision used in employment contracts for professionally certificated Maryland public school teachers is a valid and enforceable contractual provision. Curiously, the Court of Appeals thought the Circuit Court should not have interjected its opinion of the controlling law, and that its review of legal issues should have been limited to whether the forfeiture clause was an unenforceable penalty or a valid liquidated damages provision. The Court of Appeals took this approach even though acknowledging that judicial review of administrative agency decisions is more expansive if the agency is deciding a matter that is purely a legal question or if the agency has contravened state statute.
The Court of Appeals went on to hold the forfeiture clause is a valid liquidated damages provision. Whether this actually helps the public school system remains to be seen. The Court may have created a disincentive for teachers to provide notice of resignation as soon as possible. Rather than provide contractually late notice in June, a teacher now has a reason to delay notice simply to collect wages for work already performed.
I'll Be There for You - Dirty Talk Not Sex Harassment, April 21, 2006
The California Supreme Court has thrown out a claim of sexual harassment by a production writer's assistant on the television show Friends. The assistant was told when she was hired that the language got rough, and that part of the creative process involved demeaning men and women.
Incredibly, the assistant sued for hostile environment sexual harassment, though none of the demeaning comments were directed toward her. The Court said that the conduct should be judged from the perspective of a reasonable person in the plaintiff's position, not whether the conduct would be offensive in an insurance office. Lyle v. Warner Bros. Television Productions., No. S125171 (Cal., April 20, 2006).
California Supreme Court Says No To "Friends" Sex Harassment Case, April 20, 2006
by Clifton R. Gray
Comedy writers in California will surely be breathing sighs of relief now that the California Supreme Court has said that a comedy writer on the former hit NBC show Friends could not make out a prima facie case of hostile work environment sexual harassment. Lyle v. Warner Bros. Television Productions et al., Cal.Rptr.3d (Cal., filed April 20, 2006).
The suit arose when a comedy writers' assistant, a black female, whose job entailed listening to the writers' sexual jokes and discussions about sex and transcribing the jokes and dialogue most likely to be used for scripts, was fired because of problems with her typing and transcription. She later filed a charge of sexual harassment with California's Department of Fair Employment and Housing (a California agency akin in most respects to the EEOC), which provided her with a right to sue letter. In her suit, the assistant claimed that the atmosphere of working under the comedy writing team was so sexually vulgar as to create a hostile work environment under California's Fair Employment and Housing Act. This was so even though she admitted during deposition that when she was hired, the writers (who were also executive producers of the show) told her about the sexual nature of many of the show's writing sessions and that she told the writers that such discussions did not make her feel uncomfortable.
While the California Supreme Court, in its opinion, goes into detail about the varying episodes and comments that the assistant claimed created a hostile work environment, including the writers constantly commenting on their own sexual experiences and sexual preferences, the court did place emphasis on the fact that none of the conduct was ever involved or was aimed at the assistant. The court also stated that "considering the totality of the circumstances, especially the nature of the writers' work, the facts largely forming the basis of plaintiff's sexual harassment action . . . did not present a triable issue whether the writers engaged in harassment 'because of . . . sex.'"
Of course, one should not forget that the major circumstance underpinning the court's decision is the fact that the assistant worked for the comedy writers of an adult-themed sitcom, which, as the court stated, "revolved around a group of young, sexually active adults, featured adult-oriented sexual humor, and typically relied on sexual and anatomical language, innuendo, wordplay, and physical gestures to convey its humor." If such a claim had arose by a writer of a show akin to more "wholesome" fare such as Little House on the Prairie or The Waltons, the case likely would have turned out much differently.
FMLA - Don't Say You're Covered If You're Not, April 20, 2006
Under the Family and Medical Leave Act, employers must comply if they have 50 or more employees within a 75-mile radius of the location where the employee seeks leave. A federal appeals court has ruled that if an employer with fewer than 50 employees misleads an employee into thinking he is covered by the FMLA, the employee may proceed with a claim under a legal theory known as equitable estoppel. Minard v. ITC Deltacom Communications Inc., No. 04-30230 (5th Cir., April 18, 2006).
The court rejected the argument that the 50-employee requirement must be met before a federal court can hear the case. The court said that its ability to hear the case, known as its "jurisdiction," is not dependent on that requirement.
Thus, if you have some locations that would be covered by the FMLA, but others that would not, you need to be careful that you do not mislead employees in those smaller locations into thinking they are covered. Handbooks must be carefully worded to avoid the result in the Minard case.
Makeup Rule Upheld 7 to 4, April 18, 2006
A federal appeals court in California, in a decision involving the entire court, has held that a casino's rule that female bartenders wear makeup was not a violation of the Civil Rights Act of 1964, even though men were not required to do the same. The court found that the rule was not based on sexual stereotypes, and the female bartender did not show that the rule created a greater burden on women than men. Four judges disagreed. Jespersen v. Harrah's Operating Co., No. 03-15045 (9th Cir. April 14, 2006).
Rules differentiating between men and women are not automatically sex discrimination. Such rules, however, need to be reviewed on a case by case basis. The court merely found Harrah's rule not to be discrimination.
FMLA Notice Issue for Jury, April 14, 2006
A federal court in Illinois will allow an employee suffering from depression and other ailments to pursue his Family and Medical Leave Act claims, even though he did not give his employer formal notice of the need for leave. Lozano v. Kay Mfg. Co., No. 04 C 2784 (N.D. Ill., March 28, 2006). The court said that the employer was well aware of the employee's depression and other medical conditions, and it may have had "actual" notice of the need for leave. This was a question of fact, according to the court, which could be established by the employee at trial.
This case adds a dangerous dimension to the FMLA. It is tough enough for an employer to understand its obligations under the FMLA. Shifting the responsibility to the employer to "figure out" that the employee needed leave is not what Congress intended.
Employer Not Responsible for Itching and Perverted Supervisor, April 13, 2006
Without the knowledge of his employer, a male supervisor was spying on women going to the bathroom at the plant, and he was found to be putting poison ivy on the toilet seats and on the toilet paper. Once the company became suspicious, it asked an employee to "set up" the supervisor. That same employee ultimately sued for hostile environment sexual harassment.
A divided federal appeals court found that the employer was not liable because it did not know about the misconduct as it was taking place. Even though the violator was a supervisor, the court found his supervisory duties alone insufficient to impose liability automatically.
The dissenting judge, however, was concerned that the employer recruited the plaintiff to catch the supervisor in the act, consequently increasing the harassment for her. Fortunately, cooler heads prevailed. Cottrill v. MFA Inc., No. 05-1748 (8th Cir, April 7, 2006).
Federal Court Denies Requested Religious Accommodation, April 13, 2006
An Orthodox Jewish applicant was turned down for a job because he could not work the required two Saturdays a month for all employees. He sued, claiming the Saturday work requirement had a disproportionate impact on Orthodox Jews. He lost, and on appeal, the court said that the company had established a legitimate business reason for the requirement, and that the applicant had not shown – through statistics or other evidence – that the policy had that disproportionate impact. Aron v. Quest Diagnostics Inc., No. 05-3500 (3rd Cir., April 3, 2006).
Give me a D! April 7, 2006
Barbara West, an employee with "strong religious convictions," hated her supervisor. She REALLY hated her supervisor. So much so that when the supervisor got sick West attributed the illness to God's intercession at West's request. The supervisor then died suddenly, and West openly rejoiced at the death, blissfully hailing the death to her coworkers as vengeance served up by God on West's behalf. "Praise the Lord, victory is mine," West proclaimed.
The management of the medical clinic where they both worked decided that West's conduct was unseemly enough that she should be terminated. Apparently the complaints of horrified coworkers played a significant role. West sued (yes, she got a lawyer to take the case), but the case was dismissed. The judge wrote that the religious aspect of West's conduct played no role. Instead, the termination was justified because "West was openly celebrating the death of a woman . . . ." Thank God for that one!
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