- M. Lee Smith Publishers

<p>Employers have been watching with anticipation to see what the <a target="new" href="http://www.supremecourtus.gov/">U.S. Supreme Court</a> would do with the claim of several Mohawk Industries employees that the company engaged in unlawful racketeering by the widespread and knowing employment and harboring of illegal workers.</p>

<p>That action, the employees claimed, depressed the wages for the legal workforce and saved Mohawk money because illegal workers filed fewer workers' comp claims.</p>

<p>The federal Racketeer Influenced and Corrupt Organizations Act (RICO) provides a costly penalty for violations: triple damages to those harmed by unlawful racketeering activity. Even though RICO was originally targeted at organized crime, injured parties have creatively characterized the activities of various other targets as violations of RICO.</p>

<p>Can RICO be stretched as far as the Mohawk employees want? You'll have to wait awhile longer to find out. Rather than deciding the case, the Supreme Court sent the question back to the <a target="new" href="http://www.ca11.uscourts.gov/">Eleventh U.S. Circuit Court of Appeals</a>.</p>

<p>The Eleventh Circuit had ruled that the employees could proceed with their RICO claim, but that ruling was tossed out.</p>

<p>Instead, the Supreme Court instructed the court of appeals to consider the <a target="new" href="http://www.supremecourtus.gov/opinions/05pdf/05-465.pdf"><i>Mohawk Industries</i> case</a> in light of the Court's decision in another case issued the same day it sent the <i>Mohawk</i> case back to the Eleventh Circuit. The decision in the other case rejected a RICO claim asserted by one company against a competitor.</p>

<p><a target="new" href="http://www.supremecourtus.gov/opinions/05pdf/04-433.pdf">The RICO case that <i>was</i> decided</a> - and is to guide the Eleventh Circuit in the <i>Mohawk Industries</i> case - involved the claim of Ideal Steel Supply Corp. against a competitor, National Steel Supply, Inc. Ideal claimed that National and its owners violated RICO by filing fraudulent tax returns and using their ill-gotten gains to build National's business at the expense of Ideal's.</p>

<p>Relying on an earlier RICO decision, the Supreme Court noted the "unlikelihood that Congress meant to allow all factually injured plaintiffs to recover." Rather, a RICO claim may proceed only if there is a <i>direct</i> relation between the racketeering conduct alleged and the claimant's injury.</p>

<p>Even if Ideal was right about National's practices, the court noted, it was the taxing authorities that were wronged by such conduct, not Ideal. Because of that, Ideal couldn't pursue a RICO claim, particularly since it would be highly speculative as to whether National's activity had caused any loss of business for Ideal. Many other economic factors also would be part of the mix.</p>

<p>What will be the lesson for the Eleventh Circuit? Certainly the Supreme Court has sent a clear message that there must be a <i>direct link</i> between alleged "racketeering activity" by Mohawk Industries and the losses claimed by its employees as a result. RICO won't permit the employees to proceed absent such a link.</p>

<p>Even if the employees can show that Mohawk has unlawfully conspired with recruiters to employ illegal workers, will they also be able to demonstrate that they have suffered damages as a result because of lower wages? Given the many other factors that might cause lower wages, showing a direct link will be a challenge.</p>

<p>And even if the employees show that illegal workers don't file workers' comp claims, isn't it the illegal workers who lose out on the receipt of benefits (like the taxing authorities in the <i>Ideal Steel Supply</i> case), not legal Mohawk employees?</p>

<p>The Eleventh Circuit previously found that the employees' claims were sufficient to state a RICO claim, but the Supreme Court is now requiring it to take another look. If the appellate court again rules in the employees' favor, it's likely that we'll see the Mohawk Industries case take another turn in the highest court. <i>Mohawk Industries, Inc, v. Williams, Case No. 05-465 (per curiam, June 5, 2006)</i>.</p>