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RICO Wage Suppression Claim Fails

By David G. Weldon  4/9/2014
 

A class-action claim under the civil Racketeer Influenced and Corrupt Organizations (RICO) Act brought by two employees against their former employer alleging that the employer unlawfully suppressed wages by hiring undocumented workers could not proceed because the employees failed to provide any market wage or comparable data to support their allegations, the 11th U.S. Circuit Court of Appeals held.

Two former employees at a Georgia poultry processing plant filed a class-action RICO lawsuit against their former employer claiming that, despite receiving raises during their employment, they were underpaid because their wages were artificially suppressed by the employer’s hiring of undocumented immigrant workers. Both employees were legally authorized to work in the United States. They argued that by hiring an increasing number of undocumented workers and paying them a below-market wage, the company was able to underpay its documented workers.

The trial court dismissed the original complaint because it did not allege sufficient facts; however, the trial court provided the employees with an opportunity to file a new complaint with additional facts to support their claim. When they failed to add any such facts, the court again dismissed their lawsuit, but with no opportunity to try a third time.

On appeal, the 11th Circuit agreed with the trial court’s determination that the employees had not alleged sufficient data or facts to support their RICO claim. The court acknowledged that the employees’ supply and demand theory might be plausible, but they had no “real evidence” to support it and show a decrease in the employees’ wages. For example, they did not offer any market data to show that documented workers at other poultry plants in the relevant market were paid higher wages.

In fact, the only wage data that was provided to the court established that both of the employees’ wages actually increased by more than 30 percent during their relatively brief tenure at the processing plant. The employees failed to provide any evidence to suggest that their wage increases would have been greater absent the employer’s practice of hiring undocumented workers. As a result, the court ruled that their claim was properly dismissed.

Simpson v. Sanderson Farms, Inc., 11th Cir., No. 13-10624 (March 7, 2014).

Professional Pointer: Disgruntled employees and their attorneys are increasingly looking to bring claims under laws that are not typically thought of as “employment-related.” RICO, originally used as a means to go after organized crime, is now routinely used as a mechanism for private individuals to challenge alleged corporate misconduct. As this case demonstrates, RICO cases are difficult for plaintiffs to prove, but the potential liability and penalties if a RICO violation is established can be much greater than what is available under traditional “employment” laws. HR professionals can minimize risk by ensuring that their organizations have strong ethics and compliance policies and practices that encourage and require prompt reporting of unethical or illegal conduct.

David G. Weldon is an attorney with Franczek Radelet P.C., the Worklaw® Network member firm in Chicago.

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