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Apr 14

Hiring illegals costs carpet maker $18 million

Posted by Stephen Taub in Supreme CourtsettlementrICOillegalscompliance

Stephen Taub

So, you think you can save money by hiring illegals at lower salaries than U.S. citizens and legal residents are willing to take? Think again.

Just ask the folks at carpet maker Mohawk Industries.

The company-based in Dalton, Ga., the carpet capital of the world--agreed to pay $18 million to settle a six-year old lawsuit with legally-authorized, hourly-paid workers who alleged that their wages at Mohawk's facilities in Northwest Georgia were depressed by the hiring of illegal immigrants.

The settlement entitles about 48,000 former and current hourly-paid Mohawk employees to claim awards from an $18 million settlement fund.

According to the Associated Press, Mohawk's insurer, Zurich American Insurance Company, will pay $13 million of the settlement and Mohawk will kick in the remaining $5 million.

Mohawk has also agreed to conduct training regarding the verification of employment eligibility.

Even so, in the press release, Mohawk stresses it does not admit any of the plaintiffs' allegations of wrongdoing. "Mohawk has always trained its employees to comply with the immigration and workplace laws, and this settlement affirms the company's commitment to a continued culture of compliance," Mohawk's attorney Juan Morillo adds. "Mohawk has provided and continues to provide good jobs with great benefits to tens of thousands of workers in Georgia and elsewhere."

The case wound its way through a maze of courts over a six-year period.

It included three years of litigation to resolve Mohawk's appeal of U.S. District Court Judge Harold L. Murphy's 2004 ruling that the plaintiffs stated a claim under the federal and Georgia RICO laws. After the U.S. Court of Appeals for the Eleventh Circuit affirmed that ruling, the U.S. Supreme Court heard the case in 2006. The Supreme Court ultimately returned the case to the Eleventh Circuit, which ruled that the plaintiffs could proceed in 2007.

The plaintiffs then tried to be granted class action status. In 2008, Judge Murphy denied the plaintiffs' Motion for Class Certification, precluding the proposed class of employees from obtaining relief in this case. The Eleventh Circuit accepted the plaintiffs' request to review that decision, and in May 2009, vacated the decision denying class certification and sent the case back to Judge Murphy to reconsider the question of class certification.

Settlement discussions occurred after the two sides agreed on a mediator.

Howard Foster of Chicago-based Foster P.C., who argued the employees' case in the Supreme Court, told the AP this is the largest settlement of these cases he has had. "I think it will embolden us in filing more of these cases and hopefully will help get settlements in some pending cases," he added.


Employers are fore-warned.

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