Hiring Illegals: The Risks Grow

A federal suit at Tyson opens the door to a class action

Talk to former Tyson Foods Inc. (TSN ) employee Doris Jewell, and she'll insist that the hiring of illegal Mexican workers at the Shelbyville (Tenn.) plant where she worked on the production line was no secret to top Tyson executives at headquarters in Springdale, Ark. "They knew what they were doing down there," she scoffs. Now she and three other ex-Shelbyville workers are suing the company for allegedly depressing the wages of legal workers at 15 plants through an "illegal-immigrant hiring scheme" that violated federal racketeering laws, as their complaint states.

The novel legal tactic put Tyson--and potentially other big employers--at the center of a new kind of war against illegal immigration being waged by the federal government and creative plaintiff attorneys. For the first time, companies could face gargantuan fines, damage awards, and even jail sentences. That could force hiring patterns to change quickly. Jewell's class action is riding the coattails of a massive federal indictment of Tyson in December alleging that the world's largest poultry producer conspired to smuggle workers into the U.S. The government says that thousands of Tyson's 120,000 workers, who start at about $9 an hour, may be illegal.

Tyson vigorously denies a conspiracy to hire illegal workers and calls any violations of federal law "isolated incidents" carried out by a handful of mid- and lower-level managers, at least eight of whom have been fired. The company is fighting the civil and federal suits and has rejected the government's $100 million settlement proposal, which dwarfs the previous $1.9 million record fine set in another case. "This company does not want to hire undocumented workers. That's not our objective," says Tyson General Counsel Les R. Baledge.

Still, if the government's new legal strategy succeeds, it could transform the way the U.S. handles the chronic problem of illegal immigration. Ever since the 1986 immigration law made it illegal to knowingly hire undocumented aliens, enforcement has been halfhearted, with sporadic workplace raids and employer fines. So illegal immigration actually swelled sharply in the 1990s, to as many as 7 million estimated today.

Now, the government is focusing on employers that work with recruiters and agencies that bring in illegals. If companies are hammered by fines and punishment, hiring practices will be altered and many immigrants may find it more difficult to get a job, even when employers need help. "It's a strategy designed to create more of an impact than revolving-door prosecutions of illegals," says John P. MacCoon, the assistant U.S. attorney in Chattanooga in charge of the Tyson case.

The feds' new approach relies on the hard fist of criminal law instead of the softer civil sanctions typically used under the 1986 act. The first test came in 1998, when the Justice Dept. successfully prosecuted Georgia apparel maker Atlantic Finishing and its president for working with groups that smuggled in Mexican workers. The executive pled guilty and drew a 10-month prison term.

The Tyson suit ups the ante dramatically by focusing on an $11 billion company with 125 plants nationwide and a widely recognized brand name. After a two-year investigation, the government charged Tyson officials with conspiring with a smuggler and temporary-service agencies to recruit illegal workers, mostly from Mexico. Tyson retorts that the only worker-smuggling done was by undercover government agents who had approached company officials.

Meanwhile, the feds' anti-smuggling efforts caught the attention of plaintiffs' lawyers, who have some new legal theories, too. Historically, workers and competitors affected by illegal hires had no standing to sue for damages because they couldn't take the government to court for its failure to enforce a law. But in 1996, Congress expanded the Racketeer-Influenced & Corrupt Organizations Act (RICO) to include knowingly hiring illegal workers. That, say the Tyson plaintiff lawyers, allows workers to sue for the triple damages allowed under RICO.

This is an untested theory. Chicago attorney Howard W. Foster, who represents the Tyson workers, still has to prove that an employer of illegals worked with an outside "enterprise" such as a recruiter. Since that's just what the government alleges Tyson did, he's piggybacking his case on Justice's. Foster also may be able to use the feds' $100 million settlement demand to help determine workers' damages. The sum represents an estimate of the difference between what Tyson would have paid its workers if none had been illegal and what it actually did pay them.

Foster has lost a similar suit against an agricultural company but is making headway on another one. One client, Commercial Cleaning Services LLC, sued rival Colin Service Systems Inc. for using low-wage illegals to lower its costs and underbid competitors unfairly. A U.S. Appeals Court last November allowed the case to go forward. The decision is a major step for Foster's legal theory because it acknowledges that private parties can suffer damages from immigration law violations even when the government is enforcing the law.

Indeed, it's the prospect of large damages that troubles employer groups most. If companies that hire illegal workers face liabilities, that could become "a huge club that forces you into settlements even when you're not guilty" of smuggling, argues Randel K. Johnson, a labor expert at the U.S. Chamber of Commerce. If that happens, many more companies could find themselves in Tyson's uncomfortable shoes.

By Wendy Zellner in Dallas

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