Fourth Circuit Rejects RICO Claim Based on the Hiring of Unauthorized Aliens

Recently, employers have found themselves the targets of RICO lawsuits for employing aliens who are unauthorized to work in the United States.  These lawsuits have been brought by other employees of the company, who are authorized to work, claiming that the employer’s hiring of “illegal aliens” unlawfully depressed their wages.  The U.S. Court of Appeals for the Fourth Circuit (which covers Maryland and Virginia) recently addressed such a lawsuit for the first time in Walters v. McMahen.  In that decision, the Fourth Circuit affirmed dismissal of the RICO lawsuit because the plaintiffs did not allege a violation of two RICO predicate acts.

To maintain a civil RICO claim, a plaintiff must commit at least two distinct but related acts of racketeering (known as “predicate acts”).  In Walters, the plaintiffs alleged that knowingly hiring multiple unauthorized aliens brought into this country illegally constituted one predicate act.  The second predicate act, according to the plaintiffs, consisted of the alleged fraudulent use and attestation of documents by the employers.  The Fourth Circuit rejected both of these predicate acts.

The illegal hiring predicate requires that the defendant have employed at least 10 aliens within a 12-month period and that each alien have been brought into the United States.  According to the court, “the fatal deficiency of the illegal hiring predicate allegations is the failure to provide sufficient factual support concerning the unauthorized aliens’ entry into the United States.”  In particular, there were no factual allegations that supported the plaintiff’s assertion that the employers’ hiring clerks had “actual knowledge” that the unauthorized aliens had been brought into the country with the assistance of others.  Furthermore, the court rejected the contention that the employer’s hiring clerk knowingly hired ten or more unauthorized aliens within one year with knowledge that they each received assistance crossing the border between the United States and Mexico.  Put simply, the plaintiffs failed to plead sufficient facts to advance their claim regarding the first predicate from conceivable to plausible.

The court concluded that the allegations concerning the second predicate act were also deficient.  The court held that the fraudulent use and attestation of documents by the employers did not proximately cause any injury to the plaintiffs.  Since there must be a direct relationship between the injury asserted and the predicate act alleged, the allegations regarding the false attestation predicate act were legally insufficient.

The Fourth Circuit’s decision was very fact-specific and did not entirely foreclose the possibility of a successful RICO claim based on illegal hiring practices in the future.  However, it is clear that any plaintiff pursing a RICO claim in the Fourth Circuit against an employer based on its hiring of unauthorized aliens faces an uphill battle.