Carpet Maker, Employees Reach $18 Million Settlement

April 13, 2010
Employees claimed the company hired illegal immigrants in an effort to reduce wages.

One of the world's largest carpet makers has agreed to an $18 million settlement with employees who claimed the company hired illegal immigrants in an effort to reduce wages.

U.S. District Court Judge Harold Murphy on April 12 granted a motion by employees of Mohawk Industries Inc. to preliminarily approve the settlement and certify the class, effectively putting an end to six years of legal wrangling.

"We are very pleased with the settlement," said Howard Foster, a lawyer for the employees.

The workers had claimed they received lower wages than employees at other companies in the northern Georgia region where Mohawk is based. The area is known as the "Carpet Capital of the World" and is home to carpet plants for Shaw Industries, Interface and others.

Mohawk does not admit to any of the allegations of wrongdoing, lawyer Juan Morillo said. "Mohawk is pleased to have reached a settlement that allows the company to put behind it the expense and distraction associated with this case," he said.

Mohawk's insurer, Zurich American Insurance Co., has agreed to pay $13 million of the settlement, with Mohawk contributing the remaining $5 million. The settlement allows about 48,000 current and former Mohawk workers to claim awards.

In addition to the cash award, Mohawk also agrees to train its employees about employment verification measures required by state and federal law and to set up a hot line to report allegations of hiring violations.

The lawsuit was originally filed in 2004, and the parties began negotiating a settlement last summer after the 11th U.S. Circuit Court of Appeals declared in May that Murphy erred in deciding not to certify the class in the case and said the judge needed to consider expert testimony.

The 11th Circuit had already ruled that Mohawk could be considered an enterprise under the Racketeer Influenced and Corrupt Organizations Act, or RICO. The employees charged that the company violated RICO by conspiring with employment recruiting agencies to hire illegal workers to lower wages. The U.S. Supreme Court declined in February 2007 to hear the company's appeal on that issue.

RICO is a federal law originally designed to fight organized crime. In 1996, Congress expanded the anti-racketeering law's reach beyond organized crime to include violations of immigration law, such as the hiring of illegal workers.

Foster, the Chicago-based lawyer for the employees, has filed similar lawsuits against several other companies around the country using the RICO law as justification. "This is the largest settlement of these cases that I've had," he said. "I think it will embolden us in filing more of these cases and hopefully will help get settlements in some pending cases."

Copyright 2010 The Associated Press

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