Federal labor regulators have accused Cargill Inc. of hiring discrimination at an Arkansas turkey plant, proposing to penalize the agribusiness giant by stripping it of more than $550 million in federal contracts.

The Department of Labor said Tuesday that it has filed suit contending that Cargill discriminated on a race or gender basis against more than 4,000 qualified entry-level workers at its operation in Springdale, Ark.

Minnetonka-based Cargill said the allegations are unfounded. "We find the Labor Department's allegations of discrimination to be disappointing, given that Cargill's employee population at Springdale is diverse and is 84 percent minority," the company said in a statement.

The Labor Department said its Office of Federal Contract Compliance Programs discovered the alleged violations during a scheduled review over laws prohibiting federal contractors from discrimination.

The Labor Department said Cargill, an agribusiness giant that is the country's largest privately held company, holds more than $550 million in meat supply contracts with the Department of Defense.

However, Mike Martin, a Cargill spokesman, said "we can't come up with $550 million in contracts, not for the DOD. We're at a loss as to how that number was derived."

Regulators found Cargill had "subjectively and inconsistently applied" hiring standards that led to women being less likely to be employed in entry-level production jobs, and Asian job seekers to be unfairly favored over other groups. "This is an unfortunate case in which thousands of qualified workers were denied the opportunity to compete fairly for jobs in a tough economy," Patricia Shiu, director of the Labor Department's contract compliance office, said in a statement.

Cargill responds

Cargill said that the period involved -- August 2005 to July 2008 -- was a time "when jobs were plentiful in Springdale," and the jobless rate there was below what the government considers full employment.

"This situation feels a lot like government-imposed hiring based on historical standards, not reality," Cargill said.

Cargill is one of the largest U.S. meatpackers, processing turkey, beef and pork. Its Springdale turkey plant, with more than 1,200 employees, was also at the center of one of the largest meat recalls in U.S. history this year. The recall of 36 million pounds of ground turkey was linked to a nationwide outbreak of salmonella that sickened 136 and led to the death of a California woman.

Back wages at issue

The plant's ground turkey production line has been shut down for more than two months as Cargill and federal safety regulators work to figure out what went wrong. Other production continues as usual.

The Labor Department complaint against Cargill was filed with the department's Office of Administrative Law Judges. The department said it filed suit after failing to get Cargill to pay back wages and interest to the alleged victims of discrimination and to extend job offers to at least 167 of them.

The government is seeking to cancel Cargill's federal contracts and prohibit it from future business until it resolves the violations.

The Cargill suit marks the second time in recent months that the Labor Department's federal contract compliance office has taken action against a major meatpacker for alleged discrimination. In September, Tyson Foods agreed to pay $2.25 million to settle a discrimination claim. The money was earmarked for back pay and interest to more than 1,650 qualified female job applicants at plants in Illinois, Iowa and Nebraska.

The Labor Department's Shiu indicated this past summer that her office is in a "period of renaissance," benefitting from increased staff and implementing a new compliance review strategy for federal contractors, according to a recent newsletter from Twin Cities employment law firm Felhaber, Larson, Fenlon & Vogt.

Brian Benkstein, an attorney at the firm, said he's heard more comments from businesses -- and not only in the meatpacking industry -- about a more aggressive stance by the Labor Department's contract compliance office. "We're hearing how it plays out as it relates to our clients," he said.

Mike Hughlett • 612-673-7003