Sarah Altschuller: Due diligence on your labor supply chain

The International Labor Organization estimates that nearly 21 million people are victims of forced labor worldwide, working in industries ranging from agriculture to electronics manufacturing.

Emerging legal requirements and news reports have raised the profile of labor trafficking as a legal and reputational risk to be carefully considered in corporate boardrooms.

Specifically, statutes like the U.K. Modern Slavery Act and the California Transparency in Supply Chains Act require large multinational companies to make public disclosures on their efforts to assess and manage the risks of labor trafficking in their supply chains.

Relevant legal requirements also include recent amendments to the Federal Acquisition Regulation that require certain U.S. federal contractors to develop detailed compliance plans to address the risks of trafficking associated with the goods and services that they provide to the U.S. government.

Companies responding to these new requirements are often struggling to achieve full visibility with regard to increasingly complex supply chains, including the labor force that may be connected to a diverse range of subsidiaries and suppliers. Effectively addressing this challenge requires the work of multiple actors, coordinating efforts at various points along the supply chain. 

Notably, as a response to this challenge, in June 2017, the Electronic Industry Citizenship Coalition launched the Responsible Labor Initiative, a multi-industry, multi-stakeholder initiative that will work to ensure that the rights of workers vulnerable to forced labor are respected.

Just as effectively addressing concerns with regard to labor trafficking will require multi-stakeholder solutions, companies should ensure that their internal compliance efforts are appropriately integrated. Corporate personnel focused on anti-corruption compliance efforts should be aware of the relative risk that labor trafficking may be associated with discrete aspects of the company’s operations, including the activities of subsidiaries, business partners, and suppliers.

These risks may be associated with specific geographies, the types of work being performed, and especially the use of labor recruiters by different parts of the business.

Adopting a coordinated approach to managing business risks linked to labor trafficking and corruption will both strengthen internal compliance efforts and avoid the adoption of duplicative due diligence measures. Coordinated efforts will also help companies recognize and respond to the specific risks of corruption-related liability associated with their labor supply chains.

Labor trafficking is a lucrative crime and is often dependent upon bribes being paid to immigration authorities, law enforcement officials, border control personnel, and other public officials. To the extent that a company is knowingly benefiting, directly or indirectly, from the cheap labor that results from such bribery, a company and its officers could face liability under the Foreign Corrupt Practices Act.

Due diligence on the sources of labor that a company relies upon both directly and indirectly should be integrated into anti-corruption compliance efforts. Companies should ensure that relevant personnel are appropriately trained to assess and respond to interlinked corruption- and human rights-related risks. 

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Sarah Altschuller is an attorney in the Corporate Social Responsibility practice at Foley Hoag LLP, where she is the editor and primary author of the Corporate Social Responsibility and the Law blog. In 2017, she was the only U.S.-based attorney recognized by Chambers Global in its first-ever ranking of law firms advising on business and human rights concerns.