As communication technologies and trade become increasingly international and as expatriate employment becomes more common, more companies recognize the need to become "global" and are re-engineering their entire business structures to that end.
This global growth and expansion of business has led multinational companies, under the pressure of trade unions, non-governmental organizations and consumers which are campaigning for international action against labor rights violations, to adopt ethical guidelines and voluntary workplace codes of conduct in order to maintain minimum labor standards in their subsidiaries all over the world.
Some multinational companies have even created workplace codes of conduct applicable to their vendors, licensees and suppliers and more generally to their contractors and business partners. Among these companies are Nestle, Adidas and Levi Strauss. For instance, Levi Strauss imposes penalties on contractors who violate its Global Sourcing and Operating Guidelines. If it determines that a business partner has violated the Guidelines, Levi Strauss may withdraw production from the partner’s factory, terminate the business relationship, or require the contractor to implement a corrective action plan.
Deplorable working conditions and unfair trade practices are still common in developing countries where goods are produced to be sold under well-known labels in the US, Europe and other consumer countries. However, there is no need to go to a developing country to be involved in unfair practices like bribery: the investigation of the International Olympic Committee’s actions in Salt Lake City is a reminder that bribery may also exist in the USA.
B. MAIN TOPICS COVERED BY INTERNATIONAL CODES OF CONDUCT
Generally, codes of conduct cover the following four main area:
- freedom of association and the effective recognition of the right to collective bargaining;
- the elimination of all forms of forced and compulsory labor, whether in the form of prison labor, indentured labor, bonded labor or otherwise;
- the effective abolition of child labor;
- the elimination of discrimination in respect of employment and occupation: no person should be subject to any discrimination in employment, including hiring, salary, benefits, advancement, discipline, termination or retirement on the basis of gender, race, religion, age, disability, sexual orientation, nationality, political opinion or social or ethnic origin.
C. DO CODES OF CONDUCT REALLY MAKE A DIFFERENCE?
Adopting a code of conduct is increasingly perceived by multinational companies as necessary or appropriate for the following reasons:
- to be seen socially responsible;
- to enhance the company’s reputation by demonstrating, for example, integrity and other values which are seen to match the organization’s business;
- to give guidelines to employees and business partners on what conduct is acceptable and what is not;
- to proceed with the global integration by establishing a global branding or image acceptable across the world.
D. ARE INTERNATIONAL CODES OF CONDUCT ENFORCEABLE ?
1) Is there such a thing as an effective international code of conduct ?
Critics have argued that there are simply too many legal and cultural obstacles to implementing and enforcing a viable and consistent set of uniform global employment policies and practices. Furthermore, senior executives and shareholders generally are far less interested in social and ethical issues than in bottom-line financial information such as earnings and cash flows.
No one can deny that employment laws in the international arena may differ significantly according to the legal, social, political and economic forces in each country. Indeed, while employment relationships in the US are governed by private arrangements, which are voluntarily, entered into between employers and employees, they generally consist in other industrialized countries in a comprehensive and paternalistic set of legal rules whose main purpose is to protect employees in their subordinate relations vis-à-vis their employers. As a result, most employment laws in industrialized countries and in particular in Western Europe are more employee-friendly than US employment law (including California law) and tend to regulate the employment relationship far more intrusively than does the US.
However, codes of conduct may rely upon some employment doctrines emerging from global bodies such as the World Trade Organization, the International Labor Organization, the Organization for Economic Cooperation and Development and some regional trade regulations. The World Trade Organization (W.T.O.) has been discussing enshrining labor rights to trading agreements and treaties, and the World Bank is proposing to tie loans to compliance with minimum standards.
2) The I.L.O and its initiatives relating to global codes of conduct
There are initiatives from the International Labor Organization with respect to international corporate compliance programs.
Even if the ILO does not have any enforcement powers, it is an international body, which is able, by its constant pressure, to create an influence over countries not dealing in a democratic way in matters regarding workers and exposing children to hard labor. The ILO is also an important factor in the industrialized countries where the various ILO Conventions are being a significant tool in the structure of the labor force and their rights and duties (e.g. ILO Conventions 29 and 105 on forced and bonded labour; ILO Convention 87 on freedom of association; ILO Convention 182 on worst forms of child labour).
As a result, no country that is a member of ILO is keen to be pointed out as not complying with its conventions.
The key international labor standards are the core ILO standards through various programs aimed at promoting certain projects (e.g. the project on prevention of child labor which is including the prevention of slavery and prostitution). Since 1995, the International Labor Organization has been seeking to encourage as many countries as possible to sign "core" conventions of the ILO, including those relating to:
- the right of freedom of association;
- the right to organize and bargaining collectively;
- the abolition of forced labor;
- the respect of the minimum employment age regarding child labor;
- equal pay for work of equal value; and
- non-discrimination in employment.
In June 1998, the ILO issued its Declaration on Fundamental Principles and Rights at Work in order to promote the fundamental rights of freedom of association and right to collective bargaining, elimination of all forms of forced labor, effective abolition of child labor and the elimination of employment discrimination.
3) International trade union movement
Guidance on the international labor standards can also be seen in the "Basic Code of Conduct covering Labor Practices", which was adopted by the executive board of the International Conference of Free Trade Unions (ICFTU) in Brussels in December 1997 - by far the most representative existing global trade union - and the International Trade Secretariat (ITS).
4) The Social Accountability 8000 standard
There is a uniform independent method to measure and certify the integrity of global workplace codes of conduct – the Social Accountability 8000 standard ("SA 8000"). This standard provides a means for companies and consumers to ensure that the policy and practices of the companies whose goods they purchase meet minimum labor standards.
5) The O.E.C.D. Guidelines
The Organization for Economic Cooperation and Development has issued Guidelines for Multinational Enterprises whereby O.E.C.D. member-states are expected to recommend that multinational headquartered in their countries consider voluntarily adoption and compliance with recommended international labor standards (e.g. right to free association and collective bargaining, non-discrimination and commitment to employee training and development …).
More particularly, under the O.E.C.D. Guidelines, companies should:
- respect the right of their employees to be represented by trade unions and other bona fide organizations and engage in constructive negotiations with them on employment conditions;
- observe standards of employment and industrial relations not less favorable than those observed by comparable employers in the host country
- implement their employment policies including hiring, discharge, pay, promotion and training without discrimination unless selectivity in respect of employee characteristics is in furtherance of established governmental policies which specifically promote greater equality of employment opportunity.
Even though the Guidelines are voluntary and, consequently, not legally enforceable, the O.E.C.D. Guidelines have proven, in the two decades of their existence, to be a respected point of reference for a great number of companies. Furthermore, they carry the weight of a joint Recommendation of O.E.C.D. governments. In addition, their language has influenced considerably the other codes of conduct for multinational enterprises, such as the ILO Tripartite Declaration and the Code of Conduct for Transnational Corporations of the United Nations.
The Office of Investment Affairs of the US State Department is responsible for encouraging compliance with the O.E.C.D. Guidelines.
6) Codes of conduct and Human Rights
In 1999, the United Nations issued a Global Compact consisting of nine principles covering human rights and the environment.
Furthermore, regional Human Rights Conventions (e.g. the European Convention on Human Rights of 1950, the American Convention on Human Rights of 1969 and the African Charter on Human and Peoples’ Rights of 1981) provide for the practical implementation of the principles set out more generally in the Universal Declaration of Human Rights, which covers social but also economic, cultural, as well as civil and political rights.
7) Global labor standards issued by business and industry associations
Interestingly, in a number of industries, there has been an agreement on a code of conduct. IN the E.U., the most notable so far is that reached in the textile industry between the European partners in this sector.
Outside Europe, a number of business and industry associations also have issued global labor standards. Among these are the American Chamber of Commerce in Hong Kong and the Fair Labor Association.
In 1997, the members of the Apparel Industry Partnership (A.I.P.) have created the Workplace Code of Conduct and Principles of Monitoring. To achieve the objective of establishing a means to provide the public with confidence about implementation of the Workplace Code and the Monitoring Principles, the members of the A.I.P. set forth a charter for the formation of a Fair Labor Association with the following purposes:
- to accredit independent external monitors to conduct independent external monitoring and inspections of the facilities of the participating companies;
- to certify whether the brands of each participating company are produced in compliance with the Fair Labor Association Standards;
E. The limit of the enforceability of international codes of conduct:
There are some standards that cannot be uniformly applied to all countries because not all countries are rich enough and sufficiently developed to apply them. This is, for instance, the case of the following standards:
- minimum safe and healthy working environment to prevent accidents and injury to health;
- wages and benefits;
- working time and compensation for overtime hours.
In other words, standards must be variable, appropriate to a country’s stage of development. For example, considering a fixed minimum wage that would be applicable around the world is just an illusion. A more useful approach might be to request that wages and benefit levels be equal to minimum local law requirements or the local prevailing industry wage, whichever is higher.
In any event, harmonizing the social policies of countries within the same free trade area is a condition precedent to the implementation of codes of conduct incorporating sophisticated labor standards such as wages and benefits, working time and compensation for overtime hours.
Currently, the North American Free Trade Agreement and the European Union are the two most significant multi-jurisdictional bodies which produce labor standards. The U.S. and the European Union have each recommended core labor standards for adoption by multinational corporations.
More particularly, in 1996, the US Department of Commerce issued the US Model Business Principles in order to encourage companies to develop through codes of conduct a corporate culture that:
- respects free expression consistent with legitimate business concerns, and does not condone political coercion in the workplace;
- encourages good corporate citizenship and makes a positive contribution to the communities in which the company operates, and where ethical conduct is recognized, valued and exemplified by all employees.
Adoption of codes of conduct reflecting these principles is voluntary in the US Model Business Principles.
On December 7, 2000, the European Parliament issued the Charter of Fundamental Rights of the European Union, which lists the civil, political, economic and social rights of European citizens and all persons residing in the European Union.
However, it is undoubtedly easier to implement labor codes of conduct incorporating sophisticated labor standards in the European Union than in the NAFTA area. The reason for this is that, contrary to NAFTA, the E.U. is more than an agreement on free trade among its member states. It creates a single market for goods and services within the Union’s entire territory, which means that no single European state’s employment laws can be allowed to impede free movement of goods and services within Europe such as the free movement of workers guaranteed by Article 48 of the E.U. Treaty.
However, because of the reluctance of the some member states (e.g. the United Kingdom) to allow Brussels to extensively regulate social matters, because also employment initiatives have for long parts of the EU’s history required a unanimous vote of EU member states for approval, and because employment issues remain a political "hot button", the EU had only furthered its employment agenda in earnest since the mid-1990’s.
If the European Union gives rise to a significant area of international employment law practice since the mid-1990’s, this is not the case so far for NAFTA.
When NAFTA was being negotiated, US organized labor and US workers’ rights groups argued that if the North American countries were to enjoy free trade, Mexico should first have to raise its "labor standards" up to the standards of US law as it had a competitive advantage by employing workers under "lower standards". This US request has not been successful as it finally appeared that Mexico had ratified many more of the ILO conventions than had the US, and Mexico overall had a far stronger legislative record than did the US.
Therefore, under the NAFTA’s labor side agreement i.e. the North American Agreement on Labor Cooperation (NAALC), no NAFTA country has been forced to undergo any significant initiative to change its employment law enforcement mechanisms.
Essentially, the NAALC establishes a set of substantive labor principles to guide the development of domestic legislation (e.g. protection of workers in association and organization, the right to strike to protect collective interests, the prohibition on the use of forced labor, labor protections for children and young workers, the adoption of occupational health and safety standards …). It also erects a framework for extensive trilateral oversight of enforcement practices within each signatory country. However, the Side Agreement does not create any particular worker rights under domestic law. Nor does it provide sanctions to remedy violations of workers rights enumerated in the underlying Treaty.
F. Ingredients to create an effective code of conducts:
Global codes of conduct must:
- establish clear and written workplace standards;
- develop a questionnaire to verify and qualify compliance with the workplace standards;
- formally convey those standards to company’s subsidiaries as well as to licensees, contractors and suppliers;
- require local manager and contractors and suppliers to complete and submit the questionnaire to the company on a regular basis;
- receive written certifications on a regular basis from subsidiaries as well as contractors and suppliers that standards are being met, and that employees have been informed about the standards;
- obtain written agreement to subsidiaries and contractors and suppliers to submit to periodic inspections and audits, including by accredited external monitors, for compliance with workplace standards;
- have company’s monitors conduct periodic audits of production records and practices of wage, hour, payroll and other employee records and practices of company factories and contractor and suppliers;
- ensure that all subsidiaries as well as contractors and suppliers inform their employees about the workplace standards orally and through the posting of standards in a prominent place (in the local languages spoken by employees and managers) and undertake efforts to educate employees about the standards on a regular basis: in practice, many codes of conduct are not communicated properly to employees;
- provide training on a regular basis about the workplace standards and applicable local and international law, as well as about effective monitoring practices so as to enable company monitors to be able to assess compliance with the standards;
- have trained company monitors conduct periodic announced and unannounced visits to an appropriate sampling of company factories and facilities of contractors and suppliers to assess compliance with the workplace standards;
- develop a secure communications channel, in a manner appropriate to the culture and situation, to enable company employees and employees of contractors and suppliers to report to the company on noncompliance with the workplace standards with security that they shall not be punished or prejudiced for doing so;
- consult periodically with legally constituted unions representing employees at the worksite regarding the monitoring process and utilize, where company deem appropriate, the input of such unions;
- assure that implementation of monitoring is consistent with applicable collective bargaining agreements;
- work with local managers, contractors and suppliers to correct instances of noncompliance with the workplace standards promptly as they are discovered and to take steps to ensure that such instances do not recur conditions future business with contractors and suppliers upon compliance with the standards.
An international code of conduct that is thoughtfully designed and carefully enforced can be very influential in creating a more ethical atmosphere and deterring corporate misconducts globally. As a result, these codes are viewed by many companies as a part of an ongoing educational and informational program vis-à-vis their employees and business partners.
At a time when the U.N. Secretary General urges multinational companies to adopt international compliance programs at the World Economic Forum in Davos, arguing that codes of conduct may be legally and culturally specific and lack global impact is no longer true as there are now various models of global codes of conduct emerging from international organizations, which are respected points of reference for a great number of companies. Needless to say, codes of conduct can only be effectively developed when counsel has a firm grasp of the local law in relevant substantive areas. This may require retaining local counsel to assure that local law is being observed.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.