United States: House Bill Would Require Public Disclosure Of Company Policies To Combat Supply Chain Trafficking

On July 27, 2015, U.S. Representatives Carolyn Maloney (D-NY) and Chris Smith (R-NJ) introduced the Business Supply Chain Transparency on Trafficking and Slavery Act of 2015 (H.R. 3226) (the "Bill"). The Bill would require that publicly traded companies more broadly and specifically disclose their policies and efforts aimed at ridding their supply chains of slavery and human trafficking. It is anticipated that a Senate version of the Bill will be introduced soon. The Bill is similar in certain respects to the United Kingdom's recently enacted Modern Slavery Act 20151 and the California Transparency in Supply Chains Act of 2010, which took effect in 2012.2 The Bill also bears some similarity to recent amendments to the Federal Acquisition Regulation, effective March 2, 2015, also directed at eliminating trafficking within government contractors' supply chains.3

The Proposed Requirements

The Bill would amend Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) to require publicly traded companies with over $100 million in annual worldwide gross receipts to disclose on their website, and report yearly to the Securities and Exchange Commission (SEC), the extent to which they conduct any of the following activities:

  • Maintain and enforce a policy to identify and eliminate the risks in their supply chains of forced labor, slavery, trafficking, and the worst forms of child labor. "Forced labor," "slavery," and "human trafficking" are defined in the Bill as any labor practice or trafficking activity in violation of national and international standards, including ILO Convention No. 182, the Trafficking Victims Protection Act of 2000, and acts that would violate certain provisions of federal criminal law if they had been committed in the United States. "The worst forms of child labor" similarly refers to child labor in violation of national and international standards, including ILO Convention No. 182.
  • Maintain a policy prohibiting their employees and the employees associated with their supply chains from engaging in commercial sex acts with a minor. Notably, the Bill broadly defines the term "supply chain" to include all labor recruiters, suppliers of products, components parts of products, and raw materials used by the company in the manufacturing of its products—whether or not the company has a direct relationship with the supplier.
  • Engage in third-party evaluation of the risks in their supply chains of forced labor, slavery, trafficking, and the worst forms of child labor, including a description of measures taken to eliminate the risks and consultation with labor unions, workers' associations, or workers.
  • Conduct audits of suppliers, which include investigating their labor practices, verifying whether they have the appropriate systems in place to identify the risks of forced labor, slavery, trafficking, and the worst forms of child labor within their own supply chains, and evaluating whether those systems comply with the company's own policies.
  • Require suppliers to attest that the materials they manufacture and their recruitment of labor are carried out in compliance with laws4 concerning forced labor, slavery, trafficking, and the worst forms of child labor.
  • Maintain internal accountability standards, supply chain management, procurement systems, and reporting procedures for employees, suppliers, contractors, or other entities in their supply chains who fail to meet the company's standards on forced labor, slavery, trafficking, and the worst forms of child labor.
  • Train the employees and management who have direct responsibility for supply-chain management on issues related to forced labor, slavery, trafficking, and the worst forms of child labor, especially with respect to mitigating risks within the supply chains.
  • Ensure that suppliers' recruitment practices comply with both the company's policies combating exploitative labor practices and the audits of labor recruiters.
  • Ensure, where forced labor, slavery, trafficking, and the worst forms of child labor are identified in the supply chain, that remedial action is provided to victims, including support for programs designed to prevent such events in the industry or sector where they are identified. "Remedial action" is defined as the activities or systems the company puts in place to address non-compliance identified through monitoring or verification; the Bill notes without elaboration that these systems "may" apply to either individuals adversely impacted by the non-compliant conduct or to address "broader systematic processes."

The Proposed and Required Disclosures

According to the Bill, the link on the company's website must be labeled, "Global Supply Chain Transparency," and disclosures responding to the listed items must be placed under a heading entitled, "Policies to Address Forced Labor, Slavery, Human Trafficking, and the Worst Forms of Child Labor."

In addition to a link on the company's website, and to further publicize these matters, the Bill would require the SEC to post on its own website a list of companies required to make the disclosures as well as a compilation of the information they disclose.

If the Bill were to pass, within a year of enactment, the SEC and Secretary of State would be required to issue regulations implementing the disclosure requirements. Although the Bill does not expressly set forth remedies for failure to comply, it is possible the SEC would have responsibility to enforce the disclosure requirements, as the bill adds those requirements by amending the Securities Exchange Act.

The Bill in its Broader Context

Of course, until its passage, the Bill does not have the force of law, and questions remain whether and in what form it will advance through Congress. Nevertheless, the Bill represents an additional example of broader government action aimed at addressing adverse human rights impacts throughout corporate operations, business partnerships, and suppliers. The House justification for the Bill is, in part, to provide a means to assist investors and consumers from "inadvertently promoting or sanctioning ... crimes through production and purchase of raw materials, goods and finished products that have been tainted in the supply chains."

Entities covered by the Bill may or may not also be covered by the California and UK laws, and vice versa. Retail and manufacturing businesses are the only entities covered by the California law; the Bill and the UK law do not contain that limitation. The UK law, unlike the Bill and the California law, applies only to certain entities that satisfy a minimum turnover requirement, and lacks a $100 million global gross receipt threshold. Furthermore, the Bill, unlike the California law, covers only public companies.

While the listed disclosure items across the two laws and the Bill are similar, there are differences among them, including the "due diligence processes" referenced in the UK law and the "independent, unannounced" audits in the California law. The Bill expressly proposes requiring disclosures related to suppliers' recruitment practices; the UK and California laws do not.

Moreover, like the UK and California laws, the Bill proposes only the disclosure of the extent to which entities perform the listed items; it does not require that they take affirmative action. For example, while the Bill proposes requiring companies to report whether they maintain and enforce a policy to identify and eliminate the cited supply chain risks, the measure does not mandate that the companies actually maintain and enforcement such a policy. Of course, even though a company could comply with the Bill by disclosing that it takes no action to combat trafficking, doing so could have negative implications for the business's reputation.

Finally, the Bill, like the California law, notes without elaboration that the link be "conspicuous and easily understandable," but does not state whether a company can post the link on a page other than the homepage, such as on a corporate social responsibility page of its website, or one containing other information it reports to the SEC.5

Littler will monitor this Bill and report on any developments. In the meantime, companies with questions about the Bill, or broader business and human rights matters, should consult experienced employment counsel.

Footnotes

1. See Tahl Tyson, United Kingdom: New Law to Combat Supply Chain Slavery and Human Trafficking, Littler ASAP (July 14, 2015).

2. See John C. Kloosterman, California Supply Chain Law Affects Large Retailers and Manufacturers Doing Business in California, Littler Insight (Dec. 2, 2011).

3. See Elizabeth A. Lalik and Katherine A. Fearn, Anti-Trafficking Regulations Impose New Obligations on All Federal Contractors, Littler Insight (Apr. 10, 2015).

4. The Bill does not specify what "laws" should be minded pursuant to this requirement.

5. In its guidance on the California law, the California Attorney General's office takes the view that the link must be posted on the company's homepage, not on a sub-page, like a corporate social responsibility page or one linking to SEC filings. It will be interesting to see if the Bill ultimately adopts the California approach.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Michael G. Congiu
John Kloosterman
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions