United States: California Laws Are Being Used To Advance Human Rights Claims Based On Global Supply Chain Activities

Recent class actions have claimed that companies have violated California consumer fraud and unfair competition laws resulting from alleged forced labor in their global supply chains. These state law claims argue that companies are liable for allegedly misrepresenting in various corporate declarations their efforts to eradicate forced labor from their global supply chains. Plaintiffs have argued that corporate statements referring to international standards, such as the U.N. Guiding Principles on Business and Human Rights (the "UN Guiding Principles") and International Labour Organization (the "ILO") Conventions, contribute to the companies' duties to disclose the use of any forced labor in their supply chains.

The California Class Actions

In August and September of 2015, six class action cases were brought in California federal courts against companies for their purported failure to disclose alleged forced labor in their supply chains based in Thailand and West Africa. Each lawsuit alleges violations of California's consumer protection and unfair competition laws.1

These class action complaints contend that the respective companies failed in their duties to disclose the use of forced labor or the "likelihood of forced labor" in their supply chains. Plaintiffs assert that these duties arose from the companies' superior knowledge of their own supply chains and the companies' representations that they did not tolerate the use of forced labor by their suppliers. The sources of these representations include the companies' supplier codes of conduct, publicly proclaimed corporate business principles, corporate social responsibility reports, disclosures on company websites pursuant to the California Transparency in Supply Chains Act (the "California Supply Chain Act")2 and, in three cases, the industry's public commitments, to which the defendant-companies are signatories.

Attempting to Tie in International Instruments

By referencing these corporate statements as bases for their consumer protection claims, the plaintiffs in these cases have brought to bear a wide range of international instruments on forced labor. For example, the plaintiffs in two of the cases brought against the same company partly based their claims on the company's corporate business principles, which refer to the UN Guiding Principles, which in turn emphasize the corporate responsibility to respect labor rights. The plaintiffs in these cases also reference the company's supplier code of conduct, which sets company expectations on the prohibition of child labor "in accordance with ILO Minimum Age Convention No. 138." Similarly, the plaintiffs in another case partly based their claims on the company's Corporate Business Principles, which include a statement that the company "fully support[s] the United Nations Global Compact's guiding principles on human rights and labour," and the company's supplier code, which strictly prohibits the use of child labor "in line with ILO Convention 138 on the Minimum Age, and Convention 182 on the Elimination of the Worst Forms of Child Labour." These plaintiffs allege that these international standards to which the companies have publicly committed contribute to the established "public policies" against the used of forced labor, and to the companies' duties to disclose their alleged use of forced labor.

While five of the complaints appear to follow a similar "cookie-cutter" format, one is notably different. In this complaint, the plaintiffs not only based their consumer protection claims on the company's public statements on eradicating forced labor from its supply chains, but also alleged direct violations of the federal Trafficking Victims Protection Act and its reauthorizing acts, the California Supply Chain Act3 and other California laws aimed at combating forced labor, as well as "international conventions," including ILO Convention No. 29 on forced labor, and the Universal Declaration of Human Rights, as support for their unfair competition claim against the company. In the other five complaints, the unfair competition claims were premised on violations of the consumer protection laws, which in turn alleged the companies had falsely misrepresented the absence of forced labor in their supply chains. Thus, this particular complaint shows that plaintiffs are attempting to use these California consumer protection and unfair competition laws to allege direct violations of international instruments that do not independently have the force of binding law – for example, the UN Guiding Principles are voluntary principles, not law, and ILO Conventions are ratified by member states, not the private sector.4

What About Kiobel?

These plaintiffs' use of international standards as bases for their consumer protection claims is interesting in light of the U.S. Supreme Court's recent guidance on the jurisdictional scope of the Alien Tort Claims Act (the "ATCA"), which plaintiffs have attempted to use in U.S. courts against multinational corporations accused of engaging in or condoning human rights atrocities in foreign jurisdictions.5 In Kiobel v. Royal Dutch Petroleum Company, the Supreme Court held that the ATCA does not apply to employment practices conducted overseas.

Some of the cases discussed above are similar to the claims brought under the ATCA in California's federal courts by plaintiffs who alleged that the company, along with others, had "aided and abetted" slavery through their pursuit of low-cost cocoa along the Ivory Coast. In 2014, the Ninth Circuit appeared to revive the ATCA claims involving the alleged use of child slaves in the Ivory Coast. However, in September 2015, the companies filed a petition for a writ of certiorari with the U.S. Supreme Court asking the Court to reverse the Ninth Circuit's decision on the grounds that inter alia, it contravenes Kiobel.

These California Class Actions are Part of a Wider Effort to Scrutinize Global Supply Chain Violations

State law claims alleging forced labor violations emerge at a time when plaintiffs and governments have renewed efforts to hold companies accountable for supply chain violations. For example, non-Canadian workers have now repeatedly brought suit in Canadian courts for human rights violations allegedly committed by entities in the employers' supply chains, resting their negligence claims on a theory that international norms such as the UN Guiding Principles define a standard of care that, when violated, constitutes actionable negligence.6 While the plaintiffs in the earlier Canadian cases only based their negligence arguments on companies' express pronouncements on ending forced labor in their supply chains, more recently, plaintiffs have argued that international standards such as the UN Guiding Principles establish a duty of care whether or not the companies have explicitly adopted them. Thus, as in one of the complaints discussed above, plaintiffs are looking to hold companies liable for international standards that those companies have not necessarily expressly adopted.

In California, the State's Attorney General recently published guidance on complying with the Supply Chain Act. The Attorney General also sent letters to companies covered by the Supply Chain Act that were not adequately disclosing their efforts to eradicate slavery and human trafficking from their direct supply chains.7 The letters asked each company to respond within 30 days with either an explanation as to why the Supply Chain Act does not apply to them, or a web link to the company's disclosure. So far, the Attorney General has not brought enforcement proceedings against any company for not complying with the Supply Chain Act.

In addition, the California Supply Chain Act has served as guidance for a bill in the U.S. House of Representatives entitled the "Business Supply Chain Transparency on Trafficking and Slavery Act of 2015" (H.R. 3226). H.R. 3226 would 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 their efforts to eradicate slavery and human trafficking from their supply chains.8 Regardless of whether this federal bill will become law, other states may adopt the California model. Indeed, even the United Kingdom has modeled its recent Modern Slavery Act after the California Supply Chain Act.9 Finally, amendments to the Federal Acquisition Regulation (FAR) aimed at eliminating substandard labor conditions within government contractors' supply chains went into effect on March 2, 2015, and now place requirements on government contractors and subcontractors as part of an effort to curb human trafficking.10

Next Steps

These developments in California and globally emphasize the critical need for employers to properly manage their supply chains. Doing so is a complex, culture-specific and risk-specific exercise, and to that end, employers should consult experienced employment counsel.

The courts in which the six California class actions have been filed have not yet tested the validity of the plaintiffs' claims. Littler will monitor these cases and report on any developments.

Footnotes

1 The specific California laws under which these claims were brought are: the California Unfair Competition Law (Cal. Bus. & Prof. Code Sec. 17200et. seq.); the Consumers' Legal Remedies Act (Cal. Civ. Code Sec. 1750et. seq.); and the False Advertising Law (Cal. Bus. & Prof. Code Sec. 17500et. seq.).

2 For an in-depth discussion of the California Supply Chain Act,seeJohn C. Kloosterman,California Supply Chain Law Affects Large Retailers and Manufacturers Doing Business in California, Littler Insight (Dec. 2, 2011).

3 A recent Delaware case shows that plaintiffs are attempting to seek causes of actions based on California Supply Chain Act disclosures beyond consumer protection actions. One court tested whether Supply Chain Act disclosures could be used as a basis for a stockholder to inspect the company's documents under Delaware law. The stockholder claimed the company was aware that child labor could have been used by its cocoa bean suppliers in West Africa and that the company's disclosures were misleading. However, the court held that the Supply Chain Act "does not require that a company take particular, or even any, action to address illegal labor within its supply chain" and the stockholder's "philosophical disagreements with the effectiveness of [the company's] supplier code of conduct" does not violate California law. Accordingly,inter alia, because the stockholder failed to demonstrate any basis to infer illegal conduct, the court dismissed for want of a proper purpose the stockholder's demand to inspect the company's records.

4 Interestingly, while the cases refer to breaches of ILO Convention Nos 29, 138 and 182, the United States has never ratified Convention No 29 or Convention No 138.

5 SeeKiobel v. Royal Dutch Petroleum Co.133 S. Ct. 1659 (2013).

6 For more information on these Canadian cases,seeJohn Kloosterman, Trent Sutton, Sari Springer and Lavanga Wijekoon,In Canada, Foreign Workers Seek to Use International Norms as the Standard of Care in Negligence Claims Against Multinationals Operating Overseas, Littler Insight (Sept. 16, 2015).

7 California Department of Justice, sample letter re: The State of California's Transparency in Supply Chains Act, April 1, 2015,available athttps://oag.ca.gov/sites/all/files/agweb/pdfs/sb657/letter.pdf.

8 For more information on H.R. 3226,seeMichael Congiu, John Kloosterman, Stefan Marculewicz and Mark Eskenazi,House Bill Would Require Public Disclosure of Company Policies to Combat Supply Chain Trafficking, Littler Insight (Aug. 4, 2015).

9 For more information on the U.K. lawseeTahl Tyson,United Kingdom: New Law to Combat Supply Chain Slavery and Human Trafficking, Littler ASAP (July 14, 2015).

10 For more information on these FAR requirements,seeElizabeth A. Lalik and Katherine A. Fearn,Anti-Trafficking Regulations Impose New Obligations on All Federal Contractors, Littler Insight (Apr. 10, 2015).

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
John Kloosterman
Michael G. Congiu
Similar Articles
Relevancy Powered by MondaqAI
Ropes & Gray LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Ropes & Gray LLP
Related Articles
 
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 (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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