United States: Government Contractors Must Address Domestic Trafficking

Last Updated: February 4 2016
Article by Jayna Rust

Many Americans are unaware of human trafficking's pervasiveness, believing, if they have considered it at all, that trafficking takes place only in third-world countries. But human trafficking — which includes using force, fraud or coercion to induce people into labor or sexual exploitation — exists in the United States, including in industries such as shipbuilding and agriculture.

As it has done with other social ills, the government began to address domestic and international trafficking by inserting regulations into the federal contracting process. The Trafficking Victims Protection Reauthorization Act of 2003 required that executive contracts allow the government to terminate a contract if the contractor or a subcontractor engaged "in severe forms of trafficking in persons" during the contract term or used "forced labor" in performing the contract. In 2006, the Federal Acquisition Regulatory (FAR) Council implemented the requirement through an interim rule at FAR 52.222-50, "Combating Trafficking in Persons." The FAR Council issued the final rule in January 2009. President Obama later stepped up the government's response to trafficking. In September 2012, he issued Executive Order 13627, "Strengthening Protections against Trafficking in Persons in Federal Contracts." The order required the FAR Council to amend the FAR to provide the government with additional tools to implement and enforce anti-trafficking policies and to provide contractors with "additional clarity" on policy compliance. In 2015, the FAR Council finalized those amendments.

Although most of the revisions covered domestic contract work, some contractors have continued to treat human trafficking as strictly a foreign-based issue. Unfortunately, however, FAR-prohibited trafficking activities also exist within many domestic supply chains in which contractors work. Two cases decided in 2015 demonstrate this. Consequently, federal contractors should take a look at their own companies and domestic subcontracts when considering how to comply with the revised anti-trafficking provisions.

The regulatory revisions

The FAR's revised anti-trafficking provisions took effect on March 2, 2015. Among other things, these revisions expanded the list of prohibited activities, broadened the notification requirement, and notified contractors that violations would be recorded.

Prohibited acts. FAR 52.222-50 prohibits contractors from engaging in certain trafficking-related activities. The 2015 clause increased the number of activities to nine, up from three in the 2009 clause.1 The trafficking-related activities the FAR clause now prohibits are:

  1. Engaging in "severe forms of trafficking";
  2. Procuring commercial sex acts;
  3. Using forced labor;
  4. Destroying, concealing, confiscating or otherwise denying access by an employee to the employee's identity or immigration documents;
  5. Using misleading or fraudulent recruitment practices or using recruiters that do not comply with local laws;
  6. Charging employees recruitment fees;
  7. Failing to provide return transportation or pay return transportation costs at the employment's conclusion if the employee is not a national of the country in which he/she is working;
  8. Providing or arranging housing that fails to meet the host country housing and safety standards; and
  9. If required by law or contract, failing to provide an employment contract or other agreement or document, in writing.2

Broader obligation: The notification requirement. The FAR clause previously placed and continues to place multiple affirmative obligations on the contractor.3 The revised clause still requires the contractor to "immediately" notify the government of (a) actions taken against the contractor, an employee, a subcontractor or a subcontractor employee under the clause and (b) "information [the contractor] receives from any source ... that alleges" a contractor employee, subcontractor or subcontractor employee has engaged in activity violating the policy in the FAR clause. The revision added contractors' agents to the types of actors whose violations must be reported. It also requires that contractors notify the agency inspector general in addition to the contracting officer. The revision also clarified that contractors should report "credible information." The government has described this notification requirement as a "low threshold" and explained that "credible information" is "believable information."4

A new potential outcome: A negative FAPIIS record. Beyond Government remedies outlined in FAR 52.222-50(e), a prime contractor bears additional risks due to its use of subcontractors. As an initial matter, the government may find a prime contractor culpable for its subcontractors' acts.5 Additionally, the revised regulations require that when a contracting officer determines that there has been a FAR 52.222-50 violation, the contracting officer must post the violation to the prime's Federal Award Performance and Integrity Information System (FAPIIS) record.6 Subcontractor violations are posted to the prime's FAPIIS record as well.7 The prime may respond in FAPIIS with "any mitigating factors,"8 such as the fact that "The contractor had a trafficking in persons compliance plan or an awareness program at the time of the violation, was in compliance with the plan and has taken appropriate remedial actions for the violation, that may include reparation to victims for such violations."9

Labor trafficking in common U.S. government contracts supply chains

A contractor might encounter a trafficking-related activity in the United States that obligates it to notify the government of the activity or leads to a negative posting in the contractor's FAPIIS record. Indeed, as the 2015 cases discussed in this section show, such activities might occur in some contractors' domestic supply chains.

The federal government has recognized that some of its domestic supply chains are more susceptible to labor trafficking than others because they are labor intensive.10 These industries include food services, hospitality, domestic services, janitorial services, health care, driving services, construction, agriculture, forestry and facilities operations.11 Both of the 2015 cases are from these industries. Although the cases did not involve an alleged FAR-clause violation, they are relevant because they involved domestic supply chains that are susceptible to trafficking, even in federal contracts. Indeed, USAspending.gov shows that the company implicated in the Mississippi/Texas case may have received at least one government contract.12 Contractors should, therefore, consider these cases as examples of the activities that they may encounter in their domestic supply chains.

Mississippi/Texas: Shipbuilding and ship repair. Shipbuilding company Signal International LLC had a heightened need for workers after Hurricane Katrina. Using a labor recruiter and the H-2B guestworker program, it brought more than 500 Indian men to Pascagoula, Mississippi, and Orange, Texas.13 According to allegations, some of these men had paid as much as $20,000 in recruitment fees and had been promised U.S. residency due to their work.14 The men further had to agree to allow Signal to deduct $1,050 per month from their pay for transportation; food (often stale or molded); and accommodations, even if the men chose not to use the accommodations or eat the provided food.15 The accommodations consisted of one-room trailers, which housed up to 24 men each, had insufficient bathroom facilities and were accessible only through a single, guarded entrance.16 Workers and the Equal Employment Opportunity Commission (EEOC) filed suit against Signal. In 2015, a jury heard the first case, brought by five of the former workers. The jury awarded more than $12 million in total damages against Signal, including damages for Trafficking Victims Protection Act violations.17 In July the company filed for bankruptcy, and in November the court approved the Chapter 11 plan.

Ohio: Agriculture. In August 2015, the Federal Bureau of Investigation announced that two men had pleaded guilty to a labor-trafficking conspiracy after admitting to illegally bringing workers to the United States for "cleaning chicken coops, loading and unloading crates of chickens, de-beaking chickens and vaccinating chickens."18 The men had contracts with Trillium Farms and recruited young Guatemalans — some as young as 14 or 15 — to work on the egg farms by offering them good jobs and a chance to attend school in the United States.19 The men then smuggled the workers into the country and housed them in "dilapidated trailers" in Marion, Ohio.20 Some of these trailers lacked heat or running water, and some were "teeming with" rodents and bugs.21 Furthermore, the men "threatened workers with physical harm and withheld their paychecks in order to compel them to work."22

These cases are not the only recent examples of the Federal Government uncovering trafficking-related activities in domestic industries. For instance, in 2011 the EEOC filed a discrimination lawsuit against a labor contractor and eight farms in Hawaii and Washington — one of which was previously affiliated with a government contractor — alleging that the labor contractor charged recruitment fees, denied and delayed workers' pay, confiscated workers' passports and denied workers adequate food, water and living arrangements.23 Further discoveries of trafficking-related activities seem inevitable as the executive branch holds human-trafficking trainings across its agencies.24

Potential mitigation against the risks posed by trafficking in a contractor's domestic supply chain

The allegations in the above cases claimed that a company engaged in trafficking-related activities in the United States, including using forced labor, using misleading or fraudulent recruitment practices, charging recruitment fees and providing or arranging housing that failed to meet U.S. housing and safety standards. Any of these activities, standing alone, would violate FAR 52.222-50. Contractors should consider how to prevent these activities from occurring in their companies and supply chains and how to avoid negative ramifications if they are found in their supply chains.

Educate employees on the prohibited trafficking-related activities and the notification requirements. A contractor does not have the ability to "bury [its] head[] in the sand," as the U.S. Attorney described what may have happened in Ohio.25 Rather, it must notify the government of "any credible information" it receives that a subcontractor or an employee has engaged in a prohibited activity. Although the FAR clause requires contractors to "notify its employees and agents" of the prohibited activities, telling employees about the prohibitions may not be enough to ensure they understand how the violations may happen here in the United States or what the notification requirement obliges the company to do. Because of the severe consequences that can flow from a failure to understand the regulation, contractors should consider implementing an awareness program to train employees to recognize and report the activities prohibited by FAR 52.222-50.

Consider a compliance plan or awareness program to monitor and vet subcontractors. Having a compliance plan or awareness program and following it would be a "mitigating factor" for a contractor in the event the government finds a FAR 52.222-50 violation. Therefore, contractors should consider a plan or program to address the labor-trafficking risks in their domestic supply chains. As part of that plan or program, contractors should consider agency and industry guidance and requirements.26 Although the clause already requires contractors to include the substance of the clause in its subcontracts and agency contracts, contractors might also consider developing specific subcontract clauses or policies relevant to their industries. Whether a contractor decides to adopt and implement a compliance plan or awareness program will turn on a variety of factors, including the contractor's resources, the industries in which the contractor and its subcontractors operate, and the use of labor contractors. Nevertheless, it is a question that contractors should address before they are faced with a suspected violation.

Conclusion

With workers and federal agencies uncovering domestic trafficking-related activities in industries that serve the government, contractors should not ignore their domestic contracts, subcontracts and supply chains in considering how to comply with the FAR's anti-trafficking revisions. Simply put, contractors should ensure that their employees and subcontractors are well aware of the revised FAR prohibitions and obligations and should consider implementing a compliance plan or awareness program that covers their domestic supply chains.

Footnotes

[1] Compare 52.222-50, Combating Trafficking in Persons (Feb. 2009) with 52.222-50, Combating Trafficking in Persons (Mar. 2015). See also Federal Acquisition Regulation, Ending Trafficking in Persons, 78 Fed. Reg. 59317, 59318 (Sept. 26, 2013) (to be codified at 48 C.F.R. pts. 1, 2, 9, 12, 22, and 52).

[2] FAR 52.222-50(b).

[3] Other obligations include notifying employees and agents of the prohibitions; taking action if an employee, agent, or subcontractor violates the policy; having a compliance plan for certain foreign-performed contracts; including the clause's substance in subcontracts and contracts with agents; and cooperating with the agency investigators and protecting suspected victims or witnesses that are employees. FAR 52.222-50. The Department of Defense also revised its trafficking-related regulations, effective January 2015, but the revisions in that clause are not pertinent to this article's focus.

[4] Federal Acquisition Regulation; Ending Trafficking in Persons, 80 Fed. Reg. 4967, 4980 (Jan. 29, 2015) (to be codified at 48 C.F.R. pts. 1, 2, 9, 12, 22, 42, and 52).

[5] Id. at 4978.

[6] FAR 42.1503(h)(1)(v).

[7] FAR 9.104-6(b)(2).

[8] Id.

[9] FAR 52.222-50(f)(1).

[10] See Department of Defense, CTIP Program Management Office, Standard Curriculum Toolkit (2015), at 2-3.

[11]Id.; Verité, Strengthening Protections against Trafficking in Persons in Federal and Corporate Supply Chains (2015) (report provided under a Department of State contract). The 2012 Executive Order ordered a task force to identify domestic contracts with a history of trafficking-related activities and to notify agencies of those designated industries. Once that occurs, agencies will be required to develop and publish guidance and compliance requirements for those industries. The lack of that guidance and requirements does not, however, change the FAR obligations and consequences.

[12] See Contract No. DOCQA133009SE1110.

[13] Complaint & Jury Trial Request at 5, Equal Emp't Opportunity Comm'n v. Signal Int'l, LLC, No. 1:11-cv-00179-LG-RHW (S.D. Miss. Apr. 20, 2011) [hereinafter Signal EEOC Complaint].

[14] Michael Lipkin, Indian Guest Workers Win $14M in Signal Trafficking Case, Law360 (Feb. 18, 2015 10:20 PM).

[15] Signal EEOC Complaint at 5-6.

[16] Id. at 6-7.

[17] Minute Entry, David v. Signal Int'l, LLC, No. 2:08-cv-01220-SM-DEK (E.D. La. Feb. 18, 2015).

[18] Press Release, Federal Bureau of Investigation, Two Defendants Plead Guilty to Forced Labor Scheme That Exploited Guatemalan Migrants at Ohio Egg Farms (Aug. 25, 2015), [hereinafter FBI Press Release].

[19] Id.

[20] Id.

[21] Holly Zachariah, Workers Trafficked for Ohio Egg Farms Had Little Contact, Lived in Poverty, The Columbus Dispatch, July 12, 2015, [hereinafter Zachariah Article].

[22] FBI Press Release.

[23] Press Release, Equal Employment Opportunity Comm'n, Judge Approves $2.4 Million EEOC Settlement with Four Hawaii Farms for over 500 Thai Farmworkers (Sept. 5, 2014).

[24] Press Release, The White House, FACT SHEET: President's Interagency Task Force to Monitor and Combat Trafficking in Persons (Jan. 5, 2016); Lisa Ferdinando, DoD: Training, Awareness Critical in Human Trafficking Fight, DoD News, Jan. 15, 2016.

[25] Zachariah Article.

[26] See note 11.

(This article originally appeared on Law360 on January 21, 2016.)

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.

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