Hunton Employment & Labor Perspectives

The continued proliferation of human trafficking for the purpose of labor exploitation remains one of the most serious threats facing companies.  But, it is not just a concern for companies doing business overseas. California has led the charge with its passage of the California Transparency in Supply Chains Act, a law that requires retail sellers and manufacturers doing business in that state to disclose their efforts to eradicate human trafficking in their direct supply chains.  (Cal. Civ. Code, § 1714.43).  The United Kingdom has enacted similar legislation with its passage of the Modern Slavery Act 2015.

It also did not take long for class action lawyers to see an opportunity here.  A number of class action lawsuits have been filed in the California courts against food product companies for allegedly failing to disclose purported instances of slave labor in their supply chains.  The lawsuits claim that the retailers’ alleged breach of the California Transparency in Supply Chain Act also constitutes a violation of that state’s consumer protection and unfair competition laws codified in Cal. Bus. and Prof. Code, §§ 17200 and 17500 and Civ. Code § 1750.  The California Attorney General takes the position that the exclusive remedy for a Transparency in Supply Chain Act violation is a civil action brought by the Attorney General for an injunction, not a privately-filed class action lawsuit.

As a result, the jury is still out on whether these recent class action lawsuits will survive legal challenge.  Nonetheless, the risk of such legal claims from both a branding and liability perspective suggest that it may be prudent for any retailer or manufacturer, but particularly those doing business in California, to consider conducting a thorough review of its global supply chains.

The fluid nature of the crime means that traffickers can target vulnerable workers anywhere along a supply chain to fill labor shortages.  As a result, it is critical for businesses  operating in the U.S. to responsibly manage their global supply chains.  For instance, in the electronics sector, human trafficking can exist in the extractive stage (mining for raw material); in the component manufacturing stage (where separate pieces are produced or combined), and in the production stage (where a good is assembled and packaged).

There are many measures U.S. based businesses can take to mitigate the risks of human trafficking in their global supply chains.  To begin with, companies should understand how their supply chains operate, where key suppliers are located, and what conditions exist in those locations.  By fully mapping its supply chain, down to the level of raw materials, a company can gain a better understanding of gaps in transparency.

Many companies will utilize independent third parties to conduct periodic compliance audits of stages in the supply chain.  Training is key, as well, in making sure that employees responsible for supply chain-related decisions can identify the telltale signs of human trafficking and, of course, are empowered to address issues promptly.