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ALM Properties, Inc.
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Human Trafficking: a New Compliance Challenge

Alexandra Wrage

Corporate Counsel

02-27-2013


The Problem

Even companies that have come to terms with the risks of bribe-payers, terrorists, and other criminals in their supply and marketing chains still struggle to believe that they may inadvertently support human trafficking. With an estimated 4 million persons trafficked each year, the problem is not small. Traffickers recruit vulnerable persons and provide them—sell them—to work for entities lower down the supply chain. Adults and children alike are forced into industries as varied as agriculture, mining, sex work, textiles, and domestic service. While U.S. laws can’t readily reach those who take advantage of trafficked labor in most countries, there is one community over which they can exert considerable pressure: U.S. government contractors.

Imagine this scenario, which is not at all farfetched. A civilian contractor is operating in a post-conflict area of the world alongside a U.S. military peacekeeping mission there. As the weeks go by, it is generally known—although not openly discussed—that employees of the contractor are visiting prostitutes in local brothels and, eventually, they begin bringing them back onto the compound and housing them there. The contractor ignores the risk, despite the fact that the region is a hotbed for human traffickers. Eventually, when the U.S. Department of Defense becomes aware of what’s going on, it implements a mandated zero-tolerance policy against the contractor for participating in human trafficking and forced labor. The contractor not only loses its right to bid on future government contracts, but faces a federal criminal investigation as well.

The Law

In the last decade, the U.S. government has been stepping up legislative and policy efforts to stop human trafficking by imposing requirements on federal contractors and subcontractors. The Trafficking Victims Protection Act (TVPA) from 2000 makes human trafficking a crime under federal law. The prohibited conduct includes forced labor, involuntary servitude, and unlawful conduct with respect to documents in furtherance of trafficking. The law has been amended to require the federal government to terminate all contracts with overseas contractors involved in human trafficking or forced labor.

The law was first passed in 2000 and then reauthorized and renewed in 2003, 2005, and 2008. Earlier this month, the U.S. Senate voted by an overwhelming majority, as part of the Violence Against Women Act, to again renew the TVPA, and even strengthen the law.

In addition, Executive Order No. 13627, Strengthening Protections Against Trafficking in Persons in Federal Contracts, was signed by President Barack Obama on September 25, 2012, and comes into effect next month, on March 24. This executive order:

  • Applies to Federal contractors, contractor employees, subcontractors, and subcontractor employees.
  • Supplements and strengthens existing regulations, particularly the TVPA and the February 2009 Department of Defense Federal Acquisition Regulation (FAR) clause 52.222-50, Combating Trafficking in Persons, which regulates federal contractors and prohibits trafficking and forced labor.
  • Makes prohibitions against human trafficking much more specific, and includes prohibitions against fraudulent recruitment practices, confiscation or destruction of identification documents, and employee recruitment fees.
  • Imposes transparency measures to allow auditing of contractors’ books and records, and requires early reporting of potential problems.

There is also a web of state laws including, most notably, the California Transparency in Supply Chains Act of 2012. The California law applies to a larger community of companies, many which are not federal contractors, and requires certain retail and manufacturing companies to disclose efforts to eradicate slavery and human trafficking from their supply chains. Other states have similar laws.

The Solution

Human trafficking need not be an unworkable compliance dilemma for businesses. It is just another practical challenge with feasible solutions.

Each year, pursuant to the TVPA, the Bureau of International Labor Affairs publishes a "list of goods from countries," designating specific goods that the Bureau has reason to believe are produced by forced labor, child labor, or both, in violation of international standards.

The U.S. State Department Office to Monitor and Combat Trafficking in Persons publishes an annual Trafficking in Persons Report (TIP), which ranks countries into three tiers based on the extent of the problem of slavery and human trafficking in the country and progress toward combating it. The high-risk countries identified in the TIP report include Kuwait, Madagascar, the Bahamas, Ecuador, Saudi Arabia, and Russia. These lists are a good starting point, but they don’t provide information about specific companies that use child labor or forced labor.

After determining where your company faces the greatest risk, train your employees on both the purpose and scope of the rules. Whenever possible, ensure that the training is available in the local language; this is a difficult enough conversation to have without linguistic barriers. We have seen some companies display posters describing the problem of trafficked labor, emphasizing the company’s “zero-tolerance” policy and promoting existing hotlines for reporting concerns.

Due diligence allows companies to take a proactive approach to the problem, and businesses should exercise due diligence and conduct a risk assessment for their entire supply chain and network of service providers in order to eliminate risks of human trafficking in their operations. Local human resources and staffing professionals and services should be included in this. As a whole, the reputational risk associated with getting this issue wrong is so great that the investment in getting it right is readily justified.

Alexandra Wrage is the president of TRACE, a business association that offers compliance tools and services to companies, including a free global supply chain due diligence platform that addresses, among other things, trafficked labor: TRAC.