Sunday, September 6, 2020

Guest Blog: ULC's work on Coercive Labor Practices in Supply Chains, Part 4

Welcome to the ongoing guest blog that discusses the work of the ULC study committee that focuses on coercive labor practices.  In the last two blogs (here and here) I discussed two frameworks the study committee was considering: one that focuses on disclosure and one that examines labor procurement. Both of these frameworks rely on the government-as-regulator model. In this next blog I examine the government-as-purchaser model, one that would harness the enormous buying power of many of our states into a uniform law. 

More after the jump …

The framework of public procurement relates more directly to the procurement of goods and services through the global supply chain than say, the labor procurement model discussed last week.  The “procurement of goods & services” is an umbrella term that is used to discuss similar but slightly different ways that corporations interact with the global supply chains. The procurement of goods occurs when a corporation works with suppliers, usually in developing countries – to develop products (such as component parts for an electronic device) that will eventually be shipped for sale to end users.  In contrast, the procurement of services is used to denote transactions that occur when a corporation contracts with a supplier for the use of its services to a specific end; i.e., contracting with a supplier to provide logistical or technical support. Each of these issues has the potential for coercive labor practices.  A framework that focuses on the  procurement of goods and services would require a more active role on the part of corporations to engage with their vendors and suppliers around the issue of coercive labor practices. Specifically, this framework leverages the power of the government as a purchaser by requiring that companies selling to government entities take steps to eradicate coercive labor practices (“public procurement”).

  1. U.S. Federal Approach

 

            As a major purchaser of goods and services, the federal government’s power is extensive. As Study Committee Chair, Anita Ramasastry notes in a report she co-authored “The U.S. federal government is the largest single purchaser in the global economy, with annual procurement spending that totals between $350 and $500 billion.”  As such, the U.S. is in a unique position to prevent or mitigate coercive labor practices by leveraging its large purchasing power with the goal of enhanced human rights norms.  Specifically, the report notes that the U.S. could establish its power at five stages:

“Stage 1: Planning for Procurement Needs and Risks

The scope of protection should be expanded, and human rights definitions should be clarified.

Stage 2: Solicitation of Bids and Giving Notice

Notice of risks should be expanded to include a broad range of human rights abuses.

Stage 3: Evaluation of Potential Contractors

Whether a bidder is ‘responsible’ should be evaluated based on compliance with source-country laws that protect workers and communities. …

Stage 4: Award Contract and Set Contract Terms

Contractors should be required to disclose their supply chain and should be given ‘pre-award clearance’ for high-risk services or sourcing regions…

Stage 5: Enforcement of Contract

Due diligence should be made both a defense and a contract remedy for breaching compliance standards…”

            Within the context of U.S. government purchasing, the federal government has previously undertaken specific acts to prevent coercive labor practices.  In 2012,  the Obama Administration issued Executive Order 13627, Strengthening Protections Against Trafficking in Persons in Federal Contracts. In addition to provisions of the Executive Order that deal with labor procurement issues, the Executive Order requires all contractors with the U.S. government to: (1) cooperate with contracting agencies and (2) notify government officials if they become aware of activities that would violate the Executive Order.

The Executive Order also requires contractors to develop a “compliance plan” for the duration of their contract with the government that includes the following: 

(1) an anti-trafficking policy;

(2) a plan for raising awareness of the policy to the company’s employees;

(3) specific steps for remedial action for employees who violate the policy;

(4) an employee hotline to report potential violations;

(5) a recruitment and wage plan that complies with the Executive Order;

(6) a housing plan if the contractor intends to provide affected workers with housing and;

(7) an anti-trafficking plan for all subcontractors. 

            These approaches could be adopted (or expanded) into a uniform law schema with state governments standing in the stead of federal purchasers.  In fact, this approach has already been taken in some state law jurisdictions.

  1. State Law Approaches

            To date, there have been several states (and a number of municipalities) that have passed laws within the context of procurement of goods and services. In contrast to their federal counterparts, the scope of the laws seems to be tailored primarily to the garment industry and were done, at least in part, within the context of a “sweat-free purchasing” movement.  For instance, at the state level, Maine, New Jersey, California, Pennsylvania, and New York, have all adopted laws that, to some extent attempts to prevent coercive labor practices in the procurement of goods and services by leveraging their power as state purchasers. On the municipal level, the City of Portland, Oregon, is among the jurisdictions that have passed ordinances in this regard.

            California has once again taken the lead on this issue, passing in 2003 SB578, a law to amend previously enacted legislation on public procurement.  The bill applies specifically to “sweatshop labor” and states that:

Every contract entered into by any state agency for the procurement or laundering of … garments or …  the procurement of equipment, materials, or supplies, other than procurement related to a public works contract, shall require that a contractor certify that no apparel … furnished to the state [be] produced … by sweatshop labor, forced labor, convict labor, indentured labor under penal sanction, abusive forms of child labor or exploitation of children in sweatshop labor, or with the benefit of [the above]. The contractor shall agree to comply with this provision of the contract.

            The law also requires that the contractor “cooperate fully,” by providing the state with reasonable access to either the relevant state agency or the Department of Justice to ensure compliance.  Sanctions for failing to comply with the law include:

(1) the ability to have the contract voided;

(2) penalties assessed against the contractors, and;

(2) being removed from the list of approved bidders for up to 360 days.

            Similarly, the state of Maine (which seems to have been the first state to have acted on this issue) passed a law in 2001 that states:

Maine requires that all bidders seeking contracts to supply the State of Maine with goods covered by this code [including apparel and footwear] sign an affidavit stating that they and, to the best of their knowledge, their suppliers at the point of assembly comply with workplace laws of the vendor’s or supplier’s site of assembly and with treaty obligations that are shared by the United States and the country in which the goods are assembled.     

For companies that fail to comply with the statute, Maine’s approach is to allow  “the State Purchasing Agent” to “prescribe appropriate measures for the vendor to take in order to comply with the code of conduct.”   Nearly all public agency buyers across the country are also authorized to use or “piggyback” on contracts that have been competitively bid by other public buyers. The City of Madison has created a model purchasing specifically designed for piggybacking.

****

            This approach to combat coercive labor practices provides for specific outcome-oriented goals that ties continued government relationships to compliance with anti-trafficking plans.  In contrast, most mandatory due diligence schemes are process-oriented, only requiring corporations to engage in risk assessment without guaranteeing specific positive outcomes to prevent coercive labor practices. I’ll dive into that framework next week.

Don’t forget:  The work of the study committee is currently underway and is expected to continue until December 2020.  Any interested parties are able to participate as observers.  To be added to the committee as an observer please contact Leang Sou (lsou@uniformlaws.org) at the ULC.  Also, keep in mind that the work being done at this stage is to determine the feasibility of a uniform law on the issue.  Comments that provides suggestions on what specific language this proposed uniform law should contain, are premature. Another incentive, this series was adapted from a longer briefing memo I drafted for the study committee. All observers have access to the longer memo.

https://lawprofessors.typepad.com/business_law/2020/09/welcome-to-the-ongoing-guest-blog-that-discusses-the-work-of-the-ulc-study-committee-that-focuses-on-coercive-labor-practices.html

| Permalink

Comments

Post a comment