Doing Business in California? You May Need to Start Disclosing Your Efforts To Eliminate Slavery from Your Supply Chain

The deadline has passed -- is your company in compliance with the California Transparency in Supply Chains Act?

The law, which went into effect just days ago on January 1, 2012, is part of a growing effort to shine light on a huge commercial problem: human trafficking and slavery. California Attorney General Kamala Harris announced the launch of a new website last week focused on human trafficking in California. This follows President Obama's designation of January as National Slavery and Human Trafficking Prevention Month. Why all the sudden attention on slavery and human trafficking? According to the AG's new website, human trafficking has become a $9 billion industry and is the world's second largest criminal enterprise after the drug trade, and activist groups and policymakers have joined in an effort to increase awareness of this issue as the first step in addressing it.

The California Transparency in Supply Chains Act, also known as SB 657, requires many businesses to turn their attention to slavery and human trafficking and whether it exists in their supply chains. Specifically, retailers and manufacturers with over $100 million in worldwide gross receipts who "do business in California" are now required to disclose on their websites what steps, if any, they take to mitigate the risk that their products are sourced by forced labor. In the past few weeks, scores of disclosures have popped up all over the web discussing company efforts to mitigate the risks of slavery and trafficking, such as auditing suppliers and training employees and managers about the issue. Many companies, however, may not realize that under the law, they "do business in California" and therefore must comply with the law. Many more disclosures are sure to come in the following weeks as businesses that were caught off-guard by the new law rush to post disclosures on their website, regardless of whether they have yet been able to assess their supply chains and implement internal programs.

What is the penalty for failing to comply? While the bill does not limit remedies available for violations of other state or federal laws regarding slavery and trafficking, the exclusive remedy for a violation of the California Transparency in Supply Chains Act is an injunctive action brought by the attorney general. The AG's website on trafficking and slavery does not yet discuss how she intends to enforce compliance with SB 657, but we will continue to monitor the AG's actions in the coming year and keep you posted.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.