May 20, 2014

ABA Guidelines May Help Companies Prepare for New Federal Rules on Human Trafficking

Seller Beware: Consumer Protection Insights for Industry

New Federal Acquisition Regulations prohibiting human trafficking in the supply chains of federal government contractors and subcontractors are likely to be issued in the near future. The regulations, currently still in draft form, will create new requirements for contractors and subcontractors to create and maintain effective anti-trafficking compliance programs.

While the details of the new regulations are being finalized, companies may wish to review the comprehensive American Bar Association's (ABA) Model Business and Supplier Policies on Labor Trafficking and Child Labor (Model Policies), issued in February 2014. The ABA's clear and coherent guidelines can help companies review their labor supply chains to help prepare for compliance with the forthcoming acquisition regulations. While multinational companies should conduct a more targeted evaluation once the final text of the new rules is promulgated, all will benefit from a careful review of the ABA guidelines as they review their compliance programs.

The ABA, through its Business Law Section and its Task Force on Human Trafficking, drafted the Model Policies as a guide for businesses in reviewing their policies and practices. The drafters grounded the ABA Model Policies in the following four Model Business Principles and Model Supplier Principles:

  • Principle 1: The Business/Supplier will prohibit labor trafficking and child labor [the Department of Labor defines child labor as children (minors under age 18) working in the worst forms of child labor as outlined in International Labor Organization (ILO) Convention 182 and children engaged in work that is exploitative and/or interferes with their ability to participate in and complete required years of schooling, in line with ILO Convention 138] in its operations.
  • Principle 2: The Business/Supplier will conduct a risk assessment of the risk of labor trafficking and child labor and continually monitor implementation of this policy.
  • Principle 3: The Business/Supplier should: (i) train relevant employees; (ii) engage in continuous improvement; and (iii) maintain effective communications mechanisms with its suppliers.
  • Principle 4: The Business/Supplier will devise a remediation policy and plan that addresses remediation for labor trafficking or child labor in its operations.

The ABA guidelines include helpful commentary and concrete guidance on how to implement each of the above four principles. The Model Policies are designed to allow businesses the flexibility to tailor a compliance plan and policies that make sense for their particular circumstances given their size, location, products sold, sources, and risks of the business.

The risk-based approach advocated by the ABA is designed to facilitate meaningful measures to address trafficking and child labor connected with identified risks. These risks might include being in a labor-intensive industry, particularly one with a history of labor rights violations; relying heavily on subcontracted, unskilled, temporary, or migrant workers; or sourcing from countries known to have a high level of human trafficking. As in most effective compliance programs, the sources of greater risk should receive more attention, allowing for the most efficient allocation of a company's resources. For example, this could mean more monitoring of suppliers from high-risk regions or more intense auditing of suppliers in high-risk industries or supplying high-risk products. While this approach may sound like common sense, many companies are tempted to try to save costs by skipping the risk assessment needed to identify the greatest risks. This orientation toward the greatest risks is therefore a smart way both to minimize a company's risks and to prioritize scarce resources.

Given the broad provisions already in US law prohibiting trafficking in supply chains, companies of all sizes, sectors, and operating locations can benefit from the guidance provided by the ABA in its Model Policies. Government contractors and subcontractors will benefit from a careful review of these principles as they prepare for the final federal regulations.

© Arnold & Porter Kaye Scholer LLP 2014 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.

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