On September 26, 2013, the Federal Acquisition Regulatory (FAR) Council published proposed rules to implement new human trafficking compliance requirements on government contractors and subcontractors.  President Obama signed an Executive Order almost a year ago to eliminate human trafficking by government contractors and subcontractors.  Similar requirements were imposed on Defense Department contractors several months later when Congress enacted, and the President signed, the Defense Reauthorization Act of 2013.  The Defense Department has issued proposed regulations similar to those issued by the FAR which would amend the Defense Acquisition Regulations System (DFARS).

The proposed rules impose new and significant obligations on government contractors in the United States and abroad, including specific obligations to ensure that they do not directly, or indirectly through recruiting agents, provide prospective employees with misleading information about work conditions, require employees to pay recruitment fees, confiscate employees’ identity papers, or fail to pay return transportation costs for employees.  All of these requirements will flow down to subcontractors.

Companies need to review their existing human trafficking compliance program and make modifications to ensure compliance with anticipated requirements.  The proposed rules are unlikely to change very much after public comments.

Current laws and regulations prohibit contractors and their employees from engaging in human trafficking but are generally directed against severe acts such as sex trafficking and forced labor.

Under the new requirements, companies, subcontractors and recruiting agencies will be barred from engaging in a number of employment-related practices, including

— Misrepresenting (or omitting disclosure) of terms and conditions of employment, including wages and fringe benefits, the location of work, living conditions and housing, any significant costs to be charged to the employee, and, if applicable, the hazardous nature of the work;

— Destroying, confiscating or denying access to an employee’s identity documents, such as passports or drivers’ licenses;

— Charging employees recruitment fees;

— Providing or arranging housing that fails to meet the host country and safety standards;

— Providing a written employment contract, recruitment agreement, or similar work paper in the employee’s native language before the employee parts from his or her country of origin; and

— Compensating employees for return transportation costs to their home country at the end of any employment contract or term.

Federal contractors and subcontractors with contracts or subcontracts performed abroad involving services or supplies in the amount of US $500,000 or more will be required to maintain comprehensive compliance plans and to publish such plans at their work sites and on their websites.    These contractors are required to maintain: (1) an employee awareness program about the government’s zero-tolerance policy, relevant regulations and disciplinary procedures and sanctions against employees for violations; (2) A process for employees to report trafficking violations without fear of retaliation; (3) Recruitment and wage prohibitions and regulations; (4) A housing plan (if the contractor provides or arranges housing); (5) and Procedures to prevent human trafficking violations at every level of contractor performance.

These detailed requirements do not apply to contractors or subcontractors who provide commercially available off-the-shelf items.

Contractors and subcontractors must certify, prior to any contract award and then annually thereafter, that they have in place an appropriate compliance plan and that neither they nor any of their subcontractors have engaged in trafficking-related activities.

DoD has proposed similar amendments to DFARS.  The DFARS proposed amendments include an additional requirement for contractors or subcontractors above the $5 million threshold that they display hotline posters regarding human trafficking and whistleblowing including foreign language posters in locations where a substantial portion of the workforce does not speak English.

The proposed rules note that if there is adequate evidence that a contractor, contractor employee, subcontractor, subcontractor employee, or their agents violated the regulations, the contracting officer may pursue any of the existing remedies specified under current law including debarment, suspension and other sanctions. Contractors have an incentive to establish a compliance program since the proposed rules provide for mitigation if the contractor had a compliance plan or awareness program at the time of the violation.