The Volkov Law Group is pleased to announce our first, official summer internship program. We have welcomed a diverse group of talented, intelligent, and driven college students, who are interested in pursuing legal or compliance careers. In this blog article, our intern Abigail Schuman, a rising junior at the University of Wisconsin, discusses certain legislation aimed at combatting slave labor and human trafficking in corporate supply chains. Abby drafted this article as a precursor to an article that another Volkov Law intern will soon publish on our blog regarding the U.S. Uyghur Forced Labor Prevention Act, which takes effect on June 21, 2022.

The Covid-19 pandemic and Russia’s aggression in Ukraine have disrupted supply chains and heightened the need for supply chain due diligence to ensure business continuity and sustainability. Coupled with these events are increased social and political pressures from activist investors, environmentally and/or socially conscious employees, consumers, and other corporate stakeholders to promote Environmental, Social, and Governance (“ESG”) goals. Now on the horizon are certain legal obligations through which national and state governments obligate private entities to combat slave labor and human trafficking in their supply chains. A significant portion of these enhanced commercial, political, social, environmental, and legal pressures now fall on corporate supply chain functions, which is why now, more than ever, companies should re-evaluate their supply chain risks, devote appropriate resources to addressing and mitigating those risks, and conduct enhanced supplier due diligence.

The California Transparency in Supply Chains Act (effective January 1, 2012) was one of the first pieces of legislation to raise awareness regarding slave labor and human trafficking in large retailers’ and manufacturers’ supply chains. The law was intended to enlighten consumers and businesses about corporate efforts to address human trafficking and slavery. The Act requires only disclosure, it does not regulate trade practices. The Act does not require companies to take any action to eradicate modern slavery, but instead obligates companies to disclose their efforts to do so, or the lack thereof. Companies covered by the Act must have a link on the homepage of their website, if they have one, which discloses their efforts related to five specific areas – verification, audits, certification, internal accountability, and training – or informs consumers that they have not made any such efforts. Companies that do not have a website, still need to disclose their message if requested. If companies are not in compliance with the Act, the California Attorney General may file a civil action for injunctive relief, but this author is unaware of any instances in which a California AG has done so.

The United Kingdom Modern Slavery Act 2015 basically mirrors the California Transparency in Supply Chains Act. Companies covered by this Act must “Prepare a slavery and human trafficking statement for each financial year of the organisation,” and must post the statement in a prominent place on their website. If a company does not have a website, it still must have a statement and disclose it pursuant to a written request. The statement must touch on six specific areas, and if it does not, it must explain why it is not included:

1. Company’s supply chain and business structure.
2. Policies relating to slavery and human trafficking.
3. Slavery and human trafficking due diligences process.
4. At-risk parts of the businesses in regard to human trafficking and slavery in the supply chain and the steps to manage the risk.
5. Effectiveness to making sure that slavery and human trafficking is not taking place in their business and supply chains.
6. Training staff about slavery and human trafficking

Present enforcement of the UK Act is similar to enforcement in California. The Secretary of State in the UK may initiate civil injunctive proceedings to compel a company to comply, exposing the company to potential fines for contempt of court if it then fails to comply. Last month, the UK government announced a new Modern Slavery Bill that would, among other things, authorize the imposition of civil penalties on companies that fail to comply .

The UK Modern Slavery Act and The California Transparency in Supply Chains Act set a precedent for other states and countries to follow their lead in promoting eradication of slavery and human trafficking through global supply chains. However, many commentators believe that the acts’ effectiveness and impact is minimized by the lack of “teeth” or enforcement. Dr. Irene Pietopailu, co-author of the Modern Slavery PEC Report on the effectiveness of Section 54 of the Modern Slavery Act, for example, describes why the UK act is not likely to be as effective as laws with greater monitoring and enforcement mechanisms. She also states that the Act relies “exclusively on civil society pressure.” As for the California Transparency in Supply Chains Act, it too suffers from a lack of any meaningful enforcement likely to bring about meaningful change. Many criticize the California Attorneys General over the last several years for not doing more to enforce the act. It seems the legislatures and prosecutors simply are relying on private companies to act as “private attorneys general” pushing to eradicate modern slavery in their supply chains due to the social pressure of having to disclose their efforts to do so.

Many countries have followed or are about to follow the lead of California and the UK. There are a lot of similarities in these countries’ legislation, which shows how important anti-forced labor and human trafficking legislation is becoming globally. But there also are some differences, suggesting that global companies seeking to simultaneously comply with all laws will need to understand and address all nuances.

By way of example only, in April and May 2022, New Zealand proposed similar legislation, and the country is implementing a “plan of action against forced labour, people trafficking and slavery,” which sets out a five-year plan of action “undertaken through strong partnerships across government agencies and with civil society, businesses, unions, academia and international partners.”

The French Corporate Duty of Vigilance law passed in 2017 requires big companies to create vigilance plans, publish them, and implement them within their companies every year.

The German Due Diligence in Supply Chains Act 2021 will become effective in 2023. This law requires companies to create a system to measure risk management and include preventative measures against modern slavery.

The Norwegian Transparency Act will become effective on July 1, 2022. This Act requires covered companies to identify violations or at-risk spots in their company’s supply chains and to plan to stop or reduce violations. The Act also requires a transparency report from their findings.

The Swiss Conflict Mineral and Child Labor Due Diligence Provisions took effect in January of this year but are subject to a one-year transition period. These Provisions are similar to the others, requiring a report, due diligences procedures, and measurement of effectiveness. The Swiss law also authorizes fines on those who intentionally submit false information in transparency reports.

In the U.S., other state legislatures have proposed legislation to combat modern slavery. The state of Washington, for example, proposed SB 5693, “Creating Transparency in Agricultural Supply Chains,” in early 2019. The Bill was reintroduced in the 202 regular session.  This act would have required more transparency with respect to agricultural products.

The most recent legislative development in this area is the Uyghur Forced Labor Prevention Act (“UFLPA”), which will soon become effective. This new act goes beyond simple disclosures, contains potentially stronger enforcement mechanisms, and will prohibit the importation of goods made with forced labor. On June 13, 2022, the U.S. Customs and Border Protection agency (“CBP”) released “Operational Guidance for Importers,” and CBP has offered certain webinars this month designed to help importers comply with the law. My colleague is attending the June 16, 2022 webinar, and Volkov Law intends to publish another blog article regarding compliance with the UFLPA shortly thereafter.