In recent weeks, companies have learned—some the hard way—that the government is getting even more serious about human trafficking and forced labor issues. While a new law targets international trade, potentially blocking forbidden products at the U.S. border, an expanding view of joint-employer arrangements is also causing concern for domestic companies that have nothing to do with shipping.

On Feb. 24, President Barack Obama signed H.R. 644, the "Trade Facilitation and Trade Enforcement Act of 2015," into law. In addition to various trade-related provisions, such as currency manipulation and counterfeit goods, it also addresses human trafficking and forced labor and closes a longstanding loophole that stymied efforts to enforce an 86-year-old ban on importing goods made by forced and child labor.

That ban, the Tariff Act of 1930, authorized Customs and Border Protection to seize shipments where forced labor (child, prisoner, or otherwise) was suspected. The seemingly important law has been largely ignored over the years, used only 39 times, the last time in 2000.

The problem, one fixed in the new law, hinged on a mere two words: consumptive demand. In other words, if the products in question were not produced domestically in volumes needed to meet demand, the U.S. government would, in essence, look the other way.

The new law, enforceable under the Trans-Pacific Partnership, allows any concerned party, even non-citizens, the ability to petition U.S. Customs for a review of whether certain shipments, “reasonably but not conclusively,” may have been produced with slave labor. A list maintained by the U.S. Department of Labor, one that cross-references products and countries suspected of forced labor, will be used in conjunction with these investigations. If a complaint is determined to be valid by Customs officials or the Department of Homeland Security, a detention order will be issued to block entry of the merchandise.

“There have been efforts to close this loophole in the past and none of them have been successful,” says Kate Dunbar, a human trafficking expert with the consulting firm Assent Compliance. The time was, apparently, right for revisiting the issue amid an increase in public outcry, media reports, and recent high-profile lawsuits.

“The Unites States really wants to be seen as a leader when it comes to the elimination of forced labor and human trafficking globally. We can expect increased scrutiny for products often associated with countries and industries that have a high incidence of forced labor.”
Kate Dunbar, Human Trafficking Expert, Assent Compliance

Last March, new reporting requirements related to human trafficking went into effect for nearly 300,000 government contractors. Those performing work exceeding $500,000 outside the United States must develop and maintain a trafficking compliance plan and certify that, to the best of their knowledge, neither they nor any sub-contractors engage in trafficking-related activities.

Late last year, a class-action lawsuit was filed against Nestlé for allegedly supporting a system of slave labor and human trafficking when sourcing seafood for its Fancy Feast brand of cat food. A similar lawsuit alleged that Costco knowingly sold frozen prawns that were the product of slave labor in Thailand.

Companies can expect more cases like these as government regulations continue to address social issues. Notably, the California Transparency in Supply Chains Act and U.K. Modern Slavery Act require companies to disclose their efforts to eradicate forced labor and human trafficking from their supply chains. The California law, in fact, was invoked in the Nestlé and Costco lawsuits. It requires businesses to disclose the efforts they are making (if any) to eradicate human trafficking and slavery from their supply chains. It applies to retailers and manufacturers with annual worldwide gross receipts that exceed $100 million and that do business in California.

“The Unites States really wants to be seen as a leader when it comes to the elimination of forced labor and human trafficking globally,” Dunbar says. “We can expect increased scrutiny for products often associated with countries and industries that have a high incidence of forced labor.”

Don’t expect the new law to be a cure-all for forced labor. A potential challenge is the difficulty that enforcement officials will face when they are trying to trace countries or origin and identify product components, Dunbar says. “You can imagine how difficult this can be given the complexity and the non-transparency of some of today's supply chains,” she says.

Also, the law does not require that preventative measure be taken further up the supply chain before a product arrives at the U.S. border. “So, while products will be denied entry into the United States under this new law, the violation will have already occurred,” Dunbar says. “That’s the downside.”


The following chart, created by the U.S. Department of Labor, lists goods with most child labor and forced labor by number of countries and sector.

Source: U.S. Department of Labor

Nevertheless, “the prospect of a company’s goods being denied entry because of forced labor is an extremely daunting one that not only has ethical and reputational repercussions, but also potentially serious economic ones,” she adds.

Dunbar’s suggestion for affected companies is to ramp-up supplier engagement. Before a company sets out to identify and mitigate risks in their supply chain, it needs to engage all of the relevant stakeholders and identify the roles each can play in the process. “In light of the ew law, it will be important to get buy-in from suppliers, not just Tier-1 suppliers, but going further up the supply chain,” she says. Supply chain visibility and risk identification will be vital, with a need to know the country of origin for all products and components. The recruitment practices, policies, and codes of conduct of any vendor must be reviewed as part of enhanced due diligence. Supplier and sub-contractor requirements will need to be strengthened.

It isn’t just companies receiving an international presence that need to be concerned about forced labor. Recent efforts by the National Labor Relations Board, to expand the definition of what constitutes a joint employer, are adding to the risk.

Steven Cupp, a partner with law firm Fisher & Phillips, has seen that problem firsthand. Based in Gulfport, Mississippi, his firm has represented local companies snared in the net of human trafficking. Among the causes, an influx on undocumented workers in the wake of rebuilding efforts following Hurricane Katrina, and clean-up from the BP oil spill.

A cottage industry of seemingly reliable, but ultimately shady, labor providers emerged in the aftermath of the disasters, and many remain in operation.

Cupp tells of a large casino property whose housekeepers, hired through a third party, did not have legitimate visas, as was assured. Fed up from being forced to work uncompensated hours, they finally blew the whistle, alleging that the labor provider was engaged in the trafficking of these individuals and withholding absconded passports and travel documents.

“The problem for the hotel is that they were held to be a joint employer,” Cupp says.

“Shortly after the lawsuit was filed, the labor provider disappeared with the wind. They just closed shop and our client was left holding the bag with this lawsuit.”

The specific legal problem for the hotel was the federal Trafficking Victims Protection Reauthorization Act, which was amended in 2003 to include a civil cause of action. “It’s a very broad standard,” Cupp says. “It says that anybody who benefits from the trafficked labor, knew, or should have known, that these individuals were not here legally or being trafficked in some way can also be held liable. That was a real eye-opener for us.”

The advice for companies: Treat contracted labor as you would traditional employees. “If you have a worker on your property that you may not directly employ, you still need to give them access to human resources,” Cupp says. “They should be informed that if they are having any workplace problems to report them. If you pass the buck and bury your head in the sand, the plaintiffs’ attorneys will come in and say you didn’t do what a responsible employer is supposed to do and that you took advantage, indirectly, of trafficked labor.”

Another suggestion is to make sure you have a solid contract with third-party labor providers requiring that workers be paid in accordance with the provisions of the Fair Labor Standards Act and containing strong indemnification language. 

The risk of doing nothing can be not only costly, it can be lethal to a company’s brand and reputation. “The thing with human trafficking is that as soon as it is mentioned, everybody jumps to the conclusion that it is sex trafficking,” Cupp says. “It carries that bad connotation.”