Can Contracts Protect Your Business’s Supply Chain from Including Trafficked Labor?

Can Contracts Protect Your Business’s Supply Chain from Including Trafficked Labor?

Human trafficking is a global problem that touches almost every aspect of our economy.  According to a 2017 white paper from the U.S. Chamber of Commerce, it is estimated that almost 21 million people are victims of trafficking.  Businesses can unknowingly be involved in labor trafficking when their suppliers, contractors, subcontractors or partners, procure materials, products or services that are produced by people who are trafficked.

If we asked the average consumer if they would buy a good or service produced with trafficked labor, most if not all would say no way.  If we asked the average business owner who is purchasing inputs for their products if they want to purchase inputs that were made with trafficked labor, most if not all would say no way.  But does the average consumer even know what trafficked labor is?  The Trafficking Victims Protection Act (TVPA) defines labor trafficking as: the recruitment, harboring, transportation, provision, or obtaining of a person for labor or services, through the use of force, fraud or coercion for the purpose of subjection to involuntary servitude, peonage, debt bondage or slavery.  The problem is not the immediate purchaser of goods and services.  The problem is that the entire supply chain (the connected system of organizations, activities, information and resources designed to source, produce and move goods and services from origination to a final destination—typically from a supplier to an end customer) must be “accountable” for not using trafficked labor.

What is important to remember is that under both federal and state laws, a business can be found liable if the business benefits from human trafficking.  The hotel industry is feeling the sting of “benefiting” from human trafficking right now, but it won’t be long before other industries will start to be held accountable.  What is important to note is that under the TVPA and most state laws, the victim of labor trafficking may sue any party in the supply chain who knowingly benefits from participation in a venture that person knew or should have known has engaged in trafficking.  Notably, the TVPA specifically allows courts to award damages as well as attorney’s fees to the victim as well as punitive damages.

So how can the average business protect itself against this risk and more importantly make sure labor trafficking becomes unacceptable?  This accountability can be accomplished through contracts.

Industries that tend to have the highest risk of labor trafficking are agriculture, construction, electronics manufacturing, mining, fishing, forestry, hospitality, textile and apparel manufacturing, transportation and warehousing.

So, if a business’s supply chain touches or includes one or more of these industries, contracts with suppliers and partners need to include provisions that: (1) warrant that goods and services are being produced and provided in compliance with all laws, specifically calling out trafficking laws; (2) require business partners to periodically certify that they have complied with requirements for identifying and eradicating human trafficking from their operations; (3) require that the business partner have anti-trafficking policies and compliance with those polices; (4) include a covenant and indemnification obligation that requires the business partner pay for any damages incurred by the buyer if there are any claims by victims of trafficking; and (5) allow for periodic reviews or surprise visits to insure compliance.

And if we really want to use supply chain contracts to combat labor trafficking, let’s see if the insurance industry can be convinced to create a product that can be required to be obtained by the service provider to mitigate risks – like cyber security insurance is now being required.

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Kimberly Lowe

Kimberly Lowe

For over 20 years I have lawyered from the trenches with experience based on a comprehensive knowledge and understanding of how both for-profit and nonprofit enterprises operate. I guide entrepreneurs, executive management teams, boards of directors, multigenerational families, shareholders and investors through all aspects of the business life cycle from formation to operation to exit. Read Kim's Bio.

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