US law firm Jones Day has highlighted the issues leading companies face complying with legislation intended to address labour issues in the supply chains for products ranging from cocoa and chocolate to clothing.
In a white paper, Jones Day noted that human trafficking is a global problem that is receiving the attention of legislators and law enforcement. Legislative efforts are focused largely on increasing corporate responsibility in the eradication of human trafficking.
New legislation requires corporations to identify, examine, and eliminate the use of forced labour in supply chains. “Corporations now face the threat of civil and criminal ramifications for failing to comply with these new and heightened requirements,” it said.
The white paper describes recent legislation in this area, sets out the possible ramifications for failing to understand the corporate obligations and analyses the possibility of future legislation and litigation.
“Most recently, lawmakers have focused their attention on corporations. Lawmakers and law enforcement are seeking to hold corporate entities responsible for forced labour used in their supply chains,” said Jones Day.
“US corporate entities supplying Americans with their goods have routinely used a chain of foreign-based companies in the production of their goods. Whether it be an ingredient used in a food product or a piece of leather sewn into a pair of shoes, foreign-based supplies are often a necessary component to the manufacture, distribution, and sale of consumer goods. What is new and evolving is a corporation’s legal obligation to examine its chain – from top to bottom – to ensure that forced labour and substandard labour conditions have not been used.
“Given the scope of this problem and the potential for legal, financial, and reputational harm, all corporate entities should take steps to ensure that they are sufficiently aware of the nature and extent of any risks of forced labour in their supply chains and to responsibly address those risks as part of an overall compliance programme,” the law firm said.
Companies that do not comply with the various supply chain transparency laws and do not take steps to prevent labour trafficking are subject to significant legal consequences and related financial and reputational harm.
Potential legal consequences include class actions, shareholder derivative suits, enforcement actions from local attorneys general, and the potential for criminal ramifications.
Jones Day highlighted a suit currently pending in the District of Massachusetts, a class action filed against a large chocolate manufacturer, seeking to hold the manufacturer accountable for the use of child labour in the production of the cocoa it uses.
“Industry experts are watching this case closely, as it could be the first to survive the pleadings stage,” said the law firm.