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Anti-Human Trafficking & Child Labor

What Your Company Needs to Know

James CalderAssent ComplianceDirector, Compliance Programs

About Assent: Your Partner For…

Michael LittenbergRopes & Gray LLPPartner

ROPES & GRAY LLP

Anti-Human Trafficking ─Legislation and LitigationPresented by Michael Littenberg

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About Michael Littenberg

Contact Information:T +1 212 596 9160F +1 646 728 2554Michael.Littenberg@ropesgray.com

Michael Littenberg is a partner in the securities & public companies practice group at Ropes & Gray.As part of his practice, for more than 25 years, Michael has been active in advising leading public and private companies on supply chain and corporate social responsibility matters, including relating to, among other areas, anti-human trafficking and conflict minerals and other commodities, and he is widely viewed as the leading practitioner in this emerging area.In the anti-human trafficking area, Michael advises a significant number of companies on compliance with the California Transparency in Supply Chains Act, the UK Modern Slavery Act and the FAR anti-human trafficking regulation. Michael advises clients on, among other things, disclosure and compliance with legal requirements, the construction and implementation of compliance programs, mitigating customer, litigation, NGO and socially responsible investor risk and in their interactions with these constituencies.Michael was previously a partner at Schulte Roth & Zabel.

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Overview of the FAR Rule

• Prohibits specified human trafficking conduct in connection with federal contracts– Applicable to contractors, subcontractors and their

employees and agents– No de minimis exception

• Requires a compliance plan and certifications if a contract/subcontract involves supplies acquired or services to be performed outside of the U.S. with an estimated value >$500K– Excludes commercially available off-the-shelf (COTS)

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Prohibited Conduct

• Engaging in severe forms of sex trafficking during the contract period• Procuring commercial sex acts• Using forced labor in contract performance• Destroying, denying access, etc. by an employee to identity or immigration

documents• Misleading, fraudulent or illegal recruitment practices• Charging recruitment fees to employees• Under certain circumstances, failing to provide return transportation at end

of employment• Providing housing that does not meet host country standards• If required by law, failing to provide an employment contract or other

required work document

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Compliance Plan Requirements

• Flexibility in plan design• But, must include specified elements:

– An awareness program– A process for employee reporting, including a hotline– A recruitment and wage plan– If housing is provided, a housing plan– Procedures to:

• Prevent agents and subcontractors at any tier/dollar value from engaging in human trafficking

• Monitor, detect and terminate agents, subcontractors and their employees that engage in prohibited activities

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Certification Requirements

• Applies if a compliance plan is required• Certification that:

– The contractor has implemented a compliance plan and procedures to prevent, and to monitor, detect and terminate a subcontractor engaging in, prohibited activities

– After conducting due diligence, either:• To the best of the contractor’s knowledge and belief, none of

the contractor, its subcontractors or their respective agents are engaged in any prohibited activities or

• If abuses relating to prohibited activities have been found, the contractor or subcontractor has taken the appropriate actions

• The contractor also is required to obtain certifications from relevant subcontractors

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Violations; Remedies

• If a violation, requires notice to the contracting officer and agency Inspector General, the agency debarring and suspending official and, if appropriate, law enforcement with jurisdiction

• Remedies:– Removal of employee from the contract or termination of a

subcontractor– Suspension of contract payments pending remediation– Loss of award fees for the non-compliance period– Declining to exercise contract options– Termination for default or cause– Suspension or debarment

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California Transparency in Supply Chains Act ─ Overview • Requires large retailers and manufacturers doing business in

California to disclose on their websites their efforts to eradicate slavery and human trafficking from their direct supply chains of goods offered for sale

• Requires disclosure regarding the following:– Verification of product supply chains– Supplier audits– Supplier certifications– Internal accountability– Training

The Compliance Focus is Ramping Up!

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U.K. Modern Slavery Act

• “Commercial organisations” must prepare a slavery and human trafficking statement each year– Applies to entities that supply goods or services and have an annual

turnover of at least £36MM– Effective for fiscal years ending on or after 3/31/16

• Must indicate steps taken during the applicable year to ensure human trafficking is not occurring in the supply chain or business

• Recommended disclosure topics:– Organizational structure, business model and supply chain relationships– Applicable policies– Due diligence and auditing process– Human trafficking risks and steps taken to assess and mitigate risk– Compliance effectiveness and KPIs– Training

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Other Legislative Initiatives

• Business Supply Chain Transparency on Trafficking and Slavery Act

• EU Directive 2014/95– Disclosure of non-financial and diversity

information by large undertakings

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Regulatory Action and Pending/ Threatened Litigation• In 2015, the California Dept. of Justice made

inquiries concerning CTSCA compliance• There are several lawsuits pending relating to

slavery and child labor in the supply chain– These suits cite various theories for liability

• Lawsuits alleging violations of the CTSCA have been threatened by pension funds

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Disclaimer

This information should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal question you may have.

Kate DunbarAssent ComplianceSubject Matter Expert, Human Trafficking

Part 1: The Role of NGO’s in Preventing Human Rights Violations in Supply Chains

Reputational Damage

“Many of these multinationals say they have a zero tolerance policy for child labor. But this promise is not

worth the paper it is written when the companies are not investigating their suppliers."

- Mark DummettAI business & human rights researcher

Amnesty hopes their report will result in the following outcomes:

Businesses take steps to prevent human rights violations in

supply chains

Governments enact laws obligating companies to

check and disclose sources of materials and suppliers

Part 2: Due Diligence

“[a process in place] to identify, prevent, mitigate and account for how they (companies) address their impacts on

human rights.”- UN Guiding Principles

“an on-going, proactive and reactive process through which companies can ensure that they respect human rights and

do not contribute to conflict.”- OECD

Identifying and assessing risks in the supply chain

Mitigating and responding to risk

Engaging with suppliers and building capacity

Carrying out independent targeted third-party audits at identified points in the supply chain

Public disclosure

Step 1:Step 2:Step 3:Step 4:Step 5:

A key challenge that emerges from all of the above steps is that of complex information management:

“One of our big challenges is complex information management… Even if I have all the information about locations and products, how

do I manage that volume of data? It changes every day, and any data solution has to be live and responsive.”

- Quaintaince James, Australian retailer David Jones & member of the Australian Attorney-General’s

Department Supply Chains Working Group

Source: http://www.cips.org/en/supply-management/news/2016/january/australian-retailer-david-jones-targets-slavery-free-supply-chain/

= Good for Business, Good for Everyone

From defensive to strategic: Demonstrating due diligence and best practice in responding to human rights violations in supply chains is good for business, it is strategic and gives a company a competitive edge. Example: Nike

One step at a time:Start with first 2 Tiers of your supply chain, then move upwards. This is a long term process and commitment.

Good for everyone:In the long run ethical sourcing and supply chain transparency means is better for business, better for people, and better for global economic development.

BSR Migrant Worker Management Toolkit: http://www.bsr.org/reports/BSR_Migrant_Worker_Management_Toolkit.pdf

ILO Combating Forced Labor Handbook:http://www.ilo.org/wcmsp5/groups/public/---ed_norm/---declaration/documents/publication/wcms_101171.pdf

OECD Guidelines: http://www.oecd.org/corporate/mne/48004323.pdf

UN Guiding Principles: http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf

Any Questions?

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