Manufacturers and Retailers Doing Business in California Are Required to Take Action to Prevent Slavery and Human Trafficking

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Lawmakers are looking to businesses to help curb the growing problem of human trafficking. The first in a series of a new wave of legislation has taken effect. Manufacturers, retailers and others in the supply chain are watching developments on a California law that took effect last year designed to prevent human trafficking and slavery in both the United States and abroad. The California Transparency in Supply Chains Act requires large retail sellers and manufacturers doing business in California to publicly disclose their efforts to eradicate forced labor from their direct supply chains. The law pushes such companies to develop, maintain and implement policies that prevent human trafficking and slavery by requiring them to publicly post on their corporate websites the actions being taken to prevent such abuse. It also requires affected companies to make that information available in writing upon request. The law implicitly requires targeted companies to audit their practices, establish procedures, train their employees and certify their actions. As this law is aimed at eradicating abuse from the entire supply chain, suppliers, retail sellers or manufacturers should take notice.

Who Must Comply

The law applies to companies that: (1) are retail sellers or manufacturers, (2) earn more than $100 million in worldwide gross annual receipts and (3) are actively engaged in any transaction for the purpose of financial or pecuniary gain or profit in California. While the law requires only manufacturers and retail sellers—as defined under the California Revenue and Taxation Code—to take action, the actions they are required to take include coordination with their suppliers. Tax returns will be used to identify who needs to comply with the law at this time. It may be worthwhile to consider seeking legal counsel to determine whether this law applies to your specific company.

What the Law Requires

Retail sellers and manufacturers must post their efforts to eradicate slavery and human trafficking from their direct supply chain on their Internet websites, with specific requirements of what to disclose and where the information should be posted. While the disclosures are specific—requiring companies to evaluate and address the risks of human trafficking and slavery, audit suppliers and maintain internal accountability standards and procedures, among other things—companies have shown creativity in how they post that information. The penalty for noncompliance is injunctive relief by the California Attorney General, which means that companies may not face a monetary penalty for failure to disclose, but they will receive an order from the state Attorney General to take specific action.

What the Law Means for Companies

Large retail sellers or manufacturers and suppliers to such companies who have not yet taken action should take notice. The new law indirectly encourages companies to audit their practices, establish policies, train employees and obtain appropriate certifications. The law is one of several new pieces of California legislation designed to curb the human trafficking problem. Companies that have not yet taken action may want to do so promptly before the California Attorney General takes action.

For Further Information

If you have any questions about this Alert or would like more information, please contact any member of the Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.