Corporate Responsibility to Migrant Workers: Preventing Exploitation in Your Supply Chain

by Parker Poe Adams & Bernstein LLP
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The exploitation of migrant workers continues to be a problem across the globe as reports surface of forced labor for little to no compensation. The role multinational corporations play – or should avoid playing – in this recurring problem was the topic of many news stories over the past year. The spotlight fell on several companies that failed to prevent exploitation of migrant workers in their supply chain, while other companies were praised for making promising efforts to quash the abuse. These organizations should serve as models – and cautionary tales – to companies whose employees might be at risk.

The Current Climate

According to recent statistics, “approximately 25 million people worldwide are working in situations of forced labor.” On a global scale, about “150 million people leave their countries each year in search of economic opportunities elsewhere.” Many multinational corporations that depend on foreign workers use recruitment agencies to hire them. Unethical recruiting practices by these agencies are a root cause of forced labor, as many migrant workers are subject to high recruitment fees, personal debt, deceptive hiring practices, and inadequate legal protections. As a popular practice, many recruiters charge enormous fees equating to as much as two years’ salary, causing the workers to start their jobs in debt.

More than 75 percent of these vulnerable migrant workers are employed in the private sector, mostly in the agriculture, construction, manufacturing, technology, seafood, and garment industries. The International Trade Union Confederation (ITUC) recently reported that “the world’s 50 largest companies indirectly employ 116 million ‘hidden’ undocumented workers – equivalent to 94 percent of all the workers connected to their business.” The horrors are more prevalent in certain countries due to established underground recruiting systems. For example, Malaysia was in the news in 2016 and 2017 as being a “key player in the global manufacturing and trade of advanced electronics, at the cost of migrant workers.” Workers in Malaysia can be physically abused and forced to work 14-hour shifts under horrible working conditions, forced into debt, and denied freedom because their passports are confiscated upon arrival.

There is no hard body of international law forcing global corporations to prevent exploitation in their supply chain. However, the United Nations’ Guiding Principles on Business and Human Rights, which was adopted in 2011, provides that multinational businesses have an obligation to recognize these problems and address them. Thus, the responsibility falls on the companies themselves to make a difference, and they can. The Guardian reported that “with their cash reserves alone, the world’s 25 largest companies could pay informal workers in their supply chain $5,000 extra per year, ITUC calculates.” This kind of increase in income would be a significant help to a migrant worker remitting funds to financially support a family in his or her home country.

Of course, the United States is not immune to this problem. In fact, some analysts expect exploitation of migrant workers in America to grow under the Trump administration. Whether or not the president builds a wall along the United States-Mexican border, poverty will “still push economic migrants north; and the demand for cheap, low-skilled labor will still pull migrants toward the U.S.,” according to analysts with Verisk Maplecroft. Trafficking networks will adapt, using more costly methods to traffic workers into the country, and the increased cost will fall on the migrants through higher recruitment fees, meaning higher debt to keep them enslaved.

Moreover, harsher deportation policies will force undocumented migrant workers to remain in the shadows, making it harder to identify and eradicate the exploitation. In fact, tougher immigration rules will impact H-2B guest workers, on seasonal work visas, who will hesitate to report abuse for fear of not being rehired the following year. In this climate, immigrant advocates, activist groups, and the media will pressure businesses take a public position against this abuse. Any connection to exploitation of migrant workers could tarnish a corporation’s reputation, affecting revenue from customers as well as investors.

Samsung and Panasonic: Two Cautionary Tales

In 2017, labor rights activists closely watched Samsung and Panasonic, two multinational corporations that found abuse of foreign migrants in their supply chains in Malaysia. In November 2016, an investigation in The Guardian highlighted claims that workers for these two companies had been deceived about pay as well as the nature and the conditions of their work. Once arriving in Malaysia, workers’ passports were confiscated and they were forced to work up to 14 hours without rest. Since discovery of these conditions, both firms took steps in 2017 to reform their treatment of overseas migrant employees.

Panasonic has organized a series of human rights seminars for its suppliers and established a confidential whistleblowers’ hotline to report alleged abuse. Yet, not all migrant workers have a personal phone to make such reports. Panasonic later stated that its policies prohibited suppliers from collecting recruitment fees or confiscating passports. Samsung has issued fresh guidelines to its suppliers, which also impose bans on recruitment fees and the retention of workers’ passports. Further, Samsung terminated the contract with the supplier that engaged in the abuse, according The Guardian report.

NXP Semiconductors and Adidas: Two Good Models

Several companies have put promising methods in place that others should consider. For example, NXP Semiconductors, a Dutch electronics manufacturer, won a Stop Slavery Award in 2016 for its work to create a supply chain free of exploitation. NXP’s board of directors and CEO sign off on all human trafficking policies, and the company interviews foreign migrant workers before they depart to check whether they have paid recruitment fees. If money has been paid, it is refunded, and recruitment agents in the country of origin are audited. NXP also identifies vulnerable worker populations and conducts training for its suppliers in order to make informed purchasing decisions and ensure working conditions are safe and healthy. With regard to passport retention, NXP stores all workers’ passports in individual safe boxes in each employee’s locker, which are all surveilled by security cameras, and grants workers unrestricted access to those passports.

A second company, Adidas, was a 2017 winner of the Stop Slavery Award and was given  additional recognition as the Outstanding Achiever. Adidas was praised for the transparency of its audits and its strong responsible-sourcing guidelines, as well as its robust tools to trace higher-risk supply chains. For example, as a part of its Modern Slavery Outreach program, Adidas trains its leather tanneries in Taiwan and China on how to address forced labor risks. Adidas is also working on establishing multi-stakeholder partnerships and collaborations with the Fair Labor Association, International Labour Organization, civil society groups, and other brands with hopes of addressing forced labor risks in second-tier leather tanneries in China, Indonesia, and Vietnam, as well as third-tier leather hide suppliers in Brazil and Paraguay. Additionally, Adidas requires its Brazilian leather suppliers to ensure that leather only comes from cattle raised at farms that meet the requirements of Brazil’s National Pact on the Eradication of Slave Labour.

Adidas was one of the world’s first companies to create a role dedicated to fighting slavery, and it uses technology to encourage workers to speak out about any abuses. Specifically, the company’s grievance system allows most complaints to be brought by trade unions and labor and human rights organizations. The company also engages in disclosure and public reporting of these incidents and how they were resolved. For example, after learning that a supplier withheld workers’ wages, Adidas supported negotiations between the union and the supplier, the development of a payment plan, and ensured payments were made to workers. In another case where several workers were wrongly dismissed, Adidas’ investigations led to the rehiring of 186 workers and also improved rights for pregnant women to work, access government maternity benefits, and to receive severance packages from the supplier.

Further, Adidas requires workers to sign contracts directly with the factory in its supply chain instead of recruitment firms. It also requires suppliers to disclose the recruitment firms they use and to monitor all recruiters. Finally, to obtain public accountability, Adidas “publishes a list of names and addresses for its primary factories, subcontractors and licensees, a practice adopted by many leading companies in the apparel and electronics sectors,” according to a report from Domini, which specializes in socially responsible investing.

Recommended Practices

While there are no perfect solutions, multinational corporations can take several steps to make a significant difference in the lives of migrant workers. Here are a few that should be priorities:

Adopt Protective Policies

1. Recruitment fees should be eliminated or paid for by the employer instead of the migrant workers. As the party with the higher bargaining power, corporations can lower the fees to make them more reasonable, and the fees would certainly be a smaller financial burden for the company than the worker. In fact, it was reported that the fees migrants pay are not related to the true cost of recruitment. If companies take on the responsibility of paying those fees, the “fees would normalize, selection processes would closer reflect business needs, and expectations of both employer and employee would be better understood from the start,” according to The Guardian.

2. Employment contracts must be written in each workers’ native language and should be signed with the supplier instead of the recruiter. Further, the contract terms should allow the workers to earn at least minimum wage and consider permitting collective bargaining, if local laws allow.

3. Like NXP Semiconductors, companies should prohibit the confiscation of passports and provide safe storage that workers will have unlimited access to.

4. Like Adidas, prior to contracting with recruiters, companies should conduct a thorough investigation into the business practices of the recruiters and the prevalence of exploitation in the respective countries. Once hired, recruiters should undergo training to ensure they have a thorough understanding of the company’s policies against exploitation.

Enforce Protective Policies

1. Companies must constantly monitor the treatment of migrant workers in their supply chain. Conducting undercover investigations or random non-scheduled audits of recruiters and supplier facilities will allow companies to obtain a realistic picture of ongoing activity and will pressure suppliers and recruiters to adhere to the policies.

2. There must be a reporting system in place for workers to make any reports of abuse directly to a human resources division in the corporation. Establishing open flow of communication with no fear of retaliation and following up with an investigation of all reports is imperative.

3. In the event violations are discovered, terminating a supplier or recruiter contract may appear to be an easy fix. However, such a move can be detrimental to the families that rely on the income from those factory jobs. Thus, it is much better to be proactive instead of reactive.

Self-Assessments

1. As with any corporate initiative, it is important to evaluate how well the implemented policies are working. “Public reporting is needed to ensure effective implementation of these kinds of policies, and to educate others about the kinds of problems that are found, the tactics that work and those that don’t. It is also a necessary mechanism for building trust with investors, consumers and other stakeholders, a valuable asset for any global brand,” according to the Domini report.

2. To help ensure your company stays on track, try taking the Sedex self-assessment questionnaire. Sedex, a specialist in supply chain data, provides 38,000 suppliers in 150 countries with a self-assessment questionnaire that corporations can access to determine their exposure to human rights risks. Sedex focuses on four principals:

  • Labor standards: includes questions on wages, working hours, children and young employees, freedom of association, non-discrimination, forced labor and human rights
  • Health & safety: includes questions on management, training, emergency and fire safety and worker health
  • Environment: includes questions on environmental management, waste, raw materials, water, energy and pollution
  • Business ethics: includes questions on bribery and corruption

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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