The Global Repercussions of Local Employment Risks

McDermott Will & Emery

McDermott Will & Emery

While campaigning for President in 1932, Franklin Roosevelt promised a crowd in Pittsburgh that he’d balance the federal budget while cutting “government operations” by 25 per cent. When he returned to Pittsburgh during his 1936 campaign, Roosevelt asked his staff how to answer questions about that unfulfilled promise and was told “deny you were ever in Pittsburgh.”

So much has changed since then: what is said and done is now instantly visible. This lesson came earlier to politicians, it is now unavoidable for business entities. There is no option to deny that you were there.

Let’s look at some consequences of this global visibility:

  • El Super, a small California-based grocery chain with approximately 600 unionized workers, failed to resolve a routine labor dispute at one store with the union representing those employees. As a result of this dispute involving just one store, El Super’s Mexican parent company, Chedraui Commercial Group, found itself subject to double barrel complaints filed by US and Mexican labor unions under the North American Free Trade Agreement labor agreement and Organization for Economic Cooperation and Development guidelines.
  • Vedanta found itself subject to a lawsuit by individuals living more than 5,000 miles away when an appellate court in the United Kingdom held that farmers from a Zambian village could bring a claim against Vedanta and its Zambian subsidiary (Lungowe and Ors. v Vedanta Resources PLC and Konkola Copper Mines PLC [November 2017] EWCA Civ 1528). The court’s decision expanded the potential “duty of care” that parent companies have under UK law to employees of their subsidiaries, to include even non-employees who might be affected by its subsidiaries’ operation.

This trend is particularly apparent with respect to issues of forced labor. Eight of the G20 countries (Australia, Brazil, China, France, Germany, Italy, Britain, and the United States) have passed, or taken steps to pass, anti-slavery laws intended to minimize the impact of forced labor. The UK Modern Slavery Act is a prime example.

These “nudge laws” require companies to disclose what actions they have taken to ensure there is no forced labor in their businesses or within their supply chains. The idea is that large companies that have not taken actions to prevent forced labor become subject to public scorn or shaming.

The risk, however, goes far beyond adverse publicity, as the following challenges demonstrate.

  • Barber v Nestlé USA alleged violations by Nestlé USA of California’s Transparency in Supply Chains Act, asserting a failure to disclose that some of the fish used by Nestlé in its cat food products may have been caught by fishing boats in Thailand that use forced labor and sold their catch to Nestlé’s partner, Thai Union Frozen Products, PCL. Nestlé ultimately won in both the trial and appellate courts.
  • Tomasella v. Mars, Inc., raised similar claims, alleging violations by Hershey Co., Nestlé USA Inc., and Mars, Inc., of the Massachusetts’ Consumer Protection Act by failing to disclose on the packaging their “participation in supply chains making use of the worst forms of child labor” despite having “knowledge of the child and slave labor in its supply chain.” The federal court judge dismissed the claims against Hershey, Nestlé, and Mars.
  • Samsung Global and its French subsidiary, Samsung Electronics France, have been challenged by nongovernment organizations (NGOs) in France for alleged misleading advertising. For example, the NGOs claim that Samsung’s website publishes ethical commitments guaranteeing workers’ rights, while its factories in China, South Korea, and Vietnam allegedly violate human rights, including engaging in child exploitation. After a Paris prosecutor closed the investigation, the NGOs filed a civil complaint against Samsung’s French subsidiary, which has led the Paris investigating magistrate to file preliminary charges against Samsung Electronics France.
  • Doe v. Nestlé is a suit under the US Alien Tort Claims Act in which Nestlé and Cargill have been accused of aiding and abetting child slave labor in the Ivory Coast. Most recently, the US Ninth Circuit Court of Appeals reversed the dismissal of these claims and allowed the plaintiffs to amend their complaint to “specify which potentially liable party is responsible for what culpable conduct.

Historically, businesses, like Franklin Roosevelt in 1932, focused narrowly on geography. Back then, what was said or done in Pittsburgh was only heard or witnessed in Pittsburgh. Today, what is done in Pittsburgh may matter in Paris, Prague, and Phnom Penh, and vice versa. As a result, companies must pay attention to employment practices along their entire global supply chain.

This article was originally publish in the latest issue of McDermott’s International News.

This article was co-authored by Emma Chen, who was an associate at McDermott at the time of writing this article.

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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