In a sign that Congress continues to pursue its bipartisan efforts to combat the use of forced labor in supply chains, Senators Josh Hawley (R-MO) and Kirsten Gillibrand (D-NY) have reintroduced the Slave-Free Business Certification Act of 2022 (“the Act”). The law is substantially similar to a July 2020 bill, which we previously discussed on our blog. The law would impose significant new compliance and disclosure requirements on many companies, requiring companies with annual global gross revenues of more than $500 million to conduct annual audits of their supply chains to detect any labor misuse. forced, report the results to the U.S. government, and face potentially significant fines and penalties for violations.
Reducing the use of forced labor continues to be an ongoing priority for Congress, regardless of party affiliation. This legislation comes shortly after the bipartisan passage of the Uyghur Forced Labor Prevention Act (PL 117-78), signed by President Biden in December 2021. Businesses are advised to take note and begin implement appropriate and risk-based responsible sourcing programs and due diligence processes in their supply chains.
The law would require that all covered business entity – defined as any company with annual global revenues over $500 million that is involved in mining, production or manufacturing goods for sale – to audit their supply chains.
Annual audit requirement: The law would require each covered entity to conduct an annual audit of its supply chains to investigate the presence or use of forced labor by the entity as well as by its suppliers, including its direct suppliers, secondary suppliers and its on-site service providers. The law would require that these audits include interviews with a representative sample of the workforce and review of relevant documents, including but not limited to pay stubs, audit procedures age, recruitment procedures, worker contracts, any labor broker contracts and time records.
Reporting requirements: At the end of each annual audit, companies would be required to submit a report to the US Department of Labor (“DOL”), disclosing the audit findings and policies to prevent the use of forced labor. The annual report must include at least:
- A disclosure of company policies to prevent the use of forced labor in its supply chain.
- A disclosure of the policies and procedures the company uses to: (i) assess the risk of forced labor in its supply chain; (ii) ensure that products produced in its supply chain have been properly certified by suppliers and third-party business partners; (iii) maintain internal accountability standards for employees or contractors who fail to meet requirements; and (iv) provide training to all employees to recognize and prevent forced labor.
- A description of the findings of each audit, including details of any cases of forced labor.
- A written attestation, signed by the company’s CEO, that the company has complied with the law, exercised due diligence, and to the best of the CEO’s knowledge, the company has found no cases of forced labor or disclosed all known instances of forced labor.
Report violations to Congress: The Secretary of Labor must prepare and submit an annual report to Congress telling Congress which companies have not conducted audits as required by law as well as which companies have found the use of forced labor in their supply chain .
Enforcement:If the law is violated, companies could face civil damages of up to $100 million and an additional $500 million in punitive damages.
The bill was referred to the Senate Committee on Health, Education, Labor and Pensions. To date, neither a hearing in committee, nor a markup of the bill, have been scheduled.
Key Takeaways Although passage of the current bill is uncertain at this time, it is part of a growing list of legislative and regulatory proposals in both the EU and the US targeting supply chains companies should continue to monitor. Combating forced labor remains a top priority for lawmakers and executive branch policymakers, and one of the few bipartisan goals of the US Congress. Companies should develop or assess existing responsible sourcing compliance programs and assess operations and supply chains for the risk of forced labor, to ensure they are able to comply with future legal obligations of the EU and the United States and to avoid both the penalties for non-compliance as well as the potential risks. legal action by shareholders or other stakeholders for non-compliance with mandatory procedures.