Navigating New Disclosure Laws on Forced Labor: What UK and California Regulations Mean for Your Business
In an era where ethical supply chains are not just valued but expected by consumers, recent legislation in the UK and California highlights a growing trend towards transparency regarding forced labor practices. The UK's Modern Slavery Act and California's Transparency in Supply Chains Act serve as benchmarks for such disclosures, requiring manufacturers and retailers to publish what they are doing to prevent child labor, forced labor, and human trafficking on their websites.
The Importance of Disclosure
Enacted in 2015, the UK's Modern Slavery Act requires certain businesses to produce a yearly statement detailing actions taken to prevent slavery and human trafficking in their supply chains. Similarly, California's law, which has been in effect since January 2012, mandates that large retailers and manufacturers disclose their policies and practices, informing consumers of their efforts to address forced labor and trafficking across their supply chain.
While these laws require retailers and manufacturers to report their current practices transparently, they do not require companies to take any action to eliminate forced labor from their operations.
Industries at Risk
Certain industries, such as textiles, electronics, and agriculture, are particularly susceptible to forced labor risks. But any supplier with an extensive, often opaque supply chain that tends to operate outside the U.S. in areas where instances of forced labor and trafficking are high is at risk. For example, the fashion and apparel industry has faced numerous scandals related to exploitative working conditions and child labor.
Proactive companies in these sectors have leveraged detailed disclosures to comply with legal requirements and strengthen their brand reputation while building trust with increasingly conscientious consumers. Companies are realizing their efforts to address slavery and human trafficking can influence purchasing decisions.
Managing Risk and Disclosures
It’s simple. Disclosures must be posted on a website. Suppose a business assesses its risk of forced labor as low, particularly if manufacturing is conducted within the U.S. under stringent wage and labor laws. In that case, it's okay to explain why this risk is minimal. However, low-risk businesses should still articulate any general policies that contribute to preventing forced labor, including internal practices and expectations for all suppliers, such as detailed compensation structures, labor rights, employee policies outlined in the employee handbooks, or even a statement that confirms compliance with all U.S. wage and hour laws.
Legal Precedents and Repercussions
Failure to comply with these disclosure requirements can lead to significant legal and reputational risks. For instance, in California, the Attorney General can bring injunctive relief against companies failing to comply, compelling them to meet disclosure standards. Although there are no penalties for non-compliance in the UK, the court of public opinion and the potential for consumer boycotts can be just as damaging.
Staying Ahead of the Curve
The evolving legal landscape around forced labor and trafficking disclosures demands vigilant attention from businesses. By understanding and complying with these laws, companies not only mitigate legal risks but also enhance their market position by aligning with the ethical expectations of modern consumers.
Businesses can stay ahead of the curve by assessing their risk with tools such as the Slavery & Trafficking Risk Template (STRT), which provides a framework for evaluating and reporting supply chain risks. Additionally, industry-specific guidelines, available through organizations like the International Labour Organization (ILO), can help tailor disclosures to meet both legal requirements and industry standards.
If you need assistance compiling necessary disclosures, consider reaching out for a consultation. Our experienced legal team can ensure your business complies with corporate social responsibility disclosure requirements under domestic or foreign law.