Back On The (Supply) Chain Gang: New California Law Requires Disclosure of Efforts to Eradicate Slavery and Trafficking from Supply Chains

Companies doing business in California are well-acquainted with the state's wide range of consumer protection statutes, many of which are unique to California. You can now add another one-of-a-kind statute to that list — one that will add to the burdens of doing business in the Golden State. California recently passed the Transparency in Supply Chains Act (Senate Bill 657), which requires retail sellers and manufacturers to disclose their efforts to eradicate slavery and human trafficking from their supply chains. This law will take effect on January 1, 2012 and applies to all companies with over $100 million in annual revenue that are doing business in California. According to one estimate, this would affect over three thousand companies. The exclusive remedy for a violation of the law is an action brought by the California Attorney General for injunctive relief. The law will require companies to post a public disclosure of their efforts on their website, which must be identified by a conspicuous and easily understood link. If a company does not have a website, it must provide written disclosure within thirty days of receiving a consumer request. The disclosure must, at a minimum, include to what extent the company: Engages in verification of product supply chains to evaluate and address risks of human trafficking and slavery; Conducts audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains; Requires direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business; Maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking; and Provides company employees and management (who have direct responsibility for supply chain management) training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products. It should be emphasized that this law does not require any company to take any affirmative steps to eradicate slavery and trafficking from its supply chain. It simply requires the company to disclose what steps (if any) it is currently taking. Any company that decides, in response to this law or otherwise, to influence the practices of their supply chain should consider that they may be inviting litigation. At least one lawsuit has been brought alleging that a company's efforts to influence its suppliers' treatment of workers made it a "joint employer" with legal responsibility for that treatment. – James Speyer and Manav Kumar

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