It is rare to see a “Made in the USA” label or even in many cases, a “Made in Italy” one, for instance, on clothing. That is because, since the late 1990s, multinational fashion brands have increasingly outsourced their apparel manufacturing activities to lower-cost production locations in developing countries. While this process generally translated into lower price tags for consumers and booming employment in factories in regions where formal employment was limited, it has also led to widespread instances of modern slavery.
Indeed, according to the International Labour Organization, an arm of the United Nations, it has become increasingly clear that workers in the apparel manufacturing industry are often exploited and forced to work in unsafe conditions in order to keep production costs competitive in the global marketplace. The complexity of and oftentimes, the resulting lack of transparency that comes with many brands’ global supply chains, further perpetuates this problem, one that enables brands and their bottom lines to benefit from rampant labor exploitation.
However, under a recently reauthorized federal law known as the Trafficking Victims Protection Reauthorization Act (“TVPA”), apparel manufacturers and fashion companies that benefit financially from any form of modern slavery can be exposed to significant corporate liability even if they did not necessarily know about it.
As the first comprehensive federal law to address modern slavery, the TVPA creates a private right of action for victims of forced labor against third parties, such as fashion brands and retailers, that benefit from participating in a venture if they knew or “should have known” that the venture engaged in modern slavery. In other words, the TVPA imposes civil liability for corporate negligence.
The TVPA’s provisions are already playing out in court. For example, as seen in a very recent lawsuit filed against several major manufacturers in California, an apparel manufacturer may be exposed to corporate liability if one of its subcontractors employed forced labor in its supply chain, and the fashion company should have known of such exploitation.
Also, because an employee’s knowledge may generally be imputed to his/her employer, it could be established that an apparel company “should have known” of such trafficking if its employees, managers or agents witnessed signs of potential labor exploitation, such as excessively long or unusual work hours, very young and fearful workers, the use of security measures to keep workers on site, or threats of legal process.
Importantly, victims of forced labor may bring modern slavery lawsuits against foreign or U.S. companies even if the exploitation took place overseas. The TVPA’s grants jurisdiction to federal courts to hear modern slavery cases regardless of where the misconduct occurred, so long as the corporate defendant is present in the United States, and most established brands and retailers are.
Notably, in addition to creating civil liability for corporations that benefit, even unwittingly, from modern slavery, the TVPA imposes significant criminal liability if companies benefit financially from forced labor in “reckless disregard” that their business venture engaged in such exploitation. Generally, companies that violate the TVPA’s criminal provisions may face a fine of up to $500,000 or twice the benefit conferred from the violation. Moreover, as in most corporate crimes, executives and other company employees who caused the corporation to engage in a TVPA violation may also be prosecuted and, if found guilty, face up to 20 years of imprisonment for forced labor violations.
As apparel manufacturers and companies in the fashion industry may be exposed to significant corporate liability if they “should have known” that trafficking was occurring in connection with their business or supply chain, it is paramount that they implement effective anti-modern slavery compliance programs.
Forced labor is a horrific form of modern-day slavery, a multi-billion-dollar criminal industry where traffickers use force, fraud or coercion to control their victims. Proactively engaging in anti-modern slavery compliance is thus necessary from both corporate social responsibility and risk management perspectives. Indeed, not only is it an effective way to play a significant role in the fight against labor exploitation, but it also reduces business risk by mitigating a company’s exposure to potential corporate liability due to civil litigation or criminal prosecution.
Fabio Leonardi is an adjunct law professor at Georgetown University and a counsel with Pillsbury Winthrop Shaw Pittman in Washington, DC, where he represents companies and individuals on anti-modern slavery compliance and white-collar defense. The views and opinions expressed here are those of the author.