Anti-Human Trafficking Reg Could Have ‘Significant Impact' on Federal Contractors

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By Che Odom

Jan. 28 — A final rule issued Jan. 28 by three federal agencies could strengthen protections against human trafficking and have a huge impact on companies doing business with the U.S. government abroad.

The rule, released by the Department of Defense, General Services Administration and NASA, was published in the Federal Register Jan. 29. It requires certain contractors that conduct a threshold level of business for the federal government outside the U.S. to certify that, after conducting due diligence, they and their suppliers are not engaged in any trafficking-related activities.

The requirement exposes the extent to which companies are not aware of the activities of suppliers, said Sarah Altschuller, counsel in Foley Hoag LLP’s corporate social responsibility practice, during a Jan. 28 webcast.

“Again, it creates certain information-gathering challenges to be able to make the required certification,” Altschuller said while participating in the Practicing Law Institute's webcast “Integrating Human Rights Compliance into Corporate Social Strategy and Operations: The Role of Lawyers.”

“The universe of government contractors is quite large, so this rule is expected to have a significant impact,” added Altschuller, a co-author of Bloomberg BNA's portfolio on corporate social responsibility.

Regulation Creates Duties

The final rule amends the Federal Acquisition Regulation and involves changes intended to implement an order by President Obama, titled “Strengthening Protections Against Trafficking in Persons in Federal Contracts,” as well as Title XVII of the National Defense Authorization Act for Fiscal Year 2013.

It will take effect Mar. 2.

The rule requires contractors and subcontractors to notify government employees of human trafficking violations, use recruiters that comply with local labor laws and give employees a work document.

Guiding Principles an Influence

The rule is an example of a growing trend among governments worldwide to regulate in the area of human rights, Altschuller said. Corporate lawyers should familiarize themselves with the United National Guiding Principles on Business on Human Rights, which instructs such regulation, she said.

The Guiding Principles call on businesses to avoid “infringing on the human rights of others” and “address adverse human-rights impacts with which they are involved,” Ariel Meyerstein, vice president of labor affairs, corporate responsibility and governance at the U.S. Counsel for International Business, said during the webcast.

The principles were designed to apply to transnational and local businesses of all sizes and to address matters such as work conditions and rights related to land, as well as labor and justice issues, he said.

“Businesses should treat the risk of causing or contributing to human-rights abuse as an issue of legal compliance,” Meyerstein said.

Human Rights a ‘Billable' Issue

Respecting human rights in the practice of law has to do with “billable time,” John Sherman, general counsel of Shift Project, said during the webcast. Human rights issues should be factored into an attorney's advice to clients on what is “technically legal and what is morally right,” said Sherman, whose organization advises companies on social, environmental and governance issues.

“This should include the Guiding Principles,” which were endorsed by the American Bar Association in 2012, because they are “increasingly being added into laws and contract terms,” he said. “They are global norms that help lawyers decide on an appropriate course of action.

“Corporate lawyers are the most consequential players to be brought into the debate on human rights,” he added.

Boards Play a Role

Another reason for corporate counsel to become well-acquainted with corporate social responsibility matters is that these issues can create liability for corporate directors and officers, he said.

Boards should monitor and oversee management of human rights risks, which can cause delays and interruptions to operations, create conflicts and distractions for staff, and prevent lost opportunities by diverting resources, he said.

“This is not the exclusive province of lawyers, but lawyers, particularly in-house lawyers, play a crucial role in structuring M&A and other transactions,” Sherman said. “The better appreciation that lawyers have to human rights, the better they will be able to structure their advice to serve their clients.”

To contact the reporter on this story: Che Odom in Washington at codom@bna.com.

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com.

The PLI webinar is available through http://www.pli.edu.

The Federal Register notice is available at http://www.gpo.gov/fdsys/pkg/FR-2015-01-29/pdf/2015-01524.pdf.