Forced Labor: Critical Issues For US Business Leaders

Background paper prepared for conference on "Engaging Business: Addressing Forced Labor", Atlanta, Georgia, February 20, 2008. Written by Roger Plant, Special Action Program to Combat Forced Labour, ILO, Geneva, Switzerland

Conference paper | 28 January 2008

While forced labor has not been that high on the agenda of United States or other companies, the concern and interest is growing. Certainly, no company can afford the negative implications of being associated with forced labor in its own business operations or supply chains. Forced labor is a criminal practice, prohibited in both international law and most national legislation. Indeed, it is the only subject in almost 190 of the ILO’s own Conventions that touches on a matter of criminal law and its enforcement. And in a country like the USA – with its well developed legislation on forced labour, involuntary servitude, peonage and trafficking, as well as a growing commitment to enforcing laws against forced labor and trafficking – it is a matter which every company would be advised to factor into its risk assessment. A company facing sound allegations that it is profiting from forced labor exploitation will not only find its reputation severely tainted: it might in rare circumstances also face expensive lawsuits and criminal prosecution.

Yet the issue, while of major importance, is often little understood. While child labor is easy to identify, forced labor can be a more complex issue. It is rare to find workers under lock and key, or physically forced to work under threat of violence. But there are a range of more subtle forms of constraint – such as inducing workers into severe indebtedness, confiscating identity documents of migrant workers, or deliberate non-payment of wages – which can be considered as forced labor practices under national laws or international standards.

Moreover, the limits of a company’s legal obligations and liabilities are a matter of much debate. To what extent is this a corporate social responsibility (CSR) concern, as a voluntary business commitment to ensure better working conditions and application around the world? And to what extent should there be binding legal obligations on companies throughout their product and supply chains?

In today’s globalized world, companies tend to have complex supply chains and production processes. They naturally want to move to places where production costs including labor costs are most competitive. The temptation is to do business with low-cost producers and suppliers, where wages are low, working hours are long, and where living and working conditions may be far from satisfactory. As part of their CSR policies, companies may have a moral obligation to seek better work practices everywhere. They have a higher degree of responsibility, to verify whether business partners are using forced labor.

What is forced labor?

The term forced labor is defined by the ILO in its Forced Labor Convention (No. 29 of 1930). This has been ratified by 171 of the ILO’s 182 member States (though not yet by the United States), meaning that it enjoys almost universal acceptance. In essence, persons are in a forced labor situation when they enter work or service against their freedom of choice, and cannot leave it without penalty or the threat of penalty. This does not have to be physical punishment or constraint. It can also take other forms, such as the loss of rights or privileges.

Working in poor or unhealthy working conditions is also considered a form of exploitation. Accordingly, certain countries have indeed passed legislation providing penalties for companies that subject workers to conditions that are “degrading” or “incompatible with human dignity” The purpose of labor law and its enforcement, guided by the international labor standards developed by the ILO itself, is to achieve the improvement of working conditions everywhere.

Forced labor however is a criminal act. The ILO’s Forced Labor Convention clarifies (Article 25) that “The illegal exaction of forced or compulsory labor shall be punished as a penal offence, and it shall be an obligation on any Member ratifying this Convention to ensure that the penalties imposed by law are really adequate and are strictly enforced”.

Otherwise put, forced labor goes beyond a corporate social responsibility (CSR) issue, in the sense of a voluntary commitment by companies to improve business practices. It is a binding legal obligation, failing which a company can be liable to criminal prosecutions and sanctions.

Forced labor: recent trends and their implications for business

At least until recently, forced labor has not often been seen as a problem likely to affect private enterprise. Rather, it as been associated with human rights abuse by repressive regimes, with gulags and concentration camps.

But two global reports on contemporary forced labor by the ILO itself, in 2001 and 2005, help to show why it should figure higher on the risk management concerns of business. The ILO’s 2005 report, A Global Alliance against Forced Labour, contains the first ever global and regional estimates of forced labor incidence by an international organization. It estimates some 12.3 million victims of forced labor worldwide (some 9.5 million in Asia, 1.3 million in Latin America, 660,000 in sub-Saharan Africa), but no less than 360,000 in the industrialized countries including Europe and the North Americas. Perhaps more importantly, the findings are that four out of every five cases involve forced labor exploitation by private agents.

What does this consist of? Apart from state imposed forced labor, the 2005 ILO report distinguishes between two main forms. One is the widespread forced labor in the poorer developing countries, linked to longstanding patterns of poverty and discrimination. Victims are the indigenous peoples in Latin America, caste and religious minorities in Asia (particularly the Indian subcontinent), and the descendants of slave-holding societies in parts of Africa. The second major form is the forced labor that arises from migration and trafficking of workers across the world. This affects mainly those persons working at the margins of the formal economy, with an irregular employment or migration status. Sectors where problems have often been identified include agriculture or horticulture, construction, garments and textiles under sweatshop conditions, catering and restaurants, domestic work, entertainment, and in particular the sex industry, The more research that is carried out, however, the more evidence is produced that coercive recruitment and employment practices can affect migrant workers in other quite mainstream economic sectors, including food processing, health care and contract cleaning, and also in some public sector employment such as the provision of health-care services.

The trend towards subcontracting, with often complex and unregulated chains, and towards the greater use of recruiting intermediaries, can be important factors behind abusive practices. While recruitment for employment abroad is a legitimate and much needed business, in the worst cases it can provide a cover for trafficking activities. When monitoring is weak and business standards are lacking, unscrupulous recruitment agencies can make high profits by charging migrant workers excessive fees, deceiving them about the nature of their work and paying wages far less than those promised at the time of recruitment. Indeed the US Department of State, in its annual Trafficking in Persons Report issued in June 2007, highlighted the problems of debt bondage and involuntary servitude among migrant “guest workers”, including the “intentional imposition of exploitative and often illegal costs and debts on these laborers in the source country or state, often with the complicity and/or support of labor agencies and employers in the destination country or state”.

Overall the strong US Government commitment to combat trafficking, including trafficking for forced labor exploitation, around the world has served to put the spotlight on these issues. It was the 2000 Trafficking of Victims Protection Act that gave the US its first specifically Forced Labor Statute, paving the way for prosecutions of private entities. Moreover, foreign forced labor claims have recently been raised directly in US courts through the use of the Alien Tort Statute. Though such litigation is rare, it reflects a possible trend towards stressing individual and corporate liability with regard to international law including instruments on forced labor.

What can employers’ organizations and business leaders do?

Forced labour is now becoming a significant risk management concern for companies. But in today’s sophisticated business world, it can be very hard to monitor all aspects of production throughout the supply chains. Senior boardroom members may simply not know what are the recruitment practices in an outsourced operation, and procedures may not be in place to ensure that such information is available. Moreover, officials at different levels of a company’s operations may not have the tools to identify a forced labour risk, or prepare the appropriate response.

Auditors, human resource officers, field managers and supply chain managers can have different responsibilities. Some have the job of training key personnel, to ensure that all employees know what forced labor is, and when some unsatisfactory employment practices can spill over to the criminal offence of forced labour. Others have to deal with outsourcers and supply chains. They need to know when to disengage, and when to engage constructively by using their influence to achieve a gradual improvement in working conditions.

Business also needs to be involved in broader policy debates – involving legislators, government officials and also the representatives of workers’ organizations – on the labour market and other factors that can breed forced labour conditions, and on the means to address them. A good example is the charging of fees by labor brokers and recruitment agents. Throughout the world, and even in industrialised countries including the US itself, there are growing concerns that some workers are being driven into high indebtedness through the high transaction charges of these labor brokers, sometimes so severe as arguably to amount to the debt bondage prohibited by international human rights instruments. In the extreme cases, where the brokers deliberately exploit workers’ vulnerability, the costs of visas, transport, passports or accommodation can be so inflated that migrant workers remain in debt after a full season of employment. Worse still, contract workers can be deceived over promised wages or the nature of their jobs, getting trapped in a spiral of indebtedness. The US State Department has indeed considered the abuse of contract labor systems as a form of forced labor and trafficking, and a draft of the pending Trafficking Victims Protection Reauthorization Act appears to call for intensified action on this subject.

Yet where to draw the line? What charges are legitimate? An ILO Convention on private employment agencies (No. 181 of 1997) establishes the general principle that private employment agencies should not charge, directly or indirectly, any fees or costs to workers. But the competent authority can make exceptions to these provisions, after consulting the most representative employers’ and workers’ organizations, in respect of certain categories of workers and specific types of services. To ensure that debatable practices do not degenerate into forced labor, it is essential that business actors get together to agree on at least minimum standards of behaviour.

Basic principles

To set the ball rolling, the ILO’s Special Action Programme to Combat Forced Labour has proposed a set of 10 principles to guide business action against forced labour. They were originally presented at a business summit on forced labor and trafficking, in Hong Kong in April 2007, and were reproduced by the Global Compact at its Geneva Summit in July 2007.They are, respectively, to:

  • Have a clear and transparent company policy, setting out the measures taken to prevent forced labor and trafficking. Clarify that the policy applies to all enterprises involved in a company’s product and supply chains;
  • Train auditors, human resource and compliance officers in means to identify forced labor in practice, and seek appropriate remedies;
  • Provide regular information to shareholders and potential investors, attracting them to products and services where there is a clear and sustainable commitment to ethical business practice including prevention of forced labor;
  • Promote agreements and codes of conduct by industrial sector (as in agriculture, construction and textiles), identifying the areas where there is risk of forced labor, and take appropriate remedial measures;
  • Treat migrant workers fairly. Monitor carefully the agencies that provide contract labor, especially across borders, blacklisting those known to have used abusive practices and forced labor;
  • Ensure that all workers have written contracts, in language that they can easily understand, specifying their rights with regard to payment of wages, forced overtime, retention of identity documents, and other issues related to preventing forced labor;
  • Encourage national and international events among business actors, identifying potential problem areas and sharing good practice;
  • Contribute to programmes and projects to assist, through vocational training and other appropriate measures, the victims of forced labor and trafficking;
  • Build bridges between governments, workers, law enforcement agencies and labor inspectorates, promoting cooperation in action against forced labor and trafficking;
  • Find innovative means to reward good practice, in conjunction with the media.

Guidance and training materials

While the above are general principles, applicable to all industries and employers, there are signs that companies would now welcome a more intensive learning process on forced labor, together with guidance tools and materials developed in consultation with key business actors. The SAP-FL programme has begun by working with employers’ organizations, listening to their concerns, and preparing guidance materials accordingly. In China, initial seminars were conducted in Beijing and Zhejiang respectively, for senior managers from both public and private companies and recruitment agencies, in sectors including construction, manufacturing, textiles and transport. Following an assessment of training needs of member companies of the China Enterprise Confederation (CUC), a training manual is being prepared with a particular focus on employers engaged in subcontracting, recruiting agencies, small and medium enterprises in export processing zones, and suppliers to multinationals. In Russia, together with the European Bank for Reconstruction and Development (EBRD), SAP-FL has been working with construction employers to raise awareness of the risk of migrant workers’ exploitation and to improve recruitment practices. In Jordan it has held training sessions with garment exporters, particularly those whose factories in the export sector have been criticised by NGOs for alleged forced labour practices. And in Brazil, ILO guidance has helped initiatives such as the Instituto Carvao Ciudadao in Maranhao State to audit its member coal producers. By late 2007 some 1,500 coal producers, representing over 20,000 workers, had been audited by the institute. Other Brazilian activities involve a literacy programme in vulnerable recruiting areas, and more generally involving the private sector in a National Pact against Forced Labor.

As part of a UN-wide initiative against human trafficking, the SAP-FL programme has recently embarked on a new initiative on supply chain management. This covers the four sectors of construction, garments and textiles, food chains and retail, and transport. Through detailed consultations with business actors in these four sectors, it aims to develop targeted training and guidance materials by the end of 2008.

A Business Alliance against Forced Labor

The ILO now seeks to harness business actors to its global efforts to end forced labor. A strategic plan has been developed, preparing the ground for the formal launch of such a business alliance in early 2009. Beginning with this Atlanta consultation, and in close coordination with the International Organization of Employers, the plan envisages growing engagement with the business community on concerns including:

  • Forced labor as an issue of supply chain management, through codes of conduct, monitoring, auditing and compliance
  • Factors that may contribute to forced labour in the production and trade of major commodities, and which therefore warrant a more systemic approach than traditional supply chain management
  • Factors that make forced labor a particular risk for some non-export businesses, particularly those small and medium enterprises exposed to the informal economy
  • The role of trans-national recruitment agencies, and the measures needed in both law and practice to prevent the incidence of forced labor and trafficking in contract labor and recruitment processes.

This represents a strategic opportunity for US employers’ organizations and their member companies to exercise leadership on an issue which is certainly moving higher on economic, trade and social policy agendas. With their global outreach and influence, US companies have an impact that goes way beyond this country alone. Building on the already strong US commitment against child labor, this can be a vitally important step in promoting adherence to core labor standards and decent work worldwide.

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