Corporate Social Responsibility and Foreign Contractors: Corporate Accountability for Worker Safety Abroad

Saint Louis University Law Journal Saint Louis University Law Journal

Volume 62

Number 2

Winter 2018

Article 14

2018

Corporate Social Responsibility and Foreign Contractors: Corporate Social Responsibility and Foreign Contractors:

Corporate Accountability for Worker Safety Abroad Corporate Accountability for Worker Safety Abroad

Caitlin Fagan

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Caitlin Fagan,

Corporate Social Responsibility and Foreign Contractors: Corporate Accountability for

Worker Safety Abroad

, 62 St. Louis U. L.J. (2018).

Available at: https://scholarship.law.slu.edu/lj/vol62/iss2/14

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SAINT LOUIS UNIVERSITY SCHOOL OF LAW

509

CORPORATE SOCIAL RESPONSIBILITY AND FOREIGN

CONTRACTORS: CORPORATE ACCOUNTABILITY FOR WORKER

SAFETY ABROAD

NTRODUCTION

Among the many ways in which globalization has radically altered the way

people live is through how people work. As technology has enabled companies

to globalize, manufacturing jobs seeking low-wage labor have been migrating

to developing countries. Along with lower wages, workers in developing

countries also face substandard working conditions, including forced labor and

dangerous work environments. Since the 1980s, public opinion, particularly in

western countries, has pushed companies producing goods abroad to ensure that

their workers are not mistreated.

This impetus provided by customers,

shareholders, and the community at large has developed into a new concept—

Corporate Social Responsibility (“CSR”). CSR encourages companies to

implement corporate policies not only to protect workers’ rights, but also to

prevent environmental damage and to contribute to the improvement of society

in general.

In response, some companies have adopted policies to integrate CSR

into their corporate practices. In addition, governments and international

organizations have recognized the importance of CSR not only in official

statements and reports, but also in the implementation of legislation to enforce

some measure of CSR. However, legal repercussions are limited against

companies that have their goods produced by foreign contractors, which often

have poor working conditions. This Paper aims to review the current methods

used by various countries to hold such companies responsible and to consider

possible legal alternatives for the United States.

This Paper begins by reviewing the effect of globalization on labor and the

development of CSR. Next, the history of American labor law is discussed to

demonstrate the legislation resulting from decades of concern regarding worker

safety. The review extends to international standards in regards to workers’

rights and worker safety. Next, this Paper discusses the existing legal approaches

to worker safety and CSR both in the United States and around the world. In the

last section, the existing and potential legal approaches in the United States to

hold companies accountable for labor rights violations of their foreign

1. Firuza S. Madrakhimova, Evolution of the Concept and Definition of Corporate Social

Responsibility, G

LOBAL CONF. BUS. & FIN. PROCS., May 2013, at 113, 113.

2. What Is CSR?, U.N.

INDUS. DEV. ORG., http://www.unido.org/csr/o72054.html

[https://perma.cc/22C6-A7V8].

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contractors are analyzed. Finally, this Paper gives a recommendation as to how

the United States can implement CSR in the American legal system.

BACKGROUND

A. The Impact of Globalization

Since the 1970s, the process of globalization has led to greater economic,

social, and cultural interconnectedness around the world.

The social, political,

and legal implications of globalization significantly impact people around the

world and the human rights they are accorded.

Prompted by trade liberalization

and cheaper and easier transportation, companies routinely operate in different

parts of the world.

In particular, business operations and supply chains now

expand across multiple continents.

Companies have moved parts of their

business to countries with cheaper labor, fewer labor and environmental

requirements, and lower taxes in order to increase profits and competitivity.

Since the rise of globalization, multinational corporations have become

powerful players in the international sphere.

In fact, some corporations are

larger than the economies of some countries.

The growing importance of

corporations in the world means that corporations often have a role in the

enjoyment of human rights. This is especially relevant in developing countries

where many multinational corporations have brought their operations involving

manufacturing, assembly, services, and have even developed new markets.

3. Andrea Scozzaro, Labor Standards in International Law: All States Should Have an

Obligation to Punish Misconducts of Multinational Enterprises Under International Customary

Law, 19 C

UNY L. REV. 59, 62 (2016), http://www.cunylawreview.org/labour-standards-%E2%80

%A8in-international-law-all-states-should-have-an-obligation-to-punish-misconducts-of-multina

tional-enterprises-under-international-customary-law/ [https://perma.cc/FU4S-BK66].

4. Lucien J. Dhooge, Beyond Voluntarism: Social Disclosure and France’s Nouvelles

Régulations Économiques, 21 A

RIZ. J. INT’L & COMP. L. 441, 441 (2004).

5. Martín Rama, Globalization and Workers in Developing Countries 7 (World Bank Dev.

Research Grp., Working Paper No. 2958, Jan. 2003).

6. M. Eric Johnson, Supply Chain Management: Technology, Globalization, and Policy at a

Crossroads, 36 I

NTERFACES 191, 191 (2006).

7. Marié McGregor, Globalization and Decent Work (Part 1), 14 J

UTA’S BUS. L. 150, 150

(2006).

8. Claudia T. Salazar, Applying International Human Rights Norms in the United States:

Holding Multinational Corporations Accountable in the United States for International Human

Rights Violations Under the Alien Tort Claims Act, 19 S

T. JOHN’S J. LEGAL COMMENT. 111, 156

(2004); see also John Spanier, Who Are the “Non-State Actors”?, in T

HE THEORY AND PRACTICE

INTERNATIONAL RELATIONS 43, 50 (William C. Olson ed., 8th ed. 1991).

9. Erin Foley Smith, Right to Remedies and the Inconvenience of Forum Non Conveniens:

Opening U.S. Courts to Victims of Corporate Human Rights Abuses, 44 C

OLUM. J.L. & SOC.

PROBS. 145, 149 (2010).

10. OECD,

OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES 14 (2011), https://www.o

ecd.org/corporate/mne/48004323.pdf [https://perma.cc/5TL2-2RNP].

SAINT LOUIS UNIVERSITY SCHOOL OF LAW

2018] CORPORATE SOCIAL RESPONSIBILITY AND FOREIGN CONTRACTORS 511

In particular, globalization has created a significant change in employment.

Because skilled labor is more prevalent in developed countries and less so in

developing countries, unskilled employment opportunities increasingly have

migrated to developing countries.

Between 1970 and 1997, the developing

world’s share in manufacturing exports increased from twenty-three percent to

thirty-eight percent of the total amount of manufacturing exports.

This trend

has both positive and negative effects. The growth of employment opportunities

in the developing world can have a significant impact on poverty levels.

The

availability of industrial jobs is a contributing factor to poverty reduction;

poverty is more closely tied to rural agricultural jobs.

Additionally, women

have been able to take advantage of these opportunities and increase their

earnings.

Furthermore, foreign companies generally comply with domestic

and international labor standards to a greater degree than their domestic

counterparts.

While lower working standards in developing countries are a

problem, provisions in the law promoting workers’ rights can reduce the cost of

globalization for workers in developing countries.

The outsourcing of unskilled labor, however, also has significant negative

effects. While women are able to make an income, they are usually employed

because they are paid less than men and are less likely to become involved in

trade unions.

Furthermore, the growth of unskilled labor opportunities in the

developing world is associated with child labor.

In 2013, the U.S. Department

of Labor found 122 goods, including coffee, cotton, shoes, carpets, and furniture,

that were believed to have involved child labor.

Labor violations due to

globalized outsourcing disproportionately affect women, children, minority

populations, and indigenous peoples.

11. Rama, supra note 5, at 7.

12. Roger Blanpain, The Globalisation of Labour Standards: The Soft Track Law, 14 T

ILBURG

L. REV. 10, 11 (2007).

13. Rama, supra note 5, at 16.

14. Id.

15. Id. at 15.

16. Cael Warren & Raymond Robertson, Globalization, Wages, and Working Conditions: A

Case Study of Cambodian Garment Factories (Ctr. for Glob. Dev., Working Paper No. 257, June

2011).

17. M

ARY JANE BOLLE, CONG. RESEARCH SERV., 97-861 E, NAFTA LABOR SIDE

AGREEMENT: LESSONS FOR THE WORKER RIGHTS AND FAST-TRACK DEBATE 15 (2001).

18. Rama, supra note 5, at 15.

19. Id. at 16.

20. K

AMALA D. HARRIS, CAL. DEP’T. OF JUSTICE, THE CALIFORNIA TRANSPARENCY IN

SUPPLY CHAINS ACT: A RESOURCE GUIDE 1 (2015), https://oag.ca.gov/sites/all/files/agweb/pdfs/

sb657/resource-guide.pdf [https://perma.cc/T6Z8-ABTC].

21. S.L. Bachman, The Political Economy of Child Labor and Its Impacts on International

Business, 35 B

US. ECON. 30, 31, 35, 38 (2000); John McKenzie, The Limits of Off-Shoring—Why

the United States Should Keep Enforcement of Human Rights Standards “In-House,” 83 I

ND. L.J.

1121, 1132–33 (2008).

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In 2005, the International Labor Organization (“ILO”) expressed its concern

about the winner-take-all mentality pervasive in the process of globalization.

A major concern regarding globalization and employment is the “race to the

bottom” theory about working standards.

In order to encourage corporations

to operate in their countries, some governments will tolerate poorer working

conditions.

Furthermore, the laws of many countries do not govern corporate

behavior abroad,

so corporations often operate with “virtual impunity” for its

human rights obligations outside its countries’ borders. Sweatshops often have

ten-to-twelve hour workdays, compulsory overtime, unsafe working conditions,

punishment, locked doors, low pay, abuse, and prevention from organizing.

One example is Foxconn, a Chinese company that produces electronics for

Apple, Nokia, and Sony, as well as other companies.

Foxconn employees often

work 100-hour workweeks in unsafe working conditions.

The lack of

adherence to reasonable labor standards has significant negative effects on

society, dampening productivity and instilling a cycle of poverty by depriving

children workers of their education.

However, if companies can improve the

poor working conditions in their businesses abroad, or those of the contractors

they hire abroad, workers will benefit from the higher wages that globalizing

companies can provide.

Some economists argue that imposing workers’ rights

in developing countries would decrease economic growth in those countries.

Others insist that, due to the ease of business relocation, sufficient labor

standards need to be imposed in developing countries.

B. Corporate Social Responsibility

While globalization may result in worse labor standards, globalization has

also prompted people in developed countries to raise their expectations for

corporations and the corporations’ influence on the economy, society, and

environment.

In response to campaigns against child labor, forced labor, and

dangerous working conditions, companies began developing internal codes of

22. McGregor, supra note 7, at 152.

23. Scozzaro, supra note 3, at 61.

24. Id.; McKenzie, supra note 21, at 1138; Smith, supra note 9, at 150.

25. McKenzie, supra note 21, at 1138.

26. Scozzaro, supra note 3, at 62.

27. Id. at 63.

28. Id.

29. Blanpain, supra note 12, at 17.

30. McGregor, supra note 7, at 151.

31. M

ARY JANE BOLLE, CONG. RESEARCH SERV., 97–861 E, NAFTA LABOR SIDE

AGREEMENT: LESSONS FOR THE WORKER RIGHTS AND FAST-TRACK DEBATE 2 (2001).

32. Id.

33. Commission Green Paper on Promoting a European Framework for Corporate Social

Responsibility, DOC/01/19 (July 18, 2001) [hereinafter Green Paper].

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conduct.

In the late 1980s and early 1990s, Levi Strauss & Company and

Reebok Corporation were forerunners, reviewing human rights instruments to

craft their codes of conduct.

Furthermore, they demanded that the codes of

conduct be applied to their global supply chain, including their suppliers.

Their

codes of conduct involved monitoring and enforcement provisions, including

surprise audits and company reviews.

Since these early codes of conduct, the

concept of CSR has continued to grow, the pressure by civil society and the

media has intensified, and expectations have risen.

Some corporations have

exceeded expectations to ensure CSR in their actions abroad and recognized

their ability to improve the lives of their workers abroad. In 2013, for example,

Kate Spade & Company launched their “on purpose” initiative, which involved

the creation and development of an independent supplier in Rwanda to be run as

a “social enterprise.”

Although Kate Spade provided the financial means to

create the company, the company is owned by the employees, artisans who make

Kate Spade products.

The supplier pays its artisans a living wage, offers

twenty-one days paid vacation, provides a clean work environment, and

schedules an eight-to-five workday with stretch breaks and a one-hour lunch

break.

So far, Kate Spade’s independent supplier has been able to net a profit,

with expectations for a greater margin in the coming years, while enabling

workers to improve their quality of life.

As the concept of CSR gains popular

support worldwide, corporations are increasingly responding by implementing

efforts to ensure that their operations—and those of their suppliers—are socially

responsible.

CSR is “a concept whereby companies integrate social and environmental

concerns in their business operations and in their interaction with their

stakeholders on a voluntary basis.”

Stakeholders are people who affect or are

affected by the company in question, including customers, suppliers,

shareholders, financiers, employees, and the local community.

CSR involves

four layers: economic responsibility to be profitable, legal responsibility to obey

34. Lance Compa, Corporate Social Responsibility and Workers’ Rights, 30 COMP. LABOR L.

& POLICY J. 1, 3 (2008).

35. Id.

36. Id.

37. Id. at 4; Scozzaro, supra note 3, at 63.

38. Compa, supra note 34, at 5.

39. E

DWARD SOULE, CATHERINE TINSLEY & PIETRA RIVOLI, A SOCIAL ENTERPRISE LINK IN

GLOBAL VALUE CHAIN: PERFORMANCE AND POTENTIAL OF A NEW SUPPLIER MODEL 7–8

(2017) (first emphasis omitted), http://womensleadershipinstitute.georgetown.domains/on-pur

pose-kate-spade/ [https://perma.cc/HP6Q-GZ5D].

40. Id.

41. Id. at 11.

42. Id. at 52.

43. Green Paper, supra note 33.

44. Id.

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the law, ethical responsibility to act justly and fairly, and philanthropic

responsibility to be a good corporate citizen and improve quality of life.

Importantly, studies have demonstrated that companies that internalize CSR

principles can boost performance and profits.

While companies often receive

negative publicity for ignoring CSR, they develop a more productive workforce

and attract positive attention for complying with CSR principles.

Civil society, governments, and corporations themselves continuously

encourage the growth of CSR.

In 2001, the European Union published a Green

Paper about promoting CSR in Europe.

The Green Paper discussed both how

European countries had already begun to promulgate CSR, and how the

European countries should promote CSR not only within the European Union

but also worldwide.

The European Union countries are obliged to ensure that

labor standards are sufficient to promote its development policy.

The Green

Paper underscored the importance of laws and binding rules in promoting

CSR.

In addition, many non-governmental organizations (“NGOs”) have

developed techniques to hold corporations publicly accountable. For example,

the nonprofit organization, B Corporation, certifies companies that achieve

rigorous social and environmental standards. This certification encourages

companies to compete to be the best for society.

B Corporation also aims to

change the definition of success in business to include social improvement.

Another NGO is Social Accountability International, which established the

SA8000 Standard for decent workplaces.

Corporations must meet the

numerous requirements under the standards in order to become SA8000

certified.

Other NGOs, including the Fair Labor Association, Worker Rights

Consortium, Ethical Trading Initiative, Clean Clothes Campaign, Worldwide

45. Andreas Thrasyvoulou, Corporate Social Responsibility: Here to Stay, 4 LEGAL ISSUES J.

69, 74 (2016).

46. Green Paper, supra note 33.

47. Id.

48. See, e.g., About Fair Trade USA, F

AIR TRADE USA (2017), http://fairtradeusa.org/about-

fair-trade-usa [https://perma.cc/LC2H-KBFJ].

49. Green Paper, supra note 33.

50. Id.

51. Id.

52. Id.

53. Why B Corps Matter, B

CORPORATION (emphasis omitted), https://www.bcorporation.net/

what-are-b-corps/why-b-corps-matter [https://perma.cc/W95L-LX6X].

54. What Are B Corps?, B

CORPORATION, https://www.bcorporation.net/what-are-b-corps

[https://perma.cc/7T6V-XFLR].

55. About SAI, S

OC. ACCOUNTABILITY INT’L, http://www.saintl.org/index.cfm?fuseaction=

Page.ViewPage&pageId=472 [https://perma.cc/F9PC-UCH6].

56. SA8000 Standard, S

OC. ACCOUNTABILITY INT’L, http://www.sa-intl.org/index.cfm?fuse

action=Page.ViewPage&PageID=937 [https://perma.cc/TN99-EUNK].

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Responsible Apparel Production, and movements such as fair trade certification,

reflect continuously growing support for CSR.

The implementation of CSR has provided some benefits, but relying on

corporations to self-regulate has proven to have limited effect. In 2001, Nike and

Reebok, together with workers’ rights organizations, exerted pressure on their

South Korean-owned sportswear supplier to accomplish a democratic workers’

union at the factory in Mexico.

However, the reliance on companies and their

corporate codes to enforce labor standards can lead to varied applications of

labor standards.

CSR often works in conjunction with public pressure, which

is limited due to the sporadic nature of media attention.

C. The Rise of Independent Contractor Labor

The process of globalization itself evolves, and the current trend has seen

multinational enterprises increasingly rely on foreign contractors to source and

produce their goods.

The use of contractors has removed health and safety

working standards from under the legal purview of developed countries.

CSR

has contributed in this area, as some corporations have obliged their contractors

and suppliers to conform to corporate codes of conduct.

However, using

contractors has also allowed corporations to deny responsibility and avoid

liability for abuses of workers’ rights.

The application of corporate codes of

conduct on contractors and suppliers relies on implementation and subsequent

verification by the corporations.

Therefore, CSR alone is not sufficient to

ensure that corporations and the contractors involved in their supply chain and

production respect workers’ human rights and provide adequate working

conditions.

57. Compa, supra note 34, at 5.

58. Id. at 1.

59. Aaron K. Chatterji & Siona Listokin, A Comment on “Corporate Social Responsibility

and Workers’ Rights,” 30 C

OMP. LAB. L. & POL’Y J. 11, 13 (2008).

60. McKenzie, supra note 21, at 1138.

61. Green Paper, supra note 33.

62. Id.

63. Id.

64. Philipp Wesche & Miriam Saage-Maaß, Holding Companies Liable for Human Rights

Abuses Related to Foreign Subsidiaries and Suppliers Before German Civil Courts: Lessons from

Jabir and Others v KiK, 16 H

UM. RTS. L. REV. 370, 370–71 (2016); Compa, supra note 34, at 7.

65. Green Paper, supra note 33.

66. Compa, supra note 34, at 6.

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II. LABOR LAW IN THE UNITED STATES

A. Historical Development of Labor Law in the United States

In the United States, the occupational hazards facing industrial workers

became a public concern during the nineteenth century, when reports about

health effects on workers were delivered to Congress.

The first statute

regarding worker safety was passed in Massachusetts in 1877, setting an

example subsequently followed by other states.

Initially these laws intended

to compensate workers who were victims of industrial accidents.

Legal

theories of contributory negligence and assumption of risk often shielded

employers from liability.

In the early 1900s, however, states began passing

laws assigning liability to employers.

Federal legislation to protect workers appeared later. The first legislation

requiring safety equipment for railroad cars and engines was passed in 1893.

In 1916, Congress passed a child labor law, which was later declared

unconstitutional.

In 1936, Congress passed the Walsh-Healey Public Contracts

Act,

a weak attempt to set work safety standards as well as limit working

hours.

The Fair Labor Standards Act

(“FLSA”) was passed in 1938.

Until

1970, Congress enacted piecemeal legislation to combat worker safety problems

in specific industries.

Congress developed federal legislation setting health and

safety standards by passing the Occupational Safety and Health Act of 1970

(“OSHA”).

B. FLSA

Congress enacted the FLSA in 1938 to combat the rampant poverty among

the working class in the wake of the Great Depression.

The FLSA intended to

ensure an adequate standard of living and to prevent competition among

businesses from resulting in the perpetuation of poor labor conditions.

The law

67. MARK A. ROTHSTEIN, OCCUPATIONAL SAFETY AND HEALTH LAW 2 (2016).

68. Id.

69. Id.

70. Id.

71. Id.

72. R

OTHSTEIN, supra note 67, at 2.

73. Id. at 3.

74. 41

U.S.C. §§ 6501–6511 (2012).

75. R

OTHSTEIN, supra note 67, at 3.

76. 29 U.S.C. §§ 201–219 (2012).

77. R

OTHSTEIN, supra note 67, at 3.

78. Id. at 4.

79. 29 U.S.C. §§ 651–678 (2012); R

OTHSTEIN, supra note 67, at 4.

80. Ann K. Wooster, Annotation, Validity, Construction, and Application of Fair Labor

Standards Act—Supreme Court Cases, 196 A.L.R. Fed. 507 (2004).

81. United States v. Darby, 312 U.S. 100, 100 (1941); Wooster, supra note 80, at 507.

SAINT LOUIS UNIVERSITY SCHOOL OF LAW

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set minimum wage requirements and mandated overtime compensation for

hourly workers.

The FLSA has provisions prohibiting the use of child labor in

commerce and the production of goods.

C. OSHA

Congress began contemplating more comprehensive worker safety

legislation in 1970.

At the time, estimates assessed that every year 14,500

people were killed in industrial accidents, and 2.2 million workers became

disabled while on the job.

Furthermore, nearly 400,000 new cases of work-

based illness were reported annually.

Many states, however, had insufficient

safety regulations and enforcement.

In response, Congress passed OSHA. The

law not only sets a uniform standard for workplace safety across the nation, but

also permits states to introduce legislation to set higher standards.

OSHA

regulations apply in all states, the District of Columbia, Puerto Rico, and all U.S.

territories.

Employers are required to ensure that the workers’ area does not

have any hazards recognized by OSHA as likely to cause serious harm or

death.

OSHA standards require that all working areas be kept clean and

sanitary.

Furthermore, emergency action plans for fires, chemical spills, and

inclement weather are obligated to be formed and disseminated.

Safety

equipment is required to protect workers from the effects of noise exposure,

hazardous chemicals, and dangerous machines.

OSHA compliance officers

enforce the regulations through inspections.

III. WORKERS’ RIGHTS AND INTERNATIONAL LAW

A. United Nations’ Guiding Principles on Business and Human Rights

The United Nations published the Guiding Principles on Business and

Human Rights (“Guiding Principles”) in 2011.

The Guiding Principles are to

82. Wooster, supra note 80, at 507.

83. 29 U.S.C. §§ 212(a), 212(c) (2012).

84. R

OTHSTEIN, supra note 67, at 4.

85. Id. at 5.

86. Id.

87. Id. at 2.

88. Id. at 65.

89. R

OTHSTEIN, supra note 67, at 8.

90. Id. at 8–9.

91. 29 C.F.R. § 1910.22(a)(1) (2017).

92. 29 C.F.R. § 1910.38(a)–(b).

93. 29 C.F.R. § 1910.95(a), 1910.132(a), 1910.212(a)(1)–(2).

94. R

OTHSTEIN, supra note 67, at 9.

95. U.N.

HUMAN RIGHTS OFFICE OF THE HIGH COMM’R, GUIDING PRINCIPLES ON BUSINESS

AND

HUMAN RIGHTS, at iv (2011), http://www.ohchr.org/Documents/Publications/GuidingPrinci

plesBusinessHR_EN.pdf [https://perma.cc/4JMA-TWGH].

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be interpreted so as to accomplish “tangible results” for the people affected by

business practices and to promote sustainable development.

The United

Nations urges countries to encourage businesses to respect human rights through

corporate and securities law.

Countries should act in order to meet their

international human rights obligations by ensuring that businesses likewise

respect human rights.

The relevant human rights that countries should consider

in legislating for businesses are instilled in the International Bill of Human

Rights and the ILO’s Declaration on Fundamental Principles and Rights at

Work and Its Follow-Up.

In their operations, businesses should refrain from

committing human rights violations and mitigate violations that are related to

their operations.

100

The United Nations describes the application of the Guiding

Principles as an evolving process, as risks to human rights change over time with

changes to the business.

101

Where a business works with another entity that

violates human rights, the business should work to mitigate the impact of the

violation, or, if possible, end the business relationship.

102

Businesses can avoid

legal repercussions where their actions demonstrate complicity with human

rights violations by practicing due diligence to prevent such violations.

103

B. ILO Declaration on Fundamental Principles and Rights at Work

In 1998, the ILO established four unassailable principles in the Declaration

on Fundamental Principles and Rights at Work and Its Follow-Up.

104

The four

fundamental principles are:

(a) [F]reedom of association and the effective recognition of the right to

collective bargaining;

(b) the elimination of all forms of forced or compulsory labour;

(d) the elimination of discrimination in respect of employment and

occupation.

105

96. Id. at 1.

97. Id. at 5.

98. Id. at 8.

99. Id. at 13.

100. U.N. HUMAN RIGHTS OFFICE OF THE HIGH COMM’R, supra note 95, at 14–16.

101. Id. at 17–18.

102. Id. at 21–22.

103. Id. at 18–19.

104. ILO, ILO DECLARATION ON FUNDAMENTAL PRINCIPLES AND RIGHTS AT WORK AND ITS

FOLLOW-UP 1 (1998), http://www.ilo.org/declaration/thedeclaration/textdeclaration/lang—en/in

dex.htm [https://perma.cc/X7GP-4JFW].

105. Id. at 7.

SAINT LOUIS UNIVERSITY SCHOOL OF LAW

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The ILO recognized that these principles are crucial to maintain social

progress in conjunction with economic growth.

106

While these principles are

enshrined in ILO Conventions and therefore binding for countries that ratified

the documents, the ILO insists that ILO members that have not ratified are still

required to respect and promote these principles.

107

C. North American Agreement on Labor Cooperation

The North American Agreement on Labor Cooperation (“NAALC”) was

negotiated as a complementary document to the North American Free Trade

Agreement (“NAFTA”).

108

The goal of the NAALC was to improve livelihoods

and labor standards in NAFTA countries.

109

While the NAALC does not force

any extra laws on the countries, it obligates them to enforce already existing

workers’ rights.

110

Among the principles that the NAALC requires are the

prohibition on forced labor, overtime compensation rights, minimum wage,

compensation for occupational injuries, prevention of occupational injuries, and

labor protection for children.

111

Compliance is governed by the NAALC

Council, which receives and responds to complaints regarding failure to

comply.

112

However, the enforcement mechanisms are limited, as sanctions are

available for violations of only three of the eleven principles, and countries are

otherwise expected to self-enforce.

113

The development of the NAALC has

prompted cross-border communication and greater harmonization of labor

standards measurements to permit easier comparison of productivity and

wages.

114

106. Id. at 5.

107. Id. at 2.

108. B

UREAU OF INT’L LABOR AFFAIRS, U.S. DEP’T LABOR, NORTH AMERICAN AGREEMENT

LABOR COOPERATION: A GUIDE (2005), https://www.dol.gov/ilab/trade/agreements/naalcgd.

htm#NAALC [https://perma.cc/68YZ-9VCK].

109. BUREAU OF INT’L LABOR AFFAIRS, U.S. DEP’T LABOR, SUBMISSIONS UNDER THE NORTH

AMERICAN AGREEMENT ON LABOR COOPERATION (NAALC), https://www.dol.gov/ilab/trade/

agreements/naalc.htm [https://perma.cc/3Y5X-JMFL].

110. M

ARY JANE BOLLE, CONG. RESEARCH SERV., 97–861 E, NAFTA LABOR SIDE

AGREEMENT: LESSONS FOR THE WORKER RIGHTS AND FAST-TRACK DEBATE 3 (2001).

111. Id. at 4.

112. B

UREAU OF INT’L LABOR AFFAIRS, U.S. DEP’T LABOR, supra note 108.

113. M

ARY JANE BOLLE, CONG. RESEARCH SERV., 97–861 E, NAFTA LABOR SIDE

AGREEMENT: LESSONS FOR THE WORKER RIGHTS AND FAST-TRACK DEBATE 5 (2001).

114. Id. at 11.

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520 SAINT LOUIS UNIVERSITY LAW JOURNAL [Vol. 62:509

IV. EXISTING LEGAL APPROACHES

A. Summary of Legal Approaches to Ensure CSR

1. Denmark

In 2000, the Danish Ministry of Social Affairs introduced the Social Index

to measure the social responsibility of companies.

115

Company management and

employee representatives meet and assess employee conditions, training, sick

leave, dismissals, health and safety, and social responsibility of suppliers and

customers.

116

The assessment results in a score (0–100), which is useful for

determining future improvement.

117

A company achieves the right to use the “S-

label” on its products for three years if the score is above sixty and is certified

by an independent auditor.

118

In addition, the Danish Ministry of Economics and

Business Affairs created the CSR Compass in 2005 to help small and midsize

companies determine their CSR in their global supply chain.

119

2. United Kingdom

The U.K. Parliament introduced the Modern Slavery Act 2015 to force

companies to disclose the extent of their efforts to ensure that their supply chains

do not involve slavery.

120

Under the Modern Slavery Act 2015, businesses

carrying on in the United Kingdom with annual turnover of £36 million or

greater are required to make a statement disclosing the steps the business took

to ascertain that no slavery was involved in its business or its supply chain.

121

The purpose of the Modern Slavery Act 2015 is to make clear which businesses

are doing “the right thing” by ensuring that they do not profit from slavery, and

which businesses do not.

122

The government believes that such transparency will

serve to prevent slavery in business supply chains.

123

A business that qualifies

under the Modern Slavery Act 2015 and fails to make the required statement

could be subject to an injunction and, in failing to comply with the injunction,

be held in contempt and accordingly receive an unlimited fine.

124

Consumers are

115. JOSEPH M. LOZANO ET AL., GOVERNMENTS AND CORPORATE SOCIAL RESPONSIBILITY:

PUBLIC POLICIES BEYOND REGULATION AND VOLUNTARY COMPLIANCE 76 (2008).

116. Id.

117. Id.

118. Id.

119. LOZANO ET AL., supra note 115, at 77; The Parties Behind the Initiative, CSR COMPASS,

http://www.csrcompass.com/parties-behind-initiative [https://perma.cc/V52E-RWVP].

120. United Kingdom Modern Slavery Act 2015, § 1, 42 (Eng.).

121. A

MBER RUDD, TRANSPARENCY IN SUPPLY CHAINS ETC. A PRACTICAL GUIDE 5,

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/649906/Transpar

ency_in_Supply_Chains_A_Practical_Guide_2017.pdf [https://perma.cc/PL6W-VN98].

122. Id. at 3.

123. Id.

124. Id. at 6.

SAINT LOUIS UNIVERSITY SCHOOL OF LAW

2018] CORPORATE SOCIAL RESPONSIBILITY AND FOREIGN CONTRACTORS 521

to play a role in the Modern Slavery Act 2015’s goals by deciding with their

buying power whether or not the steps taken by a business are sufficient.

125

3. India

By passing the Companies Act 2013,

126

the Parliament of India became the

first country to require companies to take part in CSR.

127

The Companies Act

2013 obligates certain companies to include a Corporate Social Responsibility

Committee Board with at least three directors.

128

The purpose of the committee

is to promulgate CSR policies, such as poverty amelioration, education, health,

environment, gender equality, and vocational skills, and the company must

spend at least two percent of average net profits toward the policies.

129

If the

company fails to spend the required two percent of profits toward accomplishing

the CSR policies, then the Board must disclose the reasons for this failure.

130

4. California

In 2012, the California Transparency in Supply Chains Act of 2010 came

into effect.

131

Under the law, retailers and manufacturers that do business in

California per their California tax returns and have annual gross receipts of over

$100 million are required to disclose the company’s efforts (or non-efforts) to

verify that human trafficking and slavery are not part of their supply chain.

132

Companies must make clear and concise disclosures on their websites.

133

The

business must disclose the degree to which the business conducts evaluations

concerning human trafficking and slavery, and the extent to which it is verified

by a third-party auditor.

134

In addition, the disclosure must detail how the

business audits suppliers for compliance with the business’s standards and

whether or not the audit was independent.

135

Direct suppliers must certify that

the products used were in accordance with the laws of the countries in which the

suppliers do business.

136

Furthermore, the disclosure must include the

procedures for contractors and employees that do not meet its standards.

137

Lastly, the business must disclose the extent to which management and

125. Id.

126. Companies Act, 2013, No. 18 of 2013, I

NDIA CODE (2013).

127. Thrasyvoulou, supra note 45, at 81–82.

128. Id. at 82.

129. Id.

130. Id.

131. C

AL. CIV. CODE § 1714.43 (West 2012).

132. H

ARRIS, supra note 20, at i.

133. Id. at ii.

134. Id. at iii.

135. Id.

136. Id. at iv.

137. H

ARRIS, supra note 20, at v.

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employees receive training regarding human trafficking and slavery, especially

in the context of supply chain.

138

The California Franchise Tax Board is

responsible for determining which companies are subject to the California

Transparency in Supply Chains Act.

139

The attorney general has the authority to

enforce California Transparency in Supply Chains Act by filing for injunctive

relief.

140

The intent of the law is to give California consumers the requisite

information to allow them to combat human trafficking and slavery through their

purchase power.

141

5. France

In early 2015, a bill was introduced in the French legislature regarding the

duty of care of companies.

142

The bill proposed a law requiring large companies

to establish a “vigilance plan” instituting measures to prevent risks to human

rights and fundamental freedoms, serious physical injury, environmental

damage, and health hazards from the operations of the company, its subsidiaries,

and its contractors.

143

The National Assembly adopted the text for the proposed

law the following month.

144

The Senate rejected the bill in its first review.

145

The following year, the National Assembly modified parts of the law and passed

it to the Senate for a second review.

146

The Senate added its own modifications

138. Id.

139. Id. at 3.

140. Id. at 4.

141. Id. at 5.

142. Proposition de loi 2578 du 11 février 2017 proposition de loi relative au devoir de

vigilance des sociétés mères et des entreprises donneuses d’ordre [Proposal for law 2578 of

February 1, 2007 on the Proposal of Law for the Duty of Due Diligence of Parent Companies and

Main Contractors], ASSEMBLÉE NATIONALE [NATIONAL ASSEMBLY], Feb. 1, 2015 (Fr.),

http://www.assemblee-nationale.fr/14/propositions/pion2578.asp [https://perma.cc/4THE-JENW].

143. Id.

144. Texte adopté 501 du 30 mars 2015 proposition de loi relative au devoir de vigilance des

sociétés mères et des entreprises donneuses d’ordre [Adopted Text 501 of March 30, 2015 on the

Proposal of Law for the Duty of Due Diligence of Parent Companies and Main Contractors],

SSEMBLÉE NATIONALE [NATIONAL ASSEMBLY], Mar. 30, 2015 (Fr.), http://www.assemblee-

nationale.fr/14/ta/ta0501.asp [https://perma.cc/NF3F-DZLV].

145. Texte adopté 40 du 18 novembre 2015 proposition de loi relative au devoir de vigilance

des sociétés mères et des entreprises donneuses d’ordre [Adopted Text 40 of November 18, 2015

on the Proposal of Law for the Duty of Due Diligence of Parent Companies and Main Contractors],

ÉNAT [SENATE], Nov. 18, 2015 (Fr.), http://www.senat.fr/leg/tas15-040.html [https://perma.cc/77

8H-YNP9].

146. Texte adopté 708 du 23 mars 2016 proposition de loi relative au devoir de vigilance des

sociétés mères et des entreprises donneuses d’ordre [Adopted Text 708 of March 23, 2016 on the

Proposal of Law for the Duty of Due Diligence of Parent Companies and Main Contractors],

SSEMBLÉE NATIONALE [NATIONAL ASSEMBLY], Mar. 23, 2016 (Fr.), http://www.assemblee-na

tionale.fr/14/ta/ta0708.asp [https://perma.cc/SCQ5-558V].

SAINT LOUIS UNIVERSITY SCHOOL OF LAW

2018] CORPORATE SOCIAL RESPONSIBILITY AND FOREIGN CONTRACTORS 523

in its second review.

147

The National Assembly largely rejected the Senate’s

modifications and proffered a version that was summarily rejected by the

Senate.

148

The National Assembly adopted the definitive text of the law on

February 21, 2017 to be enacted after a constitutionality review.

149

The

Constitutional Council found some provisions of the law to be

unconstitutional.

150

The final version of the law on the duty of care of parent companies

provides:

The law applies to:

(1) Companies that, after two consecutive financial years, employ at least 5000

employees in its head office and in its direct or indirect subsidiaries with its

registered office in France, and

(2) Companies that employ at least 10,000 employees in the parent company

and in its direct or indirect subsidiaries with its registered office in France or

abroad.

Requirements for companies to which the law applies:

(1) Establish and implement an effective vigilance plan. The plan shall include

reasonable vigilance measures to identify risks and prevent serious

violations of human rights and fundamental freedoms, and the health and

safety of persons and the environment resulting from the activities of society

and those of the companies it controls directly or indirectly, as well as the

activities of subcontractors or suppliers with whom an established

147. Texte adopté 1 du 13 octobre 2016 proposition de loi relative au devoir de vigilance des

sociétés mères et des entreprises donneuses d’ordre [Adopted Text 1 of October 13, 2016 on the

Proposal of Law for the Duty of Due Diligence of Parent Companies and Main Contractors], SÉNAT

ENATE], Oct. 13, 2016 (Fr.), http://www.senat.fr/petite-loi-ameli/2016-2017/11.html [https://per

ma.cc/9DFL-XHQY].

148. Texte adopté 74 du 1 février 2017 proposition de loi relative au devoir de vigilance des

sociétés mères et des entreprises donneuses d’ordre [Adopted Text 74 of February 1, 2017 on the

Proposal of Law for the Duty of Due Diligence of Parent Companies and Main Contractors], SÉNAT

ENATE], Feb. 1, 2017 (Fr.), http://www.senat.fr/leg/tas16-074.html [https://perma.cc/23LX-

ZAFY]; Texte adopté 843 du 29 novembre 2016 proposition de loi relative au devoir de vigilance

des sociétés mères et des entreprises donneuses d’ordre [Adopted Text 843 of November 29, 2016

on the Proposal of Law for the Duty of Due Diligence of Parent Companies and Main Contractors],

SSEMBLÉE NATIONALE [NATIONAL ASSEMBLY], Nov. 29, 2016 (Fr.), http://www.assemblee-na

tionale.fr/14/ta/ta0843.asp [https://perma.cc/965T-TDLQ].

149. Texte adopté 924 du 21 février 2017 proposition de loi relative au devoir de vigilance des

sociétés mères et des entreprises donneuses d’ordre [Adopted Text 924 of February 11, 2007 on

the Proposal of Law for the Duty of Due Diligence of Parent Companies and Main Contractors],

SSEMBLÉE NATIONALE [NATIONAL ASSEMBLY], Feb. 21, 2017 (Fr.), http://www.assemblee-na

tionale.fr/14/ta/ta0924.asp [https://perma.cc/WQ2P-FCJX].

150. Bettina Grabmayr, Duty of Care Law: French Constitutional Council Gives the Green

Light, E

COVADIS (Apr. 20, 2017), http://www.ecovadis.com/blog/duty-care-law-french-constitu

tional-council-gives-green-light [https://perma.cc/ZBW4-QRKT].

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524 SAINT LOUIS UNIVERSITY LAW JOURNAL [Vol. 62:509

commercial relationship is maintained, where these activities are related to

that relationship.

(2) The vigilance plan shall include:

a. A mapping of risks, intended for their identification, analysis, and

ranking;

b. Procedures for the regular assessment of the situation of subsidiaries,

subcontractors, or suppliers with whom an established commercial

relationship is maintained with regard to risk mapping;

c. Actions to mitigate risks or prevent serious harm;

d. A mechanism for alerting and collecting alerts on the existence or the

realization of risks;

e. A mechanism for monitoring the measures implemented and evaluating

their effectiveness.

(3) The vigilance plan shall be made public.

Enforcement procedures:

(1) The Council of State can supplement the requirements of the vigilance plan.

(2) A court of competent jurisdiction and the president of the court can force

companies to comply and establish a vigilance plan.

(3) For any harm caused by a failure to comply with the duties of this law, a

company is obliged to make good on the harm that the execution of the law

would have prevented. Any person justifying an interest can bring a cause

of action against the company. The court can order the company to comply

with its decision.

151

The viability of the law is heavily debated. Detractors argue that the law

applies to very few companies, many of which have already instituted these

policies, and is too vague in its terminology.

152

Furthermore, opponents of the

law point out that companies already suffer significant harm in failing to police

their supply chains, as they suffer reputational, financial, operational, and

national and international civil and criminal penalties.

153

They insist that a

151. The author translated and paraphrased this passage from the following sources: Loi 2017-

399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses

d’ordre [Law 2017-399 of March 27, 2017 Law on the Duty of Due Diligence of Parent Companies

and Main Contractors], JOURNAL OFFICIEL DE LA RÈPUBLIQUE FRANÇAISE [J.O.] [OFFICIAL

GAZETTE OF FRANCE], Mar. 28, 2017 (Fr.), https://www.legifrance.gouv.fr/eli/loi/2017/3/27/2017-

399/jo/texte [https://perma.cc/J4PQ-S64P], translated in E

UROPEAN COALITION FOR CORP. JUST.,

http://corporatejustice.org/duty-of-vigilance-bill-en-.pdf [https://perma.cc/LSM4-SZNG].

152. Stéphane Brabant, Devoir de vigilance: « Une Proposition de Loi (Pas Vraiment)

Raisonnable », L

E MONDE (Jan. 1, 2017, 1:52 PM), http://www.lemonde.fr/idees/article/2017/01/

17/devoir-de-vigilance-une-proposition-de-loi-pas-vraiment-raisonnable_5064114_3232.html

[https://perma.cc/S5JA-7396].

153. Id.

SAINT LOUIS UNIVERSITY SCHOOL OF LAW

2018] CORPORATE SOCIAL RESPONSIBILITY AND FOREIGN CONTRACTORS 525

weaker law would be more appropriate, emphasizing the viability of the U.K.

Modern Slavery Act.

154

The law should ultimately have a pedagogical focus by

encouraging companies to comply rather than punishing them with civil

penalties for violations.

155

Furthermore, the law should aim to include

companies that may not be large enough to be covered under the current law but

operate in countries notorious for human rights abuses.

156

Detractors insist that

a more practical approach—focusing on encouraging companies to be

responsible rather than forcing them—will avert the legal uncertainty created by

this law and avoid encumbering companies with burdensome requirements.

157

On the other hand, supporters hail the French law as the first bold step

forward in encouraging companies to ensure that their operations are not

involved in human rights violations and are not putting workers at risk.

158

They

view the law not as a burden on companies, but as an advantage for them. In the

modern world, companies are uniquely poised to defend human rights and work

in favor of the common good.

159

Companies not only can appease the public’s

growing demand for satisfactory treatment of workers abroad, but they can also

appeal to legislators in the countries in which they operate to provide sufficient

protection for workers.

160

Furthermore, by preventing risks of harm, companies

are more respected and become more profitable.

161

Self-regulation is not a viable

solution, particularly in light of the recent financial crisis as a result of financial

self-regulation.

162

In addition, supporters argue that the law is practical in its

minimalist application.

163

The scope is limited, applying to only approximately

100 companies.

164

Those companies falling under the scope of the law are

required to implement only reasonable measures to identify risks to human

154. Id.

155. Id.

156. Brabant, supra note 152.

157. Legislation on Responsible Business Conduct Must Reinforce the Wheel, Not Reinvent It,

OECD I

NSIGHTS (Apr. 15, 2015), http://oecdinsights.org/2015/04/15/legislation-on-responsible-

business-conduct-must-reinforce-the-wheel-not-reinvent-it/ [https://perma.cc/PE97-YWXZ].

158. France Adopts Corporate Duty of Vigilance Law: A First Historic Step Towards Better

Human Rights and Environmental Protection, E

UR. COALITION FOR CORP. JUST. (Feb. 21, 2017),

http://corporatejustice.org/news/393-france-adopts-corporate-duty-of-vigilance-law-a-first-histor

ic-step-towards-better-human-rights-and-environmental-protection [https://perma.cc/3WVZ-RK

7Q].

159. William Bourdon & Sandra Cossart, Devoir de Vigilance : « La Proposition de Loi Reste

à L’avantage des Entreprises », L

E MONDE (Jan. 17, 2017, 1:49 PM), http://www.lemonde.fr/

idees/article/2017/01/17/devoir-de-vigilance-la-proposition-de-loi-reste-a-l-avantage-des-entre

prises_5064111_3232.html [https://perma.cc/4JE7-6XJT].

160. Id.

161. Id.

162. Michel Doucin, Corporate Social Responsibility: Private Self-Regulation Is Not Enough,

RIVATE SECTOR OPINION, 2011, at 1, 11.

163. Bourdon & Cossart, supra note 159.

164. Id.

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rights, fundamental liberties, health, and security of persons.

165

Through this

law, “France can lead the way in Europe” by legislating CSR.

166

POSSIBILITIES FOR CSR IN THE AMERICAN LEGAL SYSTEM

As CSR continues to grow in importance in the minds of consumers and

companies around the world, the creation of laws implementing CSR is likely to

occur. Information about human rights and worker abuses is more readily

available than ever before, and consumers have taken notice.

167

Furthermore,

self-regulation, while successful to some extent, is often considered insufficient

in light of severe violations that come to the public’s attention. Therefore, a

consideration of the current means of holding companies accountable for the

actions of their foreign contractors is relevant. The goal in this review is to

determine which method will be most effective to ensure that foreign workers

do not suffer egregious violations of their rights and their safety while making

products for American companies.

VI. EXISTING POSSIBILITIES UNDER AMERICAN LAW

A. Self-Regulation

The existing legal structure for CSR in the United States in regards to

workers’ rights and worker safety at foreign contractors’ workplaces relies

primarily on self-regulation of companies. As the public has increasingly

demonstrated support for CSR, companies have worked with their contractors

to ensure that workers are treated better.

168

Self-regulation gives companies the

latitude to decide how to implement CSR and to spend an amount that the

company can afford in terms of money and lost competitivity. However, self-

regulation relies largely on the arbitrary will of the public and the good will of

companies. Media stories about workers’ rights and safety violations often

prompt the public to push companies for CSR.

169

This leads to an unequal

protection of workers and an unequal punishment of companies that remain

deliberately indifferent to unsafe working conditions and rights violations.

While self-regulation is not entirely without merit, relying on companies to

police themselves is not adequate to protect workers abroad.

165. Id.

166. Id.

167. Thuy Tran, Corporate Social Responsibility and Profits: A Tradeoff or a Balance? 5 (May

2015) (unpublished thesis, Stanford University: Center on Democracy, Development, and the Rule

of Law), http://www.csringreece.gr/files/research/CSR-1443614838.pdf [https://perma.cc/M8GM-

47HR].

168. Id. at 23–24.

169. Id. at 7, 15.

SAINT LOUIS UNIVERSITY SCHOOL OF LAW

2018] CORPORATE SOCIAL RESPONSIBILITY AND FOREIGN CONTRACTORS 527

B. Extraterritorial Application of FLSA and OSHA

The trend of external application of American laws has been a recent

concern of the Supreme Court.

170

While Congress does have the power to make

American laws apply extraterritorially, the Court’s determination of

extraterritoriality is dependent on the statutory construction.

171

The Court begins

its analysis with a presumption against extraterritoriality.

172

To rebut the

presumption, the statute in question must give a clear indication of its

extraterritorial application.

173

Congress can pass or amend a law to apply extraterritorially. After the

Supreme Court found that Title VII did not rebut the presumption against

territorial application, Congress amended Title VII to cover American citizens

who are employed abroad.

174

In addition, Congress designed the Foreign

Corrupt Practices Act

175

to apply to bribes paid abroad by companies doing

business in the United States.

176

These examples demonstrate the ways in which

American laws can be extended to actions abroad.

Currently, the primary American laws that protect workers—the FLSA and

OSHA—largely do not apply extraterritorially.

177

Should Congress add an

extraterritorial provision to these laws, extending these protections to Americans

and workers for American companies abroad, many workers would be afforded

worker safety protections. However, such an amendment is not only unlikely,

but probably infeasible. First, because the violations occur abroad, frequent trials

in the United States are impractical and expensive. Second, both the FLSA and

OSHA have investigatory bodies that monitor compliance.

178

To extend the

review of those investigatory bodies abroad would be prohibitively expensive

for the federal government. Furthermore, such an amendment would not address

the role of contractors in the modern world. In fact, companies likely would rely

more on contractors to avoid the extra expense of compliance. The

extraterritorial application of the FLSA and OSHA would not only be highly

unlikely, but would not effectively protect workers abroad.

170. See Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 115 (2013).

171. EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991).

172. Kiobel, 569 U.S. at 115–16.

173. Adhikari v. Kellogg Brown & Root, Inc., 845 F.3d 184, 192 (5th Cir. 2017).

174. Arbaugh v. Y & H Corp., 546 U.S. 500, 512 n.8 (2006).

175. 15 U.S.C. §§ 78dd-1, 78dd-2, 78dd-3, 78m, 78ff (2012).

176. Robin Miller, Annotation, Construction and Application of Foreign Corrupt Practices Act

of 1977, 6 A.L.R. Fed. 2d 351 (2005).

177. Bertrand C. Sellier & Stacy Ceslowitz, Extraterritoriality & U.S. Employment Law, in

ROSKAUER ON INTERNATIONAL LITIGATION AND ARBITRATION, http://www.proskauerguide.

com/law_topics/25/III [https://perma.cc/5MMA-BHGF].

178. W

AGE & HOUR DIV., U.S. DEP’T LABOR, HANDY REFERENCE GUIDE TO THE FAIR LABOR

STANDARDS ACT (Sept. 2016), https://www.dol.gov/whd/regs/compliance/hrg.htm#15 [https://per

ma.cc/K5NV-P2NY]; U.S.

DEP’T LABOR, AT-A-GLANCE OSHA, https://www.osha.gov/Publica

tions/3439at-a-glance.pdf [https://perma.cc/QYA8-GQKX].

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C. Alien Tort Statute

The Alien Tort Statute (“ATS”), also known as the Alien Tort Claims Act,

was passed by Congress in 1789.

179

The ATS stipulates: “The district courts

shall have original jurisdiction of any civil action by an alien for a tort only,

committed in violation of the law of nations or a treaty of the United States.”

180

Between 1789 and 1980, the ATS was used on three occasions.

181

In the 1980

case Filártiga v. Peña-Irala, the Second Circuit resurrected the ATS to find

jurisdiction in federal courts over acts of torture that had taken place in Paraguay,

under the analysis that torture qualified as a “violation of the law of nations.”

182

Since Filártiga, plaintiffs have been using the ATS to bring human rights

violations abroad under the purview of American federal courts. In 2004, the

Supreme Court ensured that the scope of the ATS remained narrow in Sosa v.

Alvarez-Machain by holding that only ATS claims that violate “a norm of

international character accepted by the civilized world” and are “defined with a

specificity” sufficiently similar to those already delineated (“violation of safe

conducts, infringement of the rights of ambassadors, and piracy”).

183

Therefore,

the ATS application is limited to specific violations of customary international

law.

184

Dozens of lawsuits have been pursued under the auspices of the ATS against

corporate defendants.

185

Courts have held that corporations can be liable for

violations of customary international law under the ATS.

186

However, the

Supreme Court reviewed the use of the ATS in light of complaints by foreign

governments about the ATS application overseas and increased concern over

judicial interference in foreign policy.

187

The Supreme Court significantly

changed the ATS landscape in Kiobel v. Royal Dutch Petroleum Co. In Kiobel,

the plaintiffs alleged that the subsidiary of Shell had used the Nigerian

government to violently put down protests against the company.

188

The Second

Circuit had dismissed the case, holding—contrary to other circuits—that the law

of nations did not encompass corporate liability.

189

The issue of corporate

liability was argued before the Supreme Court; however, the Supreme Court then

ordered the case to be reargued in the next term on the issue of

179. John F. Savarese & George T. Conway III, The Impact of Kiobel Curtailing the

Extraterritorial Scope of the Alien Tort Statute, W

ALL ST. LAW., July 2013, at 1.

180. 28 U.S.C. § 1350 (2012).

181. Savarese & Conway III, supra note 179, at 1.

182. 630 F.2d 876, 887 (2d Cir. 1980); Savarese & Conway III, supra note 179, at 1.

183. 542 U.S. 692, 724–25 (2004).

184. Flomo v. Firestone Nat. Rubber Co., LLC, 643 F.3d 1013, 1016 (7th Cir. 2011).

185. Savarese & Conway III, supra note 179, at 2.

186. See Doe I v. Nestle USA, Inc., 766 F.3d 1013, 1021 (9th Cir. 2014).

187. Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 124 (2013).

188. Id. at 113.

189. Id. at 114.

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extraterritoriality.

190

In its Kiobel decision published in 2013, the Supreme Court

held that the ATS does not apply extraterritorially.

191

While the Kiobel holding narrows the scope of ATS lawsuits, the decision

left an opening for actions that “touch and concern” the United States.

192

The

case law interpreting the “touch and concern” test is not yet entirely clear.

However, courts so far generally have found that the action has sufficient nexus

with the United States where “it occurred domestically, was planned or directed

domestically, or because it was directed at the United States.”

193

ATS claims for

actions that occur abroad perpetrated by foreigners against foreign victims—the

so-called “foreign-cubed” cases—have been dismissed.

194

The Kiobel decision reflects the Supreme Court’s growing concern

regarding the extraterritoriality of American legislation. As other countries have

complained about American “judicial imperialism,” the Supreme Court has

responded by leaving the issue in the hands of Congress.

195

Therefore, Congress

can restore extraterritoriality to the ATS by amending the statute. The actions of

contractors likely are among the “foreign-cubed” cases, excluded from current

post-Kiobel ATS jurisdiction. The contractor layer insulates American

companies from liability. Even if Congress were to expand ATS jurisdiction,

worker rights and worker safety violations currently are not covered under the

ATS.

196

The ATS establishes jurisdiction of federal courts for violations of

customary international law, which is determined by widespread state practice

and case precedent.

197

In Flomo v. Firestone National Rubber Co., the Seventh

Circuit held that child labor was not a violation of customary international

law.

198

The prohibition on child labor, as well as other workers’ rights

recognized in the United States, have not achieved the same widespread

recognition as other principles recognized under the ATS, such as the prohibition

against torture.

199

However, workers’ rights are not precluded from joining the

ranks of customary international law in the future. The ATS currently cannot be

190. Savarese & Conway III, supra note 179, at 2.

191. Kiobel, 569 U.S. at 124.

192. Id. at 124–25; Doe I v. Nestle USA, Inc., 766 F.3d 1013, 1027 (9th Cir. 2014).

193. Doe I v. Cisco Sys., Inc., 66 F. Supp. 3d 1239, 1245 (N.D. Cal. 2014).

194. Id.

195. Savarese & Conway III, supra note 179, at 2.

196. Bama Athreya & Brian Campbell, No Access to Justice: The Failure of Ethical Labeling

and Certification Systems for Worker Rights, in W

ORKERS’ RIGHTS AND LABOR COMPLIANCE IN

GLOBAL SUPPLY CHAINS: IS A SOCIAL LABEL THE ANSWER? 226, 229 (Jennifer Bair et al. eds.,

2014).

197. Gwynne Skinner, Customary International Law, Federal Common Law, and Federal

Court Jurisdiction, 44 V

AL. U. L. REV. 825, 826 (2010).

198. 643 F.3d 1013, 1024 (2011).

199. Katie Wendle, Establishing Liability for the Enslavement and Forced Labor of Children

Under the Alien Tort Statute, 41 S

YRACUSE J. INT’L L. & COM. 447, 450, 456 (2014).

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used to find liability of American companies for the violation of workers’ rights

by their foreign contractors.

D. Liability Under State Common Law

In some states, American companies can potentially be found liable for

violations of workers’ rights and worker safety. Although, as a general rule,

companies that employ contractors are not liable for the negligence of their

contractors, tort law has provided narrow exceptions.

200

One such exception is

that employers can be liable for negligently selecting or hiring careless, reckless,

or incompetent independent contractors.

201

Courts have found employers liable

for their contractors’ negligence where the employer knew or could have

inferred that the contractor was careless, reckless, or incompetent.

202

Likewise,

courts have found employers liable for failing to use due care in selecting an

independent contractor.

203

In particular, larger companies that regularly employ

independent contractors generally have a greater responsibility to ensure the

competency of their independent contractors.

204

If the independent contractor

has a reputation for carelessness, recklessness, or incompetence, the employers

are also more likely to be found liable for negligence in selecting them.

205

order to establish the employer’s negligence, a plaintiff must prove that the

employer knew or should have known that the independent contractor was

careless, reckless, or incompetent.

206

This can be proven through incidents of

prior negligence of the contractor.

207

The plaintiff also must establish that a

relationship between the employer and contractor existed and that the

employer’s negligence in selecting the contractor was the proximate cause of the

injury.

208

In some states, employees of a contractor can sue the company that

employs the contractor for injury caused to the employees from the contractor’s

negligence.

209

The “negligent hiring” exception to the rule that employers are not liable for

the negligence of their contractors likely can apply to foreign contractors.

American companies that are aware of a contractor’s or potential contractor’s

track record for negligence in the workplace and in the community can be held

accountable for negligently selecting the contractor. Victims of the negligence—

200. Reuben I. Friedman, Annotation, When is Employer Chargeable with Negligence in Hiring

Careless, Reckless, or Incompetent Independent Contractor, 78 A.L.R. 3d 910 (1977).

201. Id.

202. Id.

203. Id.

204. Id.

205. Friedman, supra note 200.

206. Id.

207. Id.

208. Id.

209. See Chen v. St. Beat Sportswear, Inc., 226 F. Supp. 2d 355, 361 (E.D.N.Y. 2002).

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whether workers or other injured parties—will need to prove not only the

American employer’s knowledge of the negligence, but also the employer-

contractor relationship and the employer’s selection as the proximate cause of

the injury.

210

The concern of applying state common law extraterritorially can

be avoided where the decision to hire the contractor occurs in the United States.

Victims can use the “negligent hiring” exception to create a negligence chain

between American companies and their foreign contractors. However, this

exception applies narrowly. The injury must be caused by negligence—rather

than a mere violation of workers’ rights—and, therefore, will likely apply only

to the most egregious cases.

211

Furthermore, plaintiffs probably will struggle to

prove that the American companies knew of the contractor’s repeated

negligence. The introduction of this type of lawsuit can also lead to avoidance

tactics by American companies. If liability can be established, companies will

probably try to maintain plausible deniability regarding the negligence of

contractors by adding further layers of contractors. Despite this potential bad

outcome, the “negligent hiring” exception can provide an avenue for victims to

receive recognition and compensation for the American companies’

irresponsible use of negligent contractors.

VII.

POTENTIAL CHANGES FOR LAW IN THE UNITED STATES

A. Supply Chain Check Plans

Statutes that require companies to review their supply chains in order to

legislate CSR are a popular method. California, the United Kingdom, and France

have each instituted some measure of supply chain review.

212

In California and

the United Kingdom, companies are required to publish reports of their efforts

to ensure there is no slavery or human trafficking in their supply chains.

213

While

these laws demonstrate some measure of enforced CSR, they are fairly weak.

Companies to which the laws apply have no other obligations than to report what

actions they take in regards to the narrow scope of slavery and human

trafficking. These laws do not force the companies to take specific measures but

instead rely on transparency to empower the public to exert pressure on

offending companies. Therefore, the effect of the laws likely is not significant.

Because the information is posted on the companies’ websites, the information

is often removed from the customers at the time of the purchase. This distance

between transparency and the customer likely weakens the power of the public

210. Friedman, supra note 200.

211. Chen, 226 F. Supp. 2d at 359–61.

212. See E

LISE DUECK, DELANEY GREIG & KEVIN THOMAS, THE RISE OF SUPPLY CHAIN

TRANSPARENCY LEGISLATION 8 (Norah Murphy ed., 2017), https://share.ca/documents/investor_

briefs/Social/2017/Supply_Chain_Transparency_Legislation.pdf [https://perma.cc/47TY-ZXLK].

213. See id. at 8, 11.

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in encouraging companies to act responsibly. Although these methods of supply

chain checks recognize companies’ responsibility in the whole of their

operations, these methods rely on very motivated customers to pressure

companies. However, the simplicity of the laws has its advantages; the laws

utilize the will of the people—the driving force behind the development of

CSR—rather than costly legal obligations to improve companies’ dedication to

CSR.

The French legislature has envisioned a more authoritative law requiring

companies of a certain size to develop and implement “vigilance plans” that

prevent human rights violations and risks to worker safety.

214

In addition, in the

event of the occurrence of a harm, companies may be required to compensate

for the harm. The vigilance plan law, although it applies to few companies, is

relatively burdensome. Companies will have to not only create a plan to ensure

that subsidiaries and contractors do not cause harm, but also implement that plan

among the relevant foreign subsidiaries and contractors. This requirement is a

significant leap in legislating CSR. This French version of a supply chain check

is more robust. The dangers of this fervent dedication to instilling CSR

principles in the law are the uncertainty surrounding its requirements and

enforcement, as well as the greater expense and potentially reduced

competitivity forced on companies.

B. CSR Index and Product Labeling

Denmark has implemented a system to measure each company’s dedication

to CSR. The system creates an index to measure such dedication and rewards

companies at a minimum level with the ability to market their CSR dedication

to the public.

215

The index measures not only the company’s internal social

responsibility, but also that of its suppliers.

216

This system creates an incentive

for companies to internalize CSR principles. The public’s buying power is the

impetus for companies to gravitate toward improving their standards on social

responsibility. When buying products, people can choose to favor products that

have achieved the S-label, certifying the socially-responsible development of the

product. The certification is granted only if it is certified by an independent

auditor.

217

This indexing and product labeling system provides an easily

recognizable symbol that the public can incorporate into their daily buying

habits. The ease of this system likely boosts the power of consumers. However,

companies are only incentivized to be more socially responsible and are not

214. See id. at 10–12.

215. See E

UROPEAN COMM’N, CORPORATE SOCIAL RESPONSIBILITY NATIONAL PUBLIC

POLICIES IN THE EUROPEAN UNION 23 (2007), http://ec.europa.eu/social/BlobServlet?docId=

2036&langId=en (last visited Feb. 18, 2017).

216. See id.

217. See id.

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punished for their failures to ensure that they are responsible at every step in

their operations. While the social index and product labeling is a simple yet

important step toward legislating CSR, its effects are limited by its simplicity.

C. Obligatory CSR Officers

India has taken a unique approach to legislating CSR by obligating

companies to create a CSR committee with at least three directors who develop

CSR policies for the company and ensure that at least two percent of the

company’s net profits are devoted to these policies.

218

This law is one of the

strongest positive obligations placed on companies by statutes. Companies are

required to spend money creating and implementing CSR programs.

219

Importantly, this law is symbolic of the global development of CSR. The

government has recognized a need for companies to consider CSR in their

business practices. The law also gives companies the latitude to decide how to

introduce CSR within their companies, rather than forcing external methods

upon them.

220

However, the independence of companies to decide their own

standards can result in effective avoidance of the law’s purpose. Companies are

essentially their own oversight. Therefore, they do not have to vigorously pursue

their CSR policies. Although the two percent spending requirement will help to

ensure that companies genuinely try to implement CSR policies, companies are

free to focus on the issues that are most beneficial financially rather than

socially.

221

Despite the margin of discretion for companies, the spending

requirement is a significant imposition. For some companies, two percent of net

profits equates to a large dollar value, which may be excessive to achieve their

CSR goals.

The Indian law does not focus on CSR demands on subsidiary and contractor

behavior. This law can be bolstered to encourage companies in their CSR

policies to address the rights and safety of workers employed by subsidiaries and

contractors abroad. However, the lack of independent oversight and promotion

of the company’s discretion indicate that a company may not have much impetus

to investigate its operations overseas. Furthermore, such investigation and

implementation of CSR policies abroad is likely expensive and could decrease

their profit margins. On the other hand, this law can encourage companies to

take the time and spend the money on CSR throughout the company. The law

insists that companies recognize and internalize CSR. Despite its weaknesses,

this law also has the potential to introduce companies to CSR and encourage

218. Joya Banerjee, India Mandates Corporate Social Responsibility: The 2 Percent Bill,

GBCH

EALTH (2013), http://archive.gbchealth.org/asset/india-mandates-corporate-social-responsi

bility-the-2-percent-bill [https://perma.cc/VC9U-JMCN].

219. Id.

220. Id.

221. Id.

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them to develop their own techniques, tailored to their businesses, to integrate

CSR into their business practices, and even to those of their foreign contractors.

D. Direct Liability

The French legislature introduced the concept of compensation for harms

occurring abroad as a result of the company’s failure to adequately police its

subsidiaries and contractors.

222

However, the circumstances and scope of this

compensation are not clear. The French law contemplates liability for

companies.

223

A statute that establishes liability for harm to workers caused by

foreign contractors is the strongest incentive for American companies to

investigate and prevent such harms. However, such a statute is in many ways

impractical. First, trials would need to take place in the United States, far away

from the location where the harm occurred. The trials would not only be very

expensive but also likely deficient in evidence. Second, the statutory liability

would create a heavy burden on companies that use foreign contractors. They do

not have significant control over the contractor’s operations, and poor worker

safety is often commonplace in those countries. Third, a statute demanding

direct liability is contrary to the general rule that principals are not liable for the

negligence of their independent contractors. Furthermore, contractors often have

several customers, and it would be difficult to determine the company’s level of

liability in a particular incident. Although such a statute would heavily

encourage companies to institute measures to ensure that their foreign

contractors respect the rights and safety of their workers, the statute would be

very unpopular and likely unworkable.

VIII.

THE OPTIMAL METHOD FOR THE UNITED STATES

The French law on the duty of care of parent companies forges a new path

in legislating CSR. Significantly, the law creates the concept of a “vigilance

plan,” which includes delineation of risks to workers, measures to prevent

harms, and assessments of subsidiaries and subcontractors.

224

Such a vigilance

plan legislation would be beneficial in the United States. In fact, California has

already implemented a similar law requiring companies to report the ways in

222. See French Corporate Duty of Vigilance Law: Frequently Asked Questions, EUR.

COALITION FOR CORP. JUST. (Feb. 23, 2017), http://corporatejustice.org/documents/publications/

french-corporate-duty-of-vigilance-law-faq.pdf [https://perma.cc/Y82X-FX7D].

223. See id.; Loi 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères

et des entreprises donneuses d’ordre [Law 2017-399 of March 27, 2017 Law About the Duty of

Due Diligence of Parent Companies and Main Contractors], JOURNAL OFFICIEL DE LA

RÈPUBLIQUE FRANÇAISE [J.O.] [OFFICIAL GAZETTE OF FRANCE], Mar. 28, 2017 (Fr.),

https://www.legifrance.gouv.fr/eli/loi/2017/3/27/2017-399/jo/texte [https://perma.cc/J4PQ-S64P],

translated in E

UR. COALITION FOR CORP. JUST., http://corporatejustice.org/duty-of-vigilance-bill-

en-.pdf [https://perma.cc/LSM4-SZNG].

224. See id. at 4.

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which they act to prevent slavery and human trafficking in their supply chains.

225

However, a wider scope will better accomplish the goal to hold companies

accountable for workers’ rights violations that occur in the production and

acquisition of their products.

Because OSHA and the FLSA adequately protect American workers, the

American vigilance plan law need only require that the plans address the

operations of the company, subsidiaries, and contractors outside the United

States. Like the French “vigilance plan,” the law should demand that the

vigilance plans include: a listing of the risks, analyzed and ranked, to human

rights and fundamental freedoms, physical safety of workers, and the

environment; procedures for the regular assessments of company, subsidiary,

and contractor operations; elucidated actions to mitigate risks or prevent serious

harm; alert system to notify the company of the existence of risks; and a

monitoring process to implement and evaluate the effectiveness of the plan. In

addition, vigilance plans should be accompanied by a reporting component.

Companies should be required to report worker safety incidents that occur in the

company, its subsidiaries, and its contractors. This law should apply only to

larger companies headquartered in the United States. In addition, these

companies should be obligated to file their plans with the Department of Labor

and also make them public on their websites. The advantages of the vigilance

plan are that companies are forced to investigate their supply chains for worker

safety and that the public can use their buying power to encourage companies to

better protect workers. Furthermore, these reports can be used by potential

plaintiffs who can sue American companies under a theory of negligent selection

and hiring.

The most significant concern with the effectiveness of implementing

vigilance plan legislation is enforcement. Companies can falsify reporting data.

To combat this, a provision can be added requiring the vigilance plan to be

checked by an independent auditor, at the expense of the company. Similar to

the French law, any interested party should be able to bring an action against a

company to which this law applies if the company has failed to file and publish

a vigilance plan. The court can issue an injunction against the company. In

addition, the effect of the law’s vigilance plans and reporting requirements can

be amplified with a certification system based on best worker safety records,

similar to the Danish Social Index.

While the French law’s vigilance plan can be adapted for the American legal

context, the concept of liability and compensation for harm caused by failure to

implement the vigilance plan is incompatible. In the context of American agency

law, companies are not typically responsible for the negligence and fraud of their

independent contractors.

226

Therefore, such liability would be contrary to

225. See HARRIS, supra note 20, at 5.

226. See discussion supra Section VI.D.

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existing American legal principles. However, the requirement of vigilance plans

will encourage not only transparency but also compliance with better workers’

rights and safety standards in companies’ operations. Furthermore, such a law

reflects the growing public support for CSR, particularly in corporate operations

and supply chains abroad.

ONCLUSION

Even though workers’ rights and worker safety legislation was first

implemented in the United States over a century ago, many products sold to

American consumers are created in violation of the principles set forth in those

laws. American companies have been able to reduce production costs by moving

their manufacturing operations abroad. Many developing economies and

impoverished people have benefited from the income from these job

opportunities, but workers still suffer from poor working conditions. However,

companies have also been able to avoid the costs of providing adequate worker

protections by relying on foreign contractors to manufacture their products.

Concern for the welfare of these foreign workers is growing around the world,

as evidenced in the rise of CSR and the new French legislation. While self-

regulation is important, legislation will ensure that the public can make informed

consumer decisions. By demanding that American companies be responsible for

the safety of the people manufacturing their products, the concern for worker

safety and the implementation of measures to protect them will continue to

spread around the world.

AITLIN FAGAN*

* J.D. Candidate, 2018, Saint Louis University School of Law.