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Volume XII, Number 188


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July 05, 2022

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Senator Hawley Introduces Slave-Free Business Certification Act

On July 20, 2020, Senator Josh Hawely (R-MO) introduced the Slave-Free Business Certification Act of 2020 (Act), which would require certain large companies to investigate and report on forced labor within their supply chains.

The proposed Act has three major components: mandatory investigation and auditing, mandatory annual reporting to the U.S. Department of Labor (DOL) that includes a CEO certification, and significant penalties for non-compliance. The DOL would be required to promulgate implementing regulations within 180 days of enactment.

Covered Business Entities

The Act would apply to any “issuer,” as that term is defined in section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)), with annual worldwide gross receipts exceeding $500 million.

Supply Chain Investigation and Auditing Requirements

Under the Act, a covered business entity would be required to “conduct an audit of its supply chain … to investigate the presence or use of forced labor” by the entity or its suppliers, including by direct suppliers, secondary suppliers, and on-site service providers.

The Act requires the investigation and auditing process to include:

  • Worker interviews,
  • Management interviews,
  • Document review,
  • Closing meetings with management, and
  • An audit report.

Annual Reporting Requirements

A covered business entity would also need to submit to the Secretary of Labor and post on its website a detailed report outlining the results of the investigation and audit, including the details of any instances of forced labor; the policies or procedures the covered business entity has in place to address forced labor issues in the supply chain; and a written certification, signed by the CEO, stating that the entity has complied with the requirements of the Act and either found no instances of forced labor or has disclosed every known instance of forced labor.

Penalties for Non-Compliance

The bill includes a significant enforcement mechanism that allows the Secretary of Labor to assess penalties for noncompliance. Specifically, the Secretary of Labor can assess civil damages up to $100 million and punitive damages up to $500 million for failure to comply with the Act’s audit and reporting requirements.

The Broader Context

While prospects for the Act’s passage are uncertain, bipartisan support within Congress and across the U.S. government for human rights initiatives appears to be growing due to a combination of factors. These include mounting trade tensions along with concerns about specific reports of human rights abuses involving the Uyghur population in China. The proposed legislation would build on supply chain due diligence and disclosure requirements already in place in California and at the U.S. federal level including the California Transparency in Supply Chains Act, the Conflict Minerals Statutory Provision and Securities and Exchange Commission Rule, and the Federal Acquisition Regulation provisions on Combatting Trafficking in Persons. Legislation mandating human rights due diligence and modern slavery disclosures is also continuing to emerge in a number of countries around the world, adding challenging new obligations for multinational companies operating across jurisdictions with increasingly complex supply chains.

© 2022 Beveridge & Diamond PC National Law Review, Volume X, Number 206

About this Author

Lauren A. Hopkins Consumer Products Attorney Beveridge & Diamond San Francisco, CA

Lauren’s practice focuses primarily on global product stewardship, responsible sourcing, and corporate sustainability.

She advises clients across a range of industry sectors on environmental, social and governance (ESG) disclosures, responsible sourcing of raw materials including “conflict minerals” and forest products, as well as human rights and labor issues in corporate operations and supply chains. She advises on issues including interpretation and implementation of the U.S. Securities and Exchange Commission’s conflict minerals rule, supply chain due diligence, and the...

Kirstin K. Gruver Environmental Litigation Attorney Beveridge & Diamond Seattle, WA

Kirstin Gruver is efficient and responsive to clients' needs.

She maintains a diverse environmental litigation and regulatory practice, working with clients nationwide across industrial sectors with a focus on wetlands and water issues. She also has experience in product stewardship and sustainability matters.

Prior to joining Beveridge & Diamond, Kirstin worked as a deputy prosecuting attorney at the Clark County Prosecutor's office. She also worked as a legal intern with the Department of Transportation, Maritime Administration, and as a summer clerk at Earthjustice....

Megan L. Morgan Environmental & Business Attorney Beveridge & Diamond Baltimore, MD

Megan thrives on solving complex environmental problems and finding the most expedient and effective business-forward paths.

Her multi-disciplinary background—Masters of Business Administration, associate counsel at the Department of Veterans Affairs, judicial clerk for the Honorable Senior Judges of the District of Columbia Court of Appeals, and intern at multiple federal environmental agencies—ensures a well-rounded perspective in addressing both regulatory and adversarial issues for the firm’s corporate clients.

Corporate Responsibility and...