Reminder: Manufacturers and Retailers Doing Business in California Are Required to Take Action to Prevent Slavery and Human Trafficking
We reported in a prior Duane Morris Alert that the California Transparency in Supply Chains Act (the Act) requires large retail sellers and manufacturers doing business in California to publicly disclose their efforts to eradicate forced labor from their direct supply chains. The law pushes such companies to develop, maintain and implement policies that prevent human trafficking and slavery by requiring them to publicly post on their corporate websites the actions being taken to prevent such abuse. It also requires affected companies to make that information available in writing upon request.
The California Department of Justice is moving toward enforcement by sending letters to companies believed to fall within the Act, reminding them of the Act's requirements. Companies that have not posted their efforts on their corporate websites or have posted in limited fashion appear to be targets. Businesses that have filed tax returns listing manufacturing or retail trade as their principal business activity appear most likely to receive such notice.
Businesses should not assume that the Act does not apply to them because they are located outside of California or do not have operations or employees within the state. The law applies to companies that: (1) are retail sellers or manufacturers, (2) earn more than $100 million in worldwide gross annual receipts and (3) are "doing business in California" as defined by the tax code. The term "doing business in California" is defined quite broadly under the Act. The California Franchise Tax Board notifies the California Attorney General of businesses that may be covered by the Act.
Targeted companies may want to audit their practices, establish procedures, train their employees and certify their actions. Retail sellers and manufacturers should consider reviewing their code of ethics and corporate policies, posting their positions on slavery and human trafficking on their Internet websites, and addressing the requirements of the Act in the process.
What the Law Means for Companies
Now appears to be the time for large retail sellers and manufacturers that file tax returns in California and have not yet evaluated whether the Act applies to them to consider taking action. Companies that have not heeded the Act's requirements may want to comply promptly in light of recent enforcement activities by the California Attorney General. Those who have haphazardly posted disclosures may want to revisit their notices to ensure compliance under the law. Companies that do not act may be ordered to do so by the California Attorney General and may potentially encounter public relations issues. Taking action is not difficult, even for companies that do not currently engage in preventive action or have a plan to eradicate slavery or human trafficking in the supply chain. Businesses have shown creativity in how they post the required information. It may be worthwhile for companies to consider seeking legal counsel to determine whether this law applies to them or whether their postings are adequate under the law.
If you have any questions about this Alert or would like more information, please contact any member of the Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
