Senate Introduces Bill Requiring Corporate Audits to Uncover Forced Labor Practices in Supply Chains
The bill, which has bipartisan support, would impose significant new compliance requirements on large publicly traded companies with international supply chains.
On February 3, 2022, Senators Joshua Hawley (R) and Kirsten Gillibrand (D) introduced a bill aimed at preventing the use of forced labor in corporate supply chains by requiring certain publicly traded companies to perform detailed, annual audits and disclose the results to the federal government. This effort comes on the heels of President Biden signing into law the Uyghur Forced Labor Prevention Act in December 2021, which also garnered broad bipartisan support in Congress.
The Slave-Free Business Certification Act of 2022 ("Act") would require certain covered entities to annually audit their operations for evidence of forced labor, including suppliers, secondary suppliers, and on-site servicers. The Act defines a "covered business entity" broadly: any issuer, as defined in the Securities Act of 1933, involved in mining, production, or manufacture of goods for sale, that has annual revenue exceeding $500 million.
The audit requirements are unusually detailed for a federal statute, specifying interviews with a cross section of employees and management, and review of personnel files and operative documents such as contracts with outside suppliers. The results must be posted, "conspicuously," on the corporate website and transmitted to the U.S. Department of Labor ("DOL") for review. DOL must then submit a report to Congress identifying companies that have failed to comply with the Act or have reported forced labor concerns. Moreover, the chief executive officer must personally certify compliance with the Act and that the audit report accurately reflects the state of the entity’s supply chain. The Act empowers DOL to pursue civil and punitive damages for non-compliance up to $100 million and $500 million, respectively, and could expose corporate executives to civil and criminal liability for knowingly executing false certifications.
The bill may see substantial changes as it proceeds through Congress. If passed, DOL will develop implementing regulations.
