Accountability for outsourced torts: expanding brands' duty of care for workplace harms committed abroad.

Author:Farrell, Naima
 
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  1. INTRODUCTION II. BARRIERS TO BRAND AND SUPPLIER ACCOUNTABILITY A. Limited Coverage and Enforcement of Law in the Brand's Home-State B. Limited Coverage and Enforcement of Law in the Supplier's and Worker's Home-State C. Severely Unequal Bargaining Power Between Brands, Suppliers, and Workers III. HOLDING BRANDS ACCOUNTABLE FOR OUTSOURCED TORTS A. An Expanded Duty-Based Regime for Workplace Harms Committed Abroad B. Situating the Expanded Duty-Based Regime within Evolving Principles of Tort Law IV. ADVANTAGES AND DISADVANTAGES OF AN EXPANDED DUTY-BASED REGIME A. Deterrence Advantages B. Morality and Fairness Advantages C. Economic, Political, and Administrative Costs V. ENVISIONING AN EXPANDED DUTY-BASED REGIME FOR LABOR STANDARDS IN THE UNITED STATES A. Common Law Expansion of the Duty of Care B. Statutory Expansion of the Duty of Care VI. COMPARING U.S. AND NON-U.S. EFFORTS TO EXPAND LIABILITY FOR WORKPLACE HARMS COMMITTED ABROAD A. Litigation in Non-U.S. Courts B. Non-U.S. Statutory Proposals VII. CONCLUSION I. INTRODUCTION

    On April 29, 1996, workers' rights activist Charles Kernaghan told Congress that thirteen and fourteen-year-old children were working for pennies a day in Honduran factories to produce Kathie Lee Gifford's popular Wal-Mart clothing line. (1) Shortly thereafter, workers making Kathie Lee garments in a New York factory complained that they had not been paid for weeks. (2) Kathie Lee dissolved into tears discussing the workers' plight on her talk show, saying she was "physically sick to [her] stomach" when she heard the news. (3) She disclaimed personal involvement with the factories but pledged to establish an independent watchdog organization to monitor all producers of the line. (4) She later became an advocate for workers' rights as a member of the White House Apparel Industry Partnership Task Force. (5) Wal-Mart denied knowledge of the factories' practices and vowed to sever ties with suppliers who ran sweatshops. (6)

    Under conventional understandings of U.S. employment law, neither Kathie Lee nor Wal-Mart had a duty to prevent or compensate for these workers' mistreatment. Liability for workplace conditions is traditionally linked to the employer-employee relationship. (7) Wal-Mart did not employ the workers who made Kathie Lee clothing; rather, it contracted the work to independent firms, or "suppliers," who then subcontracted that work to other firms in a lengthy, complex supply chain, (8) Consequently, aggrieved workers in Honduras, China, Pakistan, or another developing country might seek legal redress from their "employers," but not from Wal-Mart or Kathie Lee.

    Nevertheless, the public strongly criticized both Kathie Lee and Wal-Mart for their involvement with sweatshops, and Kathie Lee--if not Wal-Mart--appeared to feel genuinely guilty about the role she played. (9) Today, several years and innumerable sweatshop scandals later, (10) including a recent garment factory collapse in Bangladesh that claimed over 1,100 lives, (11) Wal-Mart and many other multinational corporations have adopted codes of conduct that aim to ensure legal, safe, and humane labor conditions throughout their supply chains. (12) Whether these actions are simply self-serving window-dressing, a reluctant response to civil society pressure, of a sincere acknowledgment of social responsibility, they reflect a growing consensus that firms at the top of the supply chain can no longer ignore the conditions facing workers at the bottom. (13)

    This Note argues that, going forward, firms' compliance with fundamental labor standards should be neither voluntary nor merely aspirational. Drawing upon the work of Brishen Rogers in the domestic sphere, (14) this Note proposes a limited expansion of the current U.S. employment-based liability regime to hold multinational firms, or "brands," (15) to a duty of reasonable care to prevent violations of core labor standards throughout their global supply chains. Under this framework, a brand that purchased goods or services that were produced in violation of certain fundamental labor standards would be liable if the brand had notice of the violations, had power to deter them, and failed to take reasonable steps to do so. This duty derives from existing common law principles and developments in the law of tort. Although implementation would require a significant shift beyond courts' and law-makers' convictions that such duties are confined to the employer-employee relationship, a broader understanding of brands' duties is already manifest in U.S. and European public opinion. (16) A corresponding legal change is warranted by the considerable deterrence and fairness advantages that a broadened liability regime would offer in light of the realities of modern global production.

    This Note will proceed as follows. First, it will briefly describe the current difficulties that workers in the global supply chain face in holding suppliers or brands responsible for labor violations. It will describe the failure of existing regulatory regimes to protect workers adequately and explain how international competition and firm restructuring has weakened workers' ability to seek better working conditions. Second, it will introduce an expanded duty-based model of corporate liability. (17) It will explain how this regime fits within and modifies existing U.S. tort and employment law doctrine. Third, it will describe this regime's potential advantages and disadvantages. Finally, it will propose methods of implementation of an expanded liability regime in the United States, focusing on common law and statutory solutions. It will compare these proposals with efforts to expand corporate accountability for supply chain labor violations in other countries and discuss the likelihood of these proposals' adoption. (18) The Note will conclude that, as pressure to hold corporations accountable for supply chain labor violations mounts and as other means to impose liability close, the time is becoming ripe for an expanded duty-based liability regime to take root in the United States and beyond.

  2. BARRIERS TO BRAND AND SUPPLIER ACCOUNTABILITY

    Workers harmed by unsafe or unfair labor practices at the bottom of the global supply chain face nearly insurmountable barriers to achieving change or obtaining redress at the top. Obstacles include limited coverage and enforcement of law in both brands' and suppliers' home-states, as well as unequal bargaining power between brands, suppliers, and workers.

    1. Limited Coverage and Enforcement of Law in the Brand's Home-State

      Existing U.S. law conceptualizes employment as a stable, bilateral contract between a unitary employer and its employees, (19) It holds an employer to particular duties vis-a-vis its employees and links liability for workplace conditions to the employment relationship. (20)

      However, changes in employment relations and firm structure since the 1980s have rendered this system anachronistic, or at least inadequate, to regulate today's firms and workers. (21) When the vertically integrated, or "Fordist," production model dominated American industry, regulations aimed at U.S. firms could affect the status of all workers involved in production for those firms because those workers were those firms' employees. (22) Today, in contrast, production occurs through disaggregated chains of subsidiaries or independent firms, often with multiple contractual levels and national boundaries separating workers from the brands that profit most from their labor. (23) A brand does not owe duties qua employer to contracted workers unless those workers can demonstrate that the brand is a "joint employer" based on its exercise of substantial control of the workers' direct employer or the workers themselves. (24) Courts have developed a multitude of tests to determine whether such control exists, (25) but in most instances a multinational brand's control of contracted workers will not meet the threshold. (26) In consequence, large numbers of workers that produce goods and services for brands are beyond the regulatory reach of the brand's home-state.

      Additionally, enforcement of existing U.S. labor standards is inconsistent and inadequate to ensure compliance. (27) Public enforcement agencies' resources have declined over the past several decades. (28) Agencies can inspect only a small fraction of regulated establishments and initiate enforcement proceedings against even fewer. (29) Enforcement by private litigants is costly, time-consuming, and limited by steep procedural hurdles like high pleading requirements and class certification standards. (30)

    2. Limited Coverage and Enforcement of Law in the Supplier's and Worker's Home-State

      Brands usually shift production abroad when it makes economic sense--i.e., when it costs less--for them to do so. One strategy that brands use to reduce labor costs is to relocate production to a country where labor regulations are less burdensome than in the brand's home-state. (31) Although a majority of nations have adopted certain "core" labor standards, such as those designated in the "Core Four" Principles of the International Labour Organization (ILO)--freedom of association and elimination of forced labor, child labor, and discrimination in employment (32)--regulation of many other issues, such as wages, hours, health and safety, and other work conditions vary widely. (33) For example, while the federal minimum wage in the U.S. is $7.25 per hour, (34) the minimum wage in Bangladesh--the world's second-largest apparel exporter--is roughly $37 per month. (35) While the U.S. has had in place extensive, if imperfect, legislation concerning occupational health and safety for many years, (36) Bangladesh's occupational health and safety program, on the other hand, "is still in the developmental stage." (37)

      Furthermore, the governments in many workers' home-states are unable or unwilling to enforce the laws on the books. As in the...

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