The Case for an ILO Convention on Supply Chain Responsibility

1. The Case for an ILO Convention on Supply Chain Responsibility Brishen Rogers Temple University Beasley School of Law July 10, 2015 Presentation at RDW 2015 Conference

3. Common Law Backdrop (1) No Duty to Rescue • In U.S. & many other nations’ tort law, A usually has no duty to protect B against harms that A has not caused • Classic example: if A sees B drowning in a public space, A need not help even if doing so would cost A nothing. In fact, A may “sit and smoke his cigar” while B drowns. • (Some exceptions)

4. Common Law Backdrop (2)Boundaries of Firm & Employment • Firms are “Islands of conscious power in this ocean of unconscious co-operation like lumps of butter coagulating in a pail of buttermilk.” (Coase 1937) • Optimal scope of a firm is determined by transaction costs of utilizing market sourcing rather than command structures

5. “It is the fact of direction with is the essence of the legal concept of “employer and employee” just as it was in the economic concept [of the firm]” (Coase 1937) • Generally no employment law duties toward non-employees, which creates incentives to purchase goods rather than produce in house. • Partial solution in US: “joint employer” doctrine (in FLSA) can occasionally reach user firms (like farms) but not food chains or retailers

7. Wal-Mart’s Supply Chain Management http://courses.ischool.berkeley.edu/i290-4/s02/readings/line56supplychain.gif

8. Summary • In contemporary global supply chains, MNCs have power w’o responsibilities • Regulations based on employment relationship within one state can’t ensure decent work • But norms of supply chain responsibility now well-developed in civil society, and are beginning to take root in positive law • Tort law as promising site for development of supply chain liability • Possibilities/impediments to this now – especially jurisdictional questions • Potential for ILO to help process along

9. The Emergence of Supply Chain Responsibility?

10. The Emergence of Supply Chain Responsibility? • Civil society practice (MNCs and NGOs) • Private lawmaking (Bangladesh Accord) • International legal regimes (Ruggie etc.) • Public lawmaking (various examples)

11. Civil Society Practice • NGOs and consumers very often call on brands to exert their market power to ensure decent work in their supply chains. • Basically all MNCs now have CSR policies. Many commit brands to ensuring decent working conditions at suppliers.

12. Wintek worker Jia Jingchan, injured by use of n-hexane to clean iPhone: “We hope Apple will heed to its corporate social responsibility”

13. SACOM Report, May 2011(Following Chengdu explosion) • “Foxconn has primary responsibility in labour rights abuses. The clients, including Apple and HP, which declare decent working conditions at their suppliers have indispensible obligations to put their promise into practice.”

14. 2012 Dhaka Fire & 2013 Rana Plaza Collapse Over 1200 killed – leads to pervasive calls for brand responsibility, eventually to Accord

15. Import of this Norm • Not yet a significant constraint on MNCs. • But: • (1) Shows public consensus around brands’ duties, so important backdrop to lawmaking • (2) “Soft law” norms can be adopted into “hard law” regimes via adjudication • (3) Has been incorporated into binding agreements such as Bangladesh Accord, and multi-stakeholder efforts like Better Work

16. Key provisions: • (a) Brands commit to source from compliant factories for at least two years; • (b) Brands include sufficient resources in contracts to fund health/safety upgrading • (c) Enforcement via arbitration, with awards enforceable in domestic courts. • Other regime, “Alliance,” also involves alleged commitments to enable factory safety – but no contractual commitments

17. Unpacking the Norm • “Shared responsibility” among: • MNC & supplier/employer • Home states of MNC & supplier/employer • Axes of “shared responsibility” • Direct causation of a harm • Benefit from a harm • Special capacity to mitigate or eliminate harm • Special connection to those who suffer the harm • Key works: Iris Marion Young, Responsibility for Justice (2011); various by Dahan, Lerner & Milman-Sivan.

18. Norm of SCR in Int’l Legal Instruments • Ruggie Principles: “...responsibility to respect applies across its business activities and through its relationships with third parties…such as business partners, entities in its value chain, and other non-State actors” • OECD Guidelines for Multinational Enterprises (2011): require firms to “avoid causing or contributing to adverse impacts” and to engage in “social dialogue on responsible supply chain management”

19. Recent Proliferation of State Laws Reflecting SCR • United States: • Alien Tort Statute • Dodd-Frank Provisions on conflict minerals • (FLSA’s expansive definition of “employer”) • (NLRA’s garment & construction industry provisos, and proposed joint employer standard) • California Transparency in Supply Chains Act (2012) • California “Brother’s Keeper” Law • Good caselaw developing

20. State Laws Reflecting SCR • Netherlands: joint liability common for harms to contracted workers in the country • U.K., France, Denmark require large companies to report on CSR initiatives • Proposal in French Parliament to create statutory “duty of care” of companies toward supply chain workers • Many in trafficking: Gordon (ILO 2015) and Andrees, Nasri, Swiniarski (ILO 2015

21. Toward Supply Chain Liability in Tort Law

22. Substantive Impediments/Possibilities Under U.S. Tort Law • In U.S. tort law, usually no duty to protect others against harms by third parties. • Exceptions: • (1) Duty of reasonable care where one has agreed to protect another against particular harms • (2) Duty to warn or protect where one has non-negligently created a risk of harm • (3) Duties to protect arising out of “special relationships” – limited cases where D has substantial/exclusive power to protect P

23. Key Cases • Doe v. Wal-Mart, 572 F.3d 677 (9th Cir. 2009) (no duty to monitor suppliers where D made no binding contractual commitment to do so) • Holds open possibility of such liability where an MNC does make such a commitment • Kasky v. Nike, 27 Ca. 4th 939 (2002) (possible liability under state consumer protection laws for misleading statements re: supply chain labor conditions) • But constitutional status of decision is unclear. • Rana Plaza litigation, (filed 2015, D.D.C.)

24. Procedural Impediments to Supply Chain Liability Under U.S. Tort Law • (Treaties generally have no direct effect on MNCs – instead bind states to regulate employment relationships) • Jurisdiction & venue questions • Judicial aversion to “foreign” claims • Choice of law questions • Substantive: which state’s tort law? • Procedural: jury trial? Punitives? Class action?

25. The Case for ILO Standard-Setting

26. Why the ILO? • Transnational rulemaking necessary to resolve procedural Qs • ILO is the recognized site for definition and promulgation of int’l labor standards • Employer participation enhances legitimacy • Strategic advantages of ILO • Can solve “assurance game” problem • Can negotiate north/south conflicts • ILO’s monitoring & technical assistance capacity may be helpful for any new regime

27. Precedents at ILO • Better Work • Supply-chain governance; Shared responsibility • Declaration on MNEs (1977, 2000, 2006) • Defines duties for MNEs, though limited to their direct employees • Maritime Convention (2006) • Shared jurisdiction -- flag states & port states • ILO Rec. 203 on Forced Labor (2014) • Supply chain due diligence

28. Key Elements (I) • **Ensuring jurisdiction • Member states’ courts shall have jurisdiction to hear claims by supply chain workers against home state MNCs • Defining duty • “Member states shall hold MNCs to duties of reasonable care to prevent (defined harms) to workers within their supply chains” • OR: “Member states shall ensure that MNCs establish transnational industrial relations systems to cover supply chain workers”

29. Key Elements (II) • Defining harms: • Pervasive & severe violation of core labor standards (Hyde 2012)? • Unacceptable forms of work? • Failure to establish transnational bargaining? • Defining breach/defenses: • Financial commitments that enable labor standard compliance? • Monitoring protocols? • Safe harbor for use of ILO monitoring?