New federal procurement rules are likely to impact more than 68,000 federal government contractors in New Jersey, as well as 5,400 sub-contractors. The new rules, contained in the Federal Acquisition Regulation titled “Ending Trafficking in Persons,” have been subject to a period of public comment and are under final review by the General Services Administration (“GSA”).
This development will add a new layer of compliance for government contractors, on top of already existing obligations, and may require certain contractors to reassess their international worker supply chains. The new rules add protections for foreign employees against human trafficking abuses. They impose greater obligations and restrictions on contractors regarding record keeping, employee recruitment practices and related fees, and other new obligations.
Once implemented, the rules will increase the liability exposure for US government contractors, especially those dealing with international subcontractors and outsourcing services abroad. Companies that outsource services or obtain products from abroad in connection with government contracts, particularly where the portion of the government contract performed outside the US exceeds $500,000, may need to reassess their current compliance programs or implement a program if they do not have one.
Companies may also need to restructure their existing international product and services supply chains. Under the new rules, if a company is obligated to have a compliance plan, then it will need to include a specific employee awareness program, a process for reporting violations, new recruitment and wage plans with particular requirements, an employee housing plan, and procedures to prevent agents and subcontractors from engaging in trafficking. The contractor would also be required to certify that (after having conducted due diligence), to the best of the contractor’s knowledge and belief: (1) neither it nor any of its agents, subcontractors, or their agents is engaged in any trafficking in persons activities, or (2) if abuses have been found, the contractor or subcontractor has taken the appropriate remedial and referral actions.
Evidence of trafficking is often not readily apparent to the untrained observer. Contractors may not readily see through the nuances of the local culture or economics of a country where manufacturing occurs. Laborers may be coached (or intimidated) to respond to questions in order to sidetrack an investigation. Satisfying the new compliance standards will require not only the expertise of personnel experienced and trained in investigating labor trafficking, but also people familiar with local culture.
Government contractors need to be aware of these developments and monitor the implementation, and future enforcement proceedings, in connection with these rules. There are real questions about how contractors can satisfy these new obligations. For example, may a company with operations in numerous countries with varying degrees of exposure to trafficking apply a risk-based approach to their due diligence? How expansive is the definition of a company’s “agent,” and will a company be permitted to conduct some investigation of its own before notifying the government? When the final version of the regulations are announced, a US contractor’s existing compliance policies should also be re-assessed. Contractors should prepare to deal with the looming implementation of these rules, and the corresponding risks.
About the Authors: George Benaur, counsel at Buchanan Ingersoll & Rooney PC, in Princeton, represents domestic and international clients in corporate due diligence, risk management and dispute resolution, including complex litigations. Jonathan F. Lenzner is a former federal and Manhattan prosecutor with experience in prosecuting trafficking violations, and now serves as the executive vice president of Investigative Group International Inc., a private investigation and corporate intelligence firm, based in Washington, DC.Related Articles: