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Nov 06, 2023

How in-house counsel can manage US child-labor risks

Tom Plotkin outlines steps attorneys can take, including embedding accountability, third-party risk management and strategic communication

Over the past year, US child-labor risks have come into focus as a critical area of concern for in-house counsel. High-profile reporting on exploitative labor practices involving child migrants has garnered increased attention from regulators, legislators and civil society. As a result, many in-house counsel are reviewing their company’s internal practices to identify areas of potential risk or exposure.

Background on the legal risk landscape
Legal exposure for child-labor issues can originate in a company’s own workforce or in its value chain, including through relationships with suppliers, contractors and other vendors that support certain parts of the company’s business.

The precise nature of legal risk will depend on where and how child labor exists in relation to a company’s operations. For example, unlawful child labor in a company’s own workforce could result in investigation by civil and criminal enforcement authorities at both the state and federal level, or civil litigation by the workers or someone on their behalf.

Even if this issue occurs in the workforce of a supplier or contractor, a company may still face investigation or litigation risks depending on the structure of its operations and its relationship with the entity using child labor.

Depending on the nature of the labor at issue, a company could also face civil or criminal liability under the Trafficking Victims Protection Reauthorization Act if it knowingly participates in a venture that uses or benefits from forced child labor. Reputational risk is also an issue, and it can be magnified through law-adjacent processes such as shareholder activity, congressional investigation or use of non-judicial grievance mechanisms, such as the Organization for Economic Co-operation and Development’s specific instance process.

Given the wide-ranging legal and regulatory inputs at play, there are several areas where in-house counsel can focus their attention to strengthen US child labor risk-management efforts.

Embedding accountability throughout the organization
In order for child labor risk-management efforts to be effective, it is important that oversight responsibilities are clearly defined and that those responsible for oversight understand their role. In-house counsel are often in the best position to monitor and reinforce these organizational structures and responsibilities, including across the following areas of focus.

  • Centralized co-ordination. There can be many approaches to organizing the child labor risk-management function within a company, but it is helpful to define the role or team that will be responsible for co-ordinating those efforts companywide. The goal of this function is to maintain consistent oversight, reinforce accountability and report to executive management with sufficient insight on progress and risks.
  • Direct management. Responsibility for more hands-on management of child-labor oversight processes can exist within a single team and/or be spread across multiple stakeholders throughout the business. It is often helpful for those who do this role to have somewhat regular interaction with the parts of the business and the third parties that pose higher levels of risk. Those with hands-on child labor risk-management responsibility should have defined responsibilities, follow clear procedures and understand what to do if they identify or suspect a compliance issue.
  • Oversight procedures. In addition to defining roles, it is important to define the risk-management procedures those roles will be responsible for executing. These procedures can vary based on the organization, its structure and its value chains. But generally speaking, oversight procedures explain how risk-management processes such as audits and corrective action must happen, and how to escalate identified or suspected non-compliance. Critically, it may be necessary for a company to define its child-labor standards in a policy if it has not done so already.
  • Training. Education and awareness are important elements of these management structures. Training is therefore a critical tool in reinforcing individual responsibilities, improving understanding of how those responsibilities fit into the bigger compliance picture and clarifying more complex aspects of oversight. It can also be helpful to include a brief child-labor module in onboarding training or otherwise highlight the issue for the entire workforce so that those without direct responsibility for compliance can nonetheless identify and flag issues where appropriate.

Incorporating child labor into third-party risk management
Much of the recent reporting on child labor has centered on risks associated with third parties such as contractors and suppliers. Most compliance programs have defined third party risk-management practices structured to assess and identify risk across a range of compliance issues. These practices can often be an effective vehicle through which to build or strengthen child-labor oversight strategies too, including in the following areas.

  • Relationship mapping. Given the complexity of supply chains and frequent outsourcing to third-party contractors, it is important to have a working picture of the entities that contribute to a company’s goods and services. Understanding which entities are involved, what they do and how they are related to the company can help facilitate and better target risk-management efforts.
  • Risk assessment. After developing an understanding of relevant entities through relationship mapping, a company can assess risks across the value chain to better understand where it should focus oversight. There are various measures that companies can use to assess child-labor risk, including questionnaires and certifications, on-site visits and audits and due diligence carried out by a third-party vendor.
  • Contractual controls. As part of a third-party relationship, it is important to define standards and expectations as they relate to child labor. Many companies use contractual provisions and business partner codes of conduct to reinforce child-labor standards. These mechanisms can also be used to reserve oversight, audit and corrective action rights in the event of non-compliance.
  • Oversight and remediation. Third party child-labor oversight can often involve tools similar to those used in the risk-assessment process: questionnaires and certifications, on-site visits and audits and third-party due diligence. If oversight identifies non-compliance, it is important for in-house counsel to be closely involved in any corrective action and remediation, which may present enforcement, litigation or disclosure-related risks.

Strategic communication and co-ordination
Beyond overseeing child labor risk-management practices, in-house counsel are often responsible for communicating and co-ordinating with other relevant stakeholders, both within the company and externally. These interactions can help improve and bolster compliance efforts.

  • Communications with executive leadership and the board. Given the increased focus on child-labor risks, in-house counsel should consider flagging this issue for both executive leadership and boards. It can be helpful for individuals in these roles to have an understanding of both the liability risks and the potential for operational and reputational impacts. Executive leadership in particular may want to be more involved or receive more regular updates regarding the risk identification and management process.
  • Government engagement. Government stakeholders at both the state and federal level have mobilized in response to growing reports of child-labor risks. For companies, there may be opportunities to engage with government stakeholders in a way that strategically benefits risk-management efforts. Any government engagement should be carefully planned and weighed against a company’s broader risk profile.
  • Stakeholder engagement. In addition to government stakeholders, it can be beneficial to co-ordinate with other external stakeholders working to address child-labor issues. Industry coalitions, civil society organizations and other third-party partners could add valuable outside perspective and expertise that reinforce and even strengthen internal risk-management practices.

Tom Plotkin is a special counsel with Covington & Burling LLP in Washington, DC

Tom Plotkin

Special counsel with Covington & Burling