The New Social Contracts in International Supply Chains
68 Am. U. L. Rev. 1869 (2019).
* Professor of Law and Director, Business Law Program, American University Washington College of Law. Many thanks to those who have aided my (still evolving) thinking and writing on this subject, including Susan Carle, Muriel Fabre-Magnan, Paul Gaiardo, J.E. Lendon, Jonathan Lipson, Thomas Mackall, Elizabeth Meyer, Brishen Rogers, and Charles Sabel; the members of the American Bar Association Business Law Section Working Group to Draft Human Rights Protections in Supply Contracts, which I have the privilege to chair; the organizers and participants from this symposium, New Perspectives: A Discussion on Modern Global Supply Chains, of which this paper is a part; other participants in the panel Protecting Human Rights in Supply Chains: Moving from Policy to Action held by the Association of American Law Schools (Jan. 4, 2019); and the participants in the American University Business Law Faculty Workshop and the Atelier des obligations of the Université de Paris II (Panthéon-Assas). I would like to acknowledge summer research funding from the law school and would like to thank Katherine Borchert, Nicholas Burns, Michael T. Francel, and Chiara Vitiello for research assistance. Finally, I want to express my particular gratitude to Hans-Wolfgang Micklitz and the participants in the seminar he invited me to give at the European University Institute, a heavenly haven and school for scholars, where I began to see these issues in a new light. To be clear, though, some who have helped may think me thoroughly misguided, and all mistakes and misjudgments are my own.
This Article considers, from legal, practical, moral, and policy perspectives, Model Contract Clauses (MCCs) to protect the human rights of workers in international supply chains. The product of the ABA Business Law Section Working Group to Draft Human Rights Protections in International Supply Contracts, the MCCs are an effort to provide companies with carefully researched and well-drafted clauses to incorporate human rights policies into supply contracts (purchase orders, master vendor agreements, and the like). The Article discusses the impetus, goals, and strategies of the MCCs and explains the paradigm of the corporate, operational, and political landscape for which they are designed, including the seeming lack of emphasis on worker health and safety. An overview of some of the doctrinal issues and solutions is provided, emphasizing the objective of the MCCs to be legally effective and operationally likely. On a more theoretical note, it is argued that international supply chain contracts that attend to moral issues like the human rights, health, and safety of workers are a new kind of social contract, supplementing but not supplanting more classical notions of the social contract, with which they share some characteristics. In particular, the moral nature of these supply chain agreements is likened to the normative goals of the social contract, but these new social contracts necessarily move in more contemporary directions because they are typically constituted by multinational enterprises—corporations quite different from the individuals and states conceived by the classical theorists. In addition, supply contracts, and the supply chains that they constitute, cross state lines and geographic boundaries, reaching past the nation-state. After arguing that companies have a moral duty to the workers in their supply chains, the Article suggests that companies should protect them through voluntary contractual undertakings such as those in the MCCs. The place of public regulation is considered as well, including the possibility of Good Samaritan-style protection for companies that take ameliorative steps. Finally, the role of experimentalist governance in a possible new version of the MCCs is considered briefly.
The common law has traditionally eschewed theory and the statement of broad principle, but this does not mean that its instinct for the possible and the practical cannot be justified in terms of principle.1Alexander McCall Smith, The Duty to Rescue and the Common Law, in The Duty to Rescue: The Jurisprudence of Aid 55, 56 (Michael A. Menlow & Alexander McCall Smith eds., 1993). Professor McCall Smith is nowadays famous as a novelist, but for many years he was a distinguished law professor.
—Alexander McCall Smith
This contribution offers an academic consideration of the Model Contract Clauses (MCCs) published by the ABA Business Law Section Working Group to Draft Human Rights Protections in International Supply Contracts (the “Working Group”).2David V. Snyder & Susan A. Maslow, Human Rights Protections in International Supply Chains—Protecting Workers and Managing Company Risk: 2018 Report and Model Contract Clauses from the Working Group to Draft Human Rights Protections in International Supply Contracts, 73 Bus. Law. 1093 (2018) [hereinafter Model Contract Clauses]. The Article takes on several different tasks. It explains the impetus, goals, and strategies behind the MCCs and the basic paradigm for which they were designed. It also suggests that international supply chain contracts that attend to the human rights, health, and safety of workers are a new kind of social contract. On a related note, the Article argues that companies bear a moral responsibility to the workers in their supply chains, and that the companies can fulfill that responsibility, in part, through appropriate supply contracts. In short, supply contracts that transform moral duties into legal ones in a globalized, extraterritorial economic world are a new kind of social contract. The legal and policy implications of these arguments are also considered.
This newer social contract provides a necessary supplement to the social contract conceived by the Enlightenment thinkers and their classical predecessors.3It is also a different kind of “new social contract” than that expounded by Ian Macneil in his relational theory of contract, see The New Social Contract: An Inquiry into Modern Contract Relations xii (1980), and certainly not the same as the “National Bargain” of Robert Reich, see The Work of Nations: Preparing Ourselves for 21st-Century Capitalism, ch. 5 (1991), or Jill Esbenshade’s “social contract” whereby “working-class brothers and sisters” commit “to contain their struggle” while employers “commit to share their rising profits” and the government “commit[s] to regulate and mediate the relationship and to provide a crucial safety net,” see Monitoring Sweatshops: Workers, Consumers, and the Global Apparel Industry 13 (2004) (citing Reich). Through the lens of social contract theory, we can see how the privately ordered, contractual structure of a large, complex, and far-reaching supply chain, often involving thousands of people directly or indirectly, takes on the kind of organizational functions of a social contract in order to achieve mutually beneficial cooperative relationships. At the same time, this lens brings into focus some of the moral aspects of contracting, illuminating central and ancient ideas about law and its functions and goals, obligations with their implications and imperfections, and lawyers with their multiple duties and hopes.
Frequently this lawyerly work is technical and obscure, but sometimes, tragically, it blares from the front page. At least since the sweatshop scandals of the 1990s, the problem has flared into Western consciousness every few years, sometimes because of human trafficking, modern slavery, or child labor, and more recently because of catastrophic factory fires and building collapses. Many recall when Tazreen Fashions, a garment factory in Dhaka, Bangladesh, caught fire and killed 112 people, with many more seriously injured. The factory had employed about 1500 workers and produced clothes for retailers such as Walmart and Sears. The building had been found in violation of safety standards, including fire exits.4See, e.g., Steve Henn, Factory Audits and Safety Don’t Always Go Hand in Hand, NPR (May 1, 2013, 10:26 AM), http://www.npr.org/2013/05/01/180103898/foreign-factory-audits-profitable-but-flawed-business; Matt Stiles, Documents: Wal-Mart Auditors Inspect Bangladesh Factory, Find Safety Flaws, NPR (Apr. 30, 2013, 6:48 PM), http://www.npr.org/2013/04/30/180123158/documents-wal-mart-auditors-inspect-bangladeshi-factory-find-safety-flaws. The effectiveness of monitoring and audit schemes is beyond the scope of this Article, but those issues are certainly relevant. For a perspective on the issue, consider Esbenshade, supra note 3, including the literature review in chapter 6. For another, more recent, perspective, see Richard M. Locke, The Promise and Limits of Private Power: Promoting Labor Standards in a Global Economy 35–39 (2013). A few months later, another Dhaka factory collapsed, resulting in the deaths of 1129 people. The collapse occurred just one day after inspection teams had discovered structural flaws in the building. Some businesses in the building had closed because of the unsafe conditions, but others ordered their employees to work, where they were crushed to death.5Julfikar Ali Manik & Jim Yardley, Building Collapse in Bangladesh Leaves Scores Dead, N.Y. Times (Apr. 24, 2013), http://www.nytimes.com/2013/04/25/world/asia/bangladesh-building-collapse.html. There have been many other disasters, not only in Bangladesh, killing and maiming workers.6See infra note 36 and accompanying text. There will be more.
This project is motivated by two crucial ideas: horrifying things happen in international supply chains too often, and lawyers want—and are able—to help. Business lawyers, because they are close to the companies and contracts that animate the supply chain, are uniquely positioned to achieve progress.7See generally E. Christopher Johnson, Jr., Business Lawyers Are in a Unique Position to Help Their Clients Identify Supply-Chain Risks Involving Labor Trafficking and Child Labor, 70 Bus. Law. 1083 (2015) (noting that business lawyers can help their clients identify supply chain risks). The MCCs are designed to help lawyers in this work—the technical aspects of which are unusually difficult—and to provide a clear value proposition to companies to persuade them to adopt ameliorative policies. The goal is to implement policies that are legally effective and operationally likely to protect the human rights of workers.
The MCCs are simultaneously ambitious and modest. Their ambition is to have a real effect for real people. The basis for this hope is the ability of contracts to allow planning, promising, verification, and remediation. The customary place of contracts in the legal and business worlds grounds this hope: contracts are taken seriously; they are used in management, operations, and manufacturing as well as in the legal world; and their function and efficacy in the legal world gives them more force elsewhere.
At the same time, the MCCs are purely legal: they are legalese. Most importantly, they do not take on the substantive obligations that are of the most interest. For example, they do not say how old workers need to be (at what age is child labor objectionable?), how many fire exits are required, or from where materials must be sourced. This minimalist strategy is purposeful though controversial. Primarily, it is practical. Standards will necessarily vary by industry. Apparel manufacturers will care about cotton sourcing, while electronics companies will have no interest in cotton. Just as importantly, wide consensus has so far proved impossible.8Child labor is illustrative. At what age is labor objectionable? Many children work; many parents and societies view this work as important to the moral and social formation of children. Work by very young children who should be in school may be highly objectionable; a seventeen-year-old child who works on the family farm during the summer when school is not in session may not be objectionable. Where lines are to be drawn, and who should draw them, is the subject of considerable debate, even within the United States. See, e.g., Andrew Van Dam, 452 Children Died on the Job in the U.S. Between 2003 and 2016, Wash. Post (Dec. 20, 2018), https://www.washingtonpost .com/business/2018/12/20/child-labor-deaths-us-twenty-first-century (“Child labor exists in the United States in the 21st century. It’s legal and widespread . . . .”). The variation is likely much wider internationally. But particular parties, or even industries, can reach some agreement. These clauses increase the probability that such an agreement will be legally binding and operationally likely. That is the primary goal.
Much work has been done already, and it has been crucial, groundbreaking work. The UN Guiding Principles are perhaps best known,9U.N. Office of the High Commissioner, Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework, U.N. Doc. HR/PUB/11/04 (Mar. 21, 2011), http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf. For recent guidance on how companies can use them, with particular emphasis on the guidance documents from the International Bar Association, see John F. Sherman, III, Wise Counselling on Global Supply Chains: The IBA Practical Guide on Business and Human Rights for Business Lawyers, Bus. & Hum. Rts. Rev. 22 (2017). Business and human rights is an entire field of study, and no effort is made here to review or cite even the leading literature in the field. These notes simply highlight some of the key contributions, like the U.N. Guiding Principles, and a few articles discussing them. The cited sources should help lead interested readers into the vastness of the literature. and they have shown a way forward. There are many other efforts, including other principles and policies10See, e.g., ABA Model Business and Supplier Policies on Labor Trafficking and Child Labor, ABA (Jan. 9, 2019), http://www.americanbar.org/groups/business_law/initiatives_awards/child_labor. See generally Johnson, supra note 7. as well as legislative and regulatory attempts primarily aimed at human trafficking and conflict minerals.11Consider, for example, Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), Pub. L. No. 114-125, 130 Stat. 122 (2016); Trafficking Victims Protection Act of 2000, 22 U.S.C. §§ 7101–7112 (2012); see also 18 U.S.C. §§ 1589–1591 (2012); Trafficking Victims Protection Reauthorization Act of 2013 (TVPRA) (Title XII of the Violence Against Women Reauthorization Act of 2013, Pub. L. No. 113-4, 127 Stat. 54 (2013)); Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010), § 1502 (conflict minerals); California’s Transparency in Supply Chain Act of 2012 (TSCA), Cal. Civ. Code § 1714.43 (2012); FAR §§ 52.222-50–59 (2017); Modern Slavery Act 2015, c. 30 (UK); the French Corporate Duty of Vigilance Law, Loi 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre [Law 2017-399 of March 27, 2017 on the duty of vigilance of parent companies and contractors], Journal Officiel de la République Française [J.O.], Mar. 28, 2017; Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as Regards Disclosure of Non-Financial and Diversity Information by Certain Large Undertakings and Groups, 2014 O.J. (L 330) 1. For more on European and Australian efforts, see generally Davide Casale, Joint Responsibility of Enterprises for the Health and Safety of Their Contractors’ Workers: Recent Trends in Italian Law, 36 Comp. Lab. L. & Pol’y J. 131 (2014); Paul Harpur & Philip James, The Shift in Regulatory Focus from Employment to Work Relationships: Critiquing Reforms to Australian and U.K. Occupational Safety and Health Laws, 36 Comp. Lab. L. & Pol’y J. 111 (2014);Claudia Schubert, The Case of AFOA v. Port of Seattle: A German Point of View, 36 Comp. Lab. L. & Pol’y J. 149 (2014); Louise Vytopil, Contractual Control and Labour-Related CSR Norms in the Supply Chain: Dutch Best Practices, 8 Utrecht L. Rev. 155 (2012). These efforts involve not only countless trade-offs, but they are riven by a complex of geopolitical and economic interests that can hamper their effectiveness. For these reasons, many of the legislative solutions are narrowly limited, and the NGO and soft law projects that publish principles for companies to follow not only face similar pressures to compromise but are often hortatory, aspirational, or vague. Between the work of the United Nations (UN), quangos, nongovernmental organizations (NGOs), legislatures, and regulators, the rules and tools can seem bewildering, if not overwhelming, at least to an outsider.12For a collection, see Radu Mares, The Limits of Supply Chain Responsibility: A Critical Analysis of Corporate Responsibility Instruments, 79 Nordic J. Int’l L. 193 (2010), but the list is not complete. One additional entry, for example, from Amnesty International, is the Human Rights Principles for Companies, ACT 70/01/98 (1998), https://www.amnesty.org/download/Documents/148000/act700011998en.pdf.
Some of the most direct and effective intervention can come from companies themselves, particularly the Western buyers at the top of the supply chain. They see this, and their energies have been extensive and generally fall into one or more of three categories. Most prominent has been the adoption of policies, perhaps based on the UN Guiding Principles or one of the other projects, that the company posts on its website. These policies are sometimes aspirational and sometimes reflect a corporate commitment; the distinction, of course, can be legally decisive.13Order Denying Defendant’s Motion to Dismiss,Nat’l Consumers League v. Wal-Mart Stores, Inc., No. 2015 CA 007731 B, 2016 WL 4080541, at 11 (D.C. Super. Ct. July 22, 2016) (qualifying language such as “expect,” “goal,” and “ask” shows an aspiration rather than a promise or commitment). Sometimes the commitment extends to requiring suppliers and others in the supply chain to agree to adhere to the corporate “code of conduct” or “ethical business practices.”14See id. at 2–4, 11; see also Vendor Code of Conduct, Abercrombie & Fitch, http://corporate.abercrombie.com/af-cares/sustainability/social/vendor-code-of-conduct. Often such agreements may be legally required, as when the buyer is subject to the Federal Acquisition Regulation.15FAR §§ 52.222-50–59. See generally Lyndsey Conrad et al., Mandated Corporate Responsibility for Human Trafficking: New Federal Acquisition Regulation Steps up Supply Chain Accountability, 60 St. Louis U. L.J. 73, 73–74, 87 (2015). According to some assessments, the codes of conduct are ineffective, or at least insufficiently effective, rendering the companies that adopt them out of compliance with public law mandates. See Debra Cohen Maryanov, Comment, Sweatshop Liability: Corporate Codes of Conduct and the Governance of Labor Standards in the International Supply Chain, 14 Lewis & Clark L. Rev. 397 (2010). And sometimes the commitment involves a complex of other parties, as where a Western buyer joins a standard-setting organization (like the Fair Labor Association or the Worker Rights Consortium) and requires its suppliers (so-called “first tier suppliers” or colloquially “first-tiers”) and their suppliers and subcontractors to join the same organization. Membership in the organization entails a commitment to abide by the organization’s principles (e.g., to protect worker health and safety and to guard against forced labor) and an agreement to be audited by that organization or its agents.16See generally Martin Davies & David V. Snyder, International Transactions in Goods: Global Sales in Comparative Context 236–43 (2014). But these details can await further development below.
The point for now is more basic. Behind the MCCs are two stories, a seemingly straightforward effort and a wishfully simple hope. One story is notorious: the tragically repeated human catastrophes that haunt international supply chains. The other story is technocratic, revolving around bar association activities and corporate organization. The MCCs that resulted from all of this are an effort to prevent more human loss, to exercise corporate power in a morally conscious way, and to be as hardheaded and as practical as any good business lawyer.
A critical part of practicality is an eye to what it takes to get a deal closed. Sometimes closing a deal means skipping the hard part. Such a move is risky, but neither businesses nor business lawyers can live in a world without risk. A term sheet for a business deal will leave much for later development and negotiation; the same is true for letters of intent and the like. Complex business arrangements cannot close every hole or forecast every possibility. All contracts are necessarily incomplete.17E.g., Richard R.W. Brooks, The Efficient Performance Hypothesis, 116 Yale L.J. 568, 587 n.43 (2006) (“[C]ontracts are necessarily incomplete, even when written by sophisticated parties.”). Closing a deal will sometimes mean leaving more holes, or larger ones, than either party desires. But agreement beforehand may be too difficult, too costly, or even impossible, and sometimes parties prefer to leave the hole and close the deal.
That has been part of the strategy of the MCCs, and there are two obvious roads that have not (yet) been taken. Most obviously, as mentioned earlier, the MCCs do not set the human rights standards that will apply to suppliers. Similarly, they do not set standards for buyers (even though many would argue that buyers’ demands for low cost and quick production are a significant cause of the problems). The reasons have been sketched already and will receive fuller attention below. In short, the MCCs do not attempt to solve all of the problems in supply chains; their aim is simply to be part of a necessarily multifaceted solution.
Less obviously and perhaps more interestingly, the MCCs do not seek to set up an elaborate structure of governance for the supply chain relationship. Such structures have generated serious interest from political scientists and political theorists, and practically speaking, they may be the most promising road to greater success in making improvements on the ground. Such efforts are much more ambitious than the current version of the MCCs, but if there were to be an effort for Model Contract Clauses 2.0, this road deserves further exploration. These issues receive more attention below.18See infra Section III.B.
I. The Problems to be Addressed by the Model Contract Clauses
Identifying the problems to be addressed is often a productive starting point. There are several, and they will be described shortly. Since the MCCs were drafted with a lawyerly, problem-solving, fact-based attitude, sketching a paradigmatic supply chain setup will be a useful first step. Then the problems can be more easily identified, separated, and understood.
A. A Supply Chain Paradigm for Human Rights Protections
This paradigm is simplified and stylized, as paradigms necessarily are. It is based on some research19Perhaps the leading study on protecting workers in international supply chains is byLocke, supra note 4. Numerous other works are cited elsewhere in this Article. Information can also be gathered from case studies such as Christopher A. Bartlett et al., IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor (B), Harv. Bus. Sch., No. 9-906-415 (rev. Nov. 14, 2006); Dana Brown & Jette Steen Knudsen, Trip Trap: Managing Certification in the Global Supply Chain, Richard Ivey Sch. of Bus. Found., No. W14528 (Oct. 24, 2014); Monali Malvankar, Nokia India: Battery Recall Logistics, Richard Ivey Sch. of Bus. Found., No. W11082 (May 4, 2011). But these are only tastes: the management and study of supply chains is its own discipline—universities offer degrees in the subject—and this Article cannot attempt a canvas of the literature. Aside from the many works ofLocke, interested readers will find that Dara O’Rourke and Abraham Ringer, infra note 26, as well as Gary Gereffi (most recently his Global Value Chains and Development: Redefining the Contours of 21st Century Capitalism(2018)) offer entry into the literature. Readers interested in more theoretical considerations might start with IGLP Law & Global Production Working Group, The Role of Law in Global Value Chains: A Research Manifesto, 4 London Rev. Int’l L. 57 (2016) [hereinafter Manifesto]; Klaas Hendrik Eller, Private Governance of Global Value Chains from Within: Lessons from and for Transnational Law, 8 Transnat’l Legal Theory 296 (2017), http://dx.doi.org/10.1080/20414005.2017.1307310. Both offer citations to recent literature and the former also surveys current research projects. and some experience, but I cannot claim that it is an empirically based model, which would have to be the subject of a different paper. If empirical investigation reveals significantly different paradigms, then some of the thinking may need to be revisited. In essence, the purpose of this section is to explain the assumptions so that as assumptions are questioned, relaxed or expanded, the strategies and arguments can be refined or revised.
Here, then, is the paradigm. Western Company20This name is chosen because it is descriptive. The hypothetical company in the paradigm has no relation to The Western Company, a western-wear retailer in Denver, or to any other real company. Some literature might prefer to call it the Northern Company (as opposed to the workers in the Global South—not to be confused with the southern United States). sells goods in consumer markets in the developed world, primarily in the United States but also in Europe and elsewhere. Western Company is large and well known, and its brand is valuable. Western Company is organized so that it has a purchasing department, an operations department, a product development department, and a marketing department. These are the business departments. It also has a general counsel’s office; an office devoted to social responsibility (CSR office),21I will call it the CSR office, although that is an unlikely name for it. which may have titles and responsibilities related to environmental sustainability, diversity, ethics, and the like; as well as other departments. Contracts, compliance, and legal policies are the province of the general counsel’s office. The contracts are drafted and reviewed by the general counsel’s office. The business departments develop products, decide production and marketing timeframes, acceptable costs of production and sales, and they consider who can make the products. Much of the contract negotiation is done by the business departments, often without much involvement from the general counsel’s office, which will only be involved in large negotiations and which will briefly review the resulting contract for compliance with the law and company policies. Those policies may be related to labor practices, anticorruption, transparency, quality control, product reliability, and the like. The CSR office may be involved in assuring that the chosen contracting counterparty will comply with, and does not raise any red flags with respect to, Western Company’s policies on responsible business practices.
The counterparty in the contract that Western Company signs is First Tier Supplier (FTS). FTS may make some components of Western Company products itself, but subcontractors of FTS will perform much if not all of the manufacturing. At a minimum, then, the supply chain will consist of Western Company at the top, FTS in the middle, and subcontractors at the bottom. Quite possibly there will be more layers, but this description will suffice for the paradigm. To engage FTS, Western Company will sometimes use an agent or broker.22See, e.g., Filanto S.p.A. v. Chilewich Int’l Corp., 789 F. Supp. 1229, 1230 (S.D.N.Y. 1992) (involving a contract between a New York firm and an Italian manufacturer secured through the firm’s foreign agent in the United Kingdom). Sometimes, though, an FTS will itself function like an agent or broker. In these situations the primary job for FTS is to find others to do the work. FTS in such cases, in purely economic terms, may simply take a cut, i.e., a percentage of the sales, although the formal legal and accounting arrangements may call for a sale from subcontractors to FTS and a further sale by FTS to Western Company. Much if not all of the manufacturing will take place in developing countries distantly removed from the principal place of business and primary markets of Western Company.
Once the contract is signed, there are two salient pressures for the purposes of this Article: keeping costs low and production fast. The consumer market moves quickly, not only in the most obvious industries like fashion, which is characterized by its constantly changing styles, but in other industries like sporting goods and electronics. Partly these pressures are tied to fashions (even outside the fashion industry) and changing consumer tastes and demands, but much of it is purposeful revenue generation: increasing revenue requires increasing sales, and increasing sales is aided by introducing new products to sell. Put simply, a smartphone company is anxious for everyone to want a new model as soon as possible, even if the smartphone everyone has works perfectly well. And most obviously, lowering costs of production increases profits, and lowering labor costs is a key component of this strategy. The pressure on the supply chain that comes from cost control is obvious. What may be less apparent, but also important, are the problems that come from time pressure. Bringing new products to market quickly can easily lead to excessive work hours, exploitation of transient workers, or cheating on supply chain commitments.23See Locke, supra note 4, ch. 6.
Operational aspects of the paradigm are also relevant. There are workers on the factory floor. They will receive instructions either orally or in writing from a supervisor. They need to be told, in other words, what to do: what to sew and how many; how many containers to fill and of what sizes; in short, how to fulfill the contract for the production of goods. The supervisors will receive this information in writing (electronically or perhaps on paper) to pass along to the workers. The supervisors will also need this information to manage scheduling, production timing, quality control, and countless other manufacturing tasks. In the paradigm, much of this information appears not in the main body of the contract—the legalese—but in a schedule attached to a contract, or a purchase order issued under a master agreement—for example, a master vendor agreement—or the like. Operations personnel will not be looking at representations, warranties, and merger clauses; they will be looking at a schedule or appendix that is only referred to in the legalese. Other operationally important matters are also stated elsewhere, like the steps that Western Company expects FTS and subcontractors to take to protect Western Company’s intellectual property. These schedules or appendixes or purchase orders, in short, tell the production staff at FTS or its subcontractors what to do, perhaps how to do it, and also what will be checked or monitored or audited (e.g., the production run will be monitored for quantity and quality; IP safeguards may be checked or audited; and so on).
Moving away from operations and back to corporate headquarters, the paradigm includes the realities of corporate politics. For the most part, the company is managed from the C Suite, senior or executive vice presidents for operations, for marketing, and so on, and is run by the people who report directly to the people in the C Suite offices. The general counsel sits in the C Suite but does not have quite as much to do with the core business of the company—developing products, producing them, selling them. Nevertheless, the general counsel and the CEO sit on the board of directors or are at least present at the board meetings.
The chief officer in charge of CSR, like the general counsel, may have a hand in various operational aspects of the company, particularly relating to labor, due diligence, reporting, and marketing. Like the general counsel, the CSR chief is a bit of an afterthought for the business people—not in the literal sense of being sought out afterwards, although that is often true with respect to the general counsel—but is viewed as an extra step in the process. CSR is a supernumerary department or an extra person who must be permitted on the team.
The overall performance of the company and the executive officers are overseen by the board, and large matters of policy are the province of the board. The board does little or nothing that is not at the behest of the CEO, however. The board may adopt a policy, for instance, but it may or may not be put into everyday practice. What happens in the operations of the company is up to management, not the board.
In this paradigm there is another set of players: NGOs who will mount an outcry and advocate for negative consequences for Western Company if it misbehaves. The NGOs will do a bit of monitoring and will “name and shame” companies for misbehavior; they may also try to help companies build new capabilities for protecting workers. The NGO outcry will be at its most strident not when monitoring reveals lapses but when something terrible happens. The NGOs will also launch lawsuits against offending companies24E.g., Order Denying Defendant’s Motion to Dismiss, Nat’l Consumers League v. Wal-Mart Stores, Inc., No. 2015 CA 007731 B, 2016 WL 4080541 (D.C. Super. Ct. July 22, 2016). and will seek negative publicity against them. The NGOs will also advocate for Western Company to adopt different practices and will issue reports on which companies follow preferred policies, which do not, and which companies are the best and worst.25For further information on the empirical and theoretical bases for the part of the paradigm described in this paragraph, see generally The Politics of Leverage in International Relations: Name, Shame, and Sanction 32-102 (H. Richard Friman ed., 2015), particularly the chapters on Revisiting Human Rights Naming and Shaming. See e.g., Esbenshade, supra note 3, at 10–12, 52–58 (on the role of civil society and NGOs in monitoring sweatshops and exerting pressure); Locke, supra note 4, ch. 4; Emilie M. Hafner-Burton, Sticks and Stones: Naming and Shaming the Human Rights Enforcement Problem, 62 Int’l Org. 689 (2008). The preferred policies will vary depending on the NGO.
The paradigm just described underlies the thinking in this Article, but there are variations. In some, the link to the consumer market may be weak, invisible, or nonexistent. This will have several implications. First, there is not likely to be nearly the same level of consumer consternation and market effect if there turn out to be problems with, say, the steel production for oceangoing cargo vessels, or the manufacturing of rail presses used by heavy-truck manufacturers, and so on. Similarly, the NGOs may have trouble gaining as much traction in their efforts, and either for that reason or others may have less interest in devoting energy and money into monitoring, reporting, and the like. Also, whatever effect consumer demand has on the production of untainted goods may play differently in the market for rail presses than in the market for chocolate.26The wording here is deliberate. There is some indication that consumer demand for untainted goods will help clean up supply chains. See, e.g., Laura Enax et al., Effects of Social Sustainability Signaling on Neural Valuation Signals and Taste-Experience of Food Products, 9 Frontiers in Behav. Neuroscience 1 (2015), https://www.frontier sin.org/articles/10.3389/fnbeh.2015.00247/full (chocolate experiment); Jens Hainmueller et al., Consumer Demand for Fair Trade: Evidence from a Multistore Field Experiment, 97 Rev. Econ. & Stat. 242 (2015) (coffee experiment); Howard Kimeldorf et al., Consumers with a Conscience: Will They Pay More?, 5 Contexts 24 (2006) (sock study). Even these cautiously optimistic studies, however, report results that must be qualified by limits on how much more consumers are willing to spend and particularly by consumers’ limited capacity to take in information, as was made clear by the sock study. See Kimeldorf et al., supra, at 26–28. Other studies are even less optimistic. Adam S. Chilton & Galit A. Sarfaty, The Limitations of Supply Chain Disclosure Regimes, 53 Stan. J. Int’l L. 1 (2017). For an assessment on the environmental side, see Dara O’Rourke & Abraham Ringer, The Impact of Sustainability Information on Consumer Decision Making, 20 J. Indus. Ecology 882 (2015) (arguing that “providing more or better information on sustainability issues will likely have limited impact on changing mainstream consumer behavior unless it is designed to connect into existing decision-making processes”), and more generally, Dara O’Rourke, Shopping for Good (2012).
Regardless of the variation in the paradigm—whether it involves a consumer market or not—one assumption made here is that the leadership of Western Company wants to “do the right thing.” Operating in the real world as it does, Western Company faces constraints on achieving the ideal. The executives know that they will not reach the ideal and that their version of the “right thing” might differ from the NGOs’. But they would like to do their best, and they are willing to incur costs to do so, with the understanding that their best also includes considering the financial health of the company, which means taking into account revenues and time-to-market measures, costs, profits, shareholders, domestic employees, and others. It also means taking into account the reputation of the company, which—particularly in the consumer-market version of the paradigm—aligns with their desire to do the right thing.
This alignment is not perfect: protecting the reputation of the company, keeping it compliant with a variety of laws and regulations that apply differently and variously around Western’s global operations, and doing the right thing will induce a number of the decisionmakers to assign these tasks to particular departments, the key one of which is the CSR department, and another one of which is the general counsel’s office. This division of labor allows some executives and departments to leave human rights concerns to others. Moreover, reputation can be protected through marketing efforts in addition to and to some degree instead of substantive remediation. The NGOs and some consumers are often quite worried about this “whitewashing” phenomenon.27Medea Benjamin, Foreword to Archon Fung et al., Can We Put an End to Sweatshops? ix (2001) (“[T]he real battle was over how to ensure that the company’s code was not just a lofty document on a piece of paper but something that had meaning on the ground.”). Salminen argues that even enforceable contractual liability against Western buyers allows “whitewashing.” Jaakko Salminen, The Accord on Fire and Building Safety in Bangladesh: A New Paradigm for Limiting Buyers’ Liability in Global Supply Chains?, 66 Am. J. Comp. L. 411, 412 (2018). I am keenly aware that similar arguments may be leveled against the MCCs. See Sarah Dadush, Contracting for Human Rights: Looking to Version 2.0 of the ABA Model Contract Clauses, 68 Am. U. L. Rev. 1519, 1534–45 (2019). They will be worried that the attractive, glossy efforts of the marketing department will sufficiently obscure supply chain problems so that Western Company will ignore the issue.28Concerns are not limited to marketing. Esbenshade, supra note 3, at 11, argues that even monitoring production and auditing supply chains are methods used by companies “primarily to avoid bad publicity and to address consumer concerns.” The company, in short, may enjoy something close to the magical invisibility that enables the company to do wrong with impunity.29This problem is one impetus for the social contract: Plato suggests the idea (in Glaucon’s argument) that a person will prefer to do injustice as long as he will not be punished, as would be the case if he had a magical ring that could make him invisible while engaging in wrongdoing. In this sense, the fear is that marketing and public relations give Western Company something like this magical ring. In short, PR is the corporate ring of Gyges. See Plato, The Republicbk. II, 359a–360d, in The Republic of Plato 37–38 (Allan Bloom trans., 2d ed. 1968). (Current readers can conceive of the ring of Gyges as being much the same as Harry Potter’s cloak of invisibility). The conventional agreement to law and contracts to achieve justice is a compromise to avoid the undesirable results of accommodating everyone’s presumed desire to do as much injustice as possible. These matters are taken up infra in Section II.A.
Finally, and crucially, the paradigm assumes that regulation is increasing, but that it remains primarily if not exclusively limited to regimes of disclosure, due diligence, or both. Widespread international imposition of liability for injuries in the supply chain—whether such a regime is desirable or not—is presumed to be highly unlikely in the foreseeable future.30Imposition of supply chain liability remains quite limited. The law in France, see supra note 11, is perhaps the most prominent, although perhaps not the most ambitious. Consider the project of Bair, Jackson & Rogers mentioned in Manifesto, supra note 19, at 76.
B. Making Human Rights Protections Legally Effective and Operationally Likely
With the paradigms in mind, the problems emerge. There are several. First and most important, workers are suffering and sometimes dying as they work to produce the goods so enjoyed and so expected by the prosperous. On this there is general agreement, but the agreement ends when the conversation becomes more specific, and this is the second problem: consensus on meaningful standards is difficult or impossible to achieve. One of the chief problems for lawyers to solve is this lack of consensus; the law is no stranger to moving forward despite a lack of complete agreement.31“[C]ontracts are necessarily incomplete.” Brooks, supra note 17, at 587 n.43. Even during the most formalistic period, although it required agreement on the same thing (consensus ad idem), e.g., Raffles v. Wichelhaus (1864), 159 Eng. Rep. 375, 375–76 (Peerless Case), the common law did not insist on agreement on every possible detail, which would have been impossible in any case. Further, what agreement there is may be worthwhile even though it is incompletely theorized and even though the parties’ reasons may in fact diverge. See generally Cass R. Sunstein, Commentary, Incompletely Theorized Agreements, 108 Harv. L. Rev. 1733, 1737–38 (1995). Another problem may be a lack of consensus within a particular corporate context, but the issue may be more a matter of organization and emphasis than any active disagreement. Still, the corporate politics may need some careful navigation—hence the attention to management organization in the paradigm. That work will include an eye to operations so that corporate policies are not merely nice window dressing on the corporate website but have some chance at being put into practice (“operationalized,” in the parlance).
Additionally, and not least, the clauses necessary to make the protections legally effective are extremely difficult to draft from a doctrinal standpoint. This difficulty results mainly from the focus of commercial law on the goods to be produced rather than the conditions of production.32This issue explains the extensive attention to representations and warranties and their relation to the goods themselves in the Model Contract Clauses, supra note 2, ¶¶ 1–2. Most importantly, breach of the obligations with respect to workers makes the goods themselves nonconforming under the MCCs. See id. ¶¶ 2.2 (rejection of goods), 3.1 (buyer’s revocation of acceptance) & 1099 n.29 (defining nonconforming goods). That focus, in turn, leads to difficulty with respect to remedies33See Jennifer S. Martin’s contribution to this symposium, Private Law Remedies, Human Rights, and Supply Contracts, 68 Am. U. L. Rev. 1781(2019). that are geared to workers’ human rights, health, and safety rather than monetary compensation for defective goods.
In sum, there are multiple problems to be solved: (1) improving the conditions for workers; (2) crafting agreements in the absence of consensus; (3) drafting contractual language despite doctrinal gaps created by a mismatch in focus; (4) finding productive paths through the corporate political landscape; and (5) making corporate policies operational instead of aspirational, and certainly not mere window dressing. Each of these problems is addressed below.
1. Protecting the human rights, health, and safety of workers, and the problem of moral luck
At first it may seem that not much argument would be necessary on this score, but three points are worth making. The first is easiest because it is obvious—too often supply chains are plagued by forced labor, child labor, or unsafe working conditions. Sometimes the situation reaches sufficiently horrific levels to draw headlines in Western media. The second point is that current efforts are insufficiently effective. The problem is partly due to measures being ignored too often, either because some companies do not have them or because other companies have them but do too little to make them effective. And interestingly, but perhaps controversially, there is an argument (advanced most forcefully by Provost Richard Locke) that the kind of measures represented by the MCCs are doomed to tragic insufficiency because private efforts cannot achieve the goal without public legal reinforcement.34Locke, supra note 4, at 17 (authoritative rulemaking, as from a state, required to solve collective action problems), 18 (“‘[E]nabling rights’ . . . can be brought to life” only by law), passim.
First, the worst (but easiest) part: this Article began with the factory fire that killed over 100 and the building collapse that killed over 1000, just a few years ago and within easy memory.35See supra notes 4–5 and accompanying text. A sizeable literature documents and considers abuses and tragedies in domestic and international supply chains.36See, e.g., Globalization from Below: The World’s Other Economy(Gordon Mathews et al. eds., 2012); Laura Hapke, Sweatshop: The History of an American Idea (2004); Robert J.S. Ross, Slaves to Fashion: Poverty and Abuse in the New Sweatshops (2004); Fung et al.,supra note 27. Additional examples of recent allegations include Annie Kelly, Nestlé Admits Slavery in Thailand While Fighting Child Labour Lawsuit in Ivory Coast, Guardian (Feb. 1, 2016), https://www.theguardian.com/ sustainable-business/2016/feb/01/nestle-slavery-thailand-fighting-child-labour-lawsuit-ivory-coast (presenting Nestlé’s instances of forced labor within its supply chains); Daniela Penha, Slave Labor Found at Starbucks-Certified Brazil Coffee Plantation, Mongabay (Sept. 18, 2018), https://news.mongabay.com/2018/09/slave-labor-found-at-starbucks-certified-brazil-coffee-plantation(finding slave labor in a Starbucks coffee bean supplier); Michael Sainato, Accidents at Amazon: Workers Left to Suffer After Warehouse Injuries, Guardian (July 18, 2018, 6:00 AM), https://www.theguardian.com/technology/2018/jul/30/accidents-at-amazon-workers-left-to-suffer-after-warehouse-injuries (revealing numerous instances of workplace injuries in Amazon’s factories); Martje Theuws & Pauline Overeem, Flawed Fabrics: The Abuse of Girls and Women Workers in the South Indian Textile Industry, SOMO Ctr. Res. Multinational Corps. 17–30 (2014), http://www.indianet.nl/pdf/FlawedFabrics.pdf (reporting on women’s labor conditions in five spinning mills: Best Cotton Mills, Jeyavishnu Spintex, Premier Mills, Sulochana Cotton Spinning Mills, and Super Spinning Mills). The good news on the bad news is that it makes the news, and thus makes the importance of the issue clear. In the terms of cognitive biases and behavioral economics, the information becomes more “available.”37E.g., Daniel Kahneman, Thinking, Fast and Slow 129–30 (2011). In this sense it is too bad that problems do not make the front page more often (although of course no one wishes for any more tragedies).
Steps taken so far, then, are inadequate. The problem does not arise for absence of effort; perhaps there is not enough effort, or perhaps the efforts are insufficiently effective. One of the most salient points of the factory fire and building collapse was that the particular issues in the buildings were not unknown. Nor was the knowledge merely general, along the lines of, “Oh, yes, there are always issues in those places.” Recent inspections had discovered the problems in the particular places where the deaths occurred, and the inspections had found the specific problems—a lack of fire exits in the case of the factory fire and structural flaws in the case of the building collapse.38See supra notes 4–5 and accompanying text. Again, this seems like good news and bad news: the problem of knowledge has been solved, at least in these cases. The problem of remediation, however, has not.
Provost Locke’s work argues that a complementary public-private structure will in any case be necessary to achieve optimal labor protections.39Locke, supra note 4, at 12–22 & ch. 7; see also Thomas A. Hemphill & George O. White III, The World Economic Forum and Nike: Emerging ‘Shared Responsibility’ and Institutional Control Models for Achieving a Socially Responsible Global Supply Chain?, 1 Bus. & Hum. Rts. J. 307, 308 (2016). The point is intuitive: if public and private players work in complementary ways on the same problem, presumably the solving power is at its greatest.40This seems to be much the same point as Justice Jackson’s famous concurrence in Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring) (federal power is at its greatest when the President and Congress act in concert, and less when they do not, particularly when they act in opposition). Some scenarios might be imagined where the public and private actors work counterproductively, but this seems unlikely, and Provost Locke’s research suggests that the intuition is borne out empirically. In the electronics industry, where private efforts are combined with public ones, the results are better.41Locke, supra note 4, ch. 7. Further, this may not be simply a matter of better results stemming from more and varied institutional players working in the same direction. Crucial to understanding Provost Locke’s argument is the idea that only an authoritative rulemaker can resolve collective action problems and conflicts of interest.42E.g., id. at 12, 17.
This conclusion seems well worth noticing even if at first there is little that the business lawyer or the supply contract can do about it. Although a private effort alone is disparaged as second best,43Id. at 9. the claim does not seem to be that private efforts should not be made. The argument made by Provost Locke, many NGOs, and labor advocates is simply that public efforts are also necessary and should not be discouraged. Indeed, many NGOs have devoted themselves to advocating for private supply chain management to promote labor rights, human rights, and the like, both in the traditional manner contemplated by the MCCs and in newer, “capability building” initiatives.44See Margaret E. Keck & Kathryn Sikkink, Activists Beyond Borders: Advocacy Networks in International Politics (1998); Gay W. Seidman, Beyond the Boycott: Labor Rights, Human Rights, and Transnational Activism (2007); Locke, supra note 4, at 11, ch. 4. Assuming this argument is correct—that private efforts alone will achieve less human rights protections than combined private and public ones—then only so much can be hoped for. Still, second best is better than nothing, and may be quite a lot better than nothing, particularly once the goals are considered clearly.
Moreover, remember that Provost Locke, other labor-oriented scholars, the International Labour Organisation, and many NGOs share goals (like unionization) that companies like Western Company may not fully support.45Esbenshade, supra note 3, at 12 (“[P]romote workers’ organizing . . . .”); Locke, supra note 4, at 18, 21; Ross, supra note 36, ch. 9. This Article does not mean to argue against unionization, but it does recognize the issue as contested in an international context. For instance, unionization rights and collective bargaining are recognized and protected by the National Labor Relations Act of 1935, 29 U.S.C. §§ 151–169. Id. at 78. Internationally, the situation is less clear. Unionization is protected by article 23 of the Universal Declaration of Human Rights, but that is a nonbinding instrument. And while the right is also protected by article 8 of the International Covenant on Economic, Social and Cultural Rights, the United States has not ratified that instrument. Further, Western Company has a number of other goals that must be met. So two observations are necessary. First, strategies like those in the MCCs can only achieve so much, but they still seem worth pursuing. Second, these criticisms point to next steps that may be more productive. They may lead, in other words, to Model Contract Clauses 2.0.
There is a different problem with respect to worker health and safety. Leaving aside the more controversial issues (meaning that consensus will be difficult or impossible to achieve) like unionization, the issue of worker health and safety often seems to get less attention—especially compared to forced labor—despite its obvious importance. The evil of forced labor should not be minimized, but surely it is at least as bad for workers to be crushed to death in a building collapse or to be immolated in a factory fire. Aside from that horrific point, certainly it does not escape notice that when such events occur, they make front page news and lead to the outcries and boycotts that could (in theory) decimate Western Company’s bottom line. So why is it that worker health and safety seem to get slighted in comparison to forced labor policies?
At first this (apparent) phenomenon is puzzling, and observers of Western Company’s supply chain management practices may question whether the observation is correct. But there are reasons. First, in terms of the legal and compliance practice within Western Company, forced labor, human trafficking, and child labor are the subject of numerous laws and regulations that bind Western Company directly.46See, e.g., Trafficking Victims Protection Act of 2000, 22 U.S.C. §§ 7101–7112 (2012); see also 18 U.S.C. §§ 1589–1592 (2012) (criminal sanctions for forced labor, trafficking, and peonage); Trafficking Victims Protection Reauthorization Act of 2013 (TVPRA) (Title XII of the Violence Against Women Reauthorization Act of 2013, Pub. L. No. 113-4, 127 Stat. 54 (2013)). Violations could lead to civil47The first private cause of action under the TVPRA was settled recently. See Stipulation of Dismissal, Sorihin v. Nguyen, No. 16-5422 (N.D. Cal. Jan. 3, 2018). and potentially criminal liability for Western Company, depending on various detailed facts of what happened and how, as well as the seizure of its products by federal agents.48Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), Pub. L. No. 114-125, 130 Stat. 122 (2016). Even under laws that require disclosure of supply chain practices rather than prohibiting certain practices,49E.g., California Transparency in Supply Chains Act of 2010 (TSCA), Cal. Civ. Code § 1714.43 (West 2010) (effective Jan. 1, 2012). child labor, forced labor, or trafficking could easily result in liability for Western Company itself as it is unlikely to have made any required disclosures about such practices in its supply chain.50See, e.g., id. (outlining retailers’ duty to disclose efforts to eradicate slavery and human trafficking from direct supply chain for tangible goods). Since Western Company is large and has global reach, the laws under which it will find itself in deep trouble are nearly innumerable.51See, e.g., Modern Slavery Act 2015, c. 30 (UK); French Corporate Duty of Vigilance Law, Loi 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre [Law 2017-399 of March 27, 2017 on the duty of vigilence of parent companies and contractors], Journal Officiel de la République Française [J.O.], Mar. 28, 2017; Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as Regards Disclosure of Non-Financial and Diversity Information by Certain Large Undertakings and Groups, 2014 O.J. (L 330) 1. Small wonder that Western Company pays close attention to these matters. Western Company also pays close attention to conflict minerals because of the U.S. Securities and Exchange Commission rule on such matters.52See 17 C.F.R. § 240.13p-1 (2018). Part of the rule was held unconstitutional. See Nat’l Ass’n of Mfrs. v. SEC, 800 F.3d 518, 530 (D.C. Cir. 2015) (invalidating the rule on the grounds that it violated the First Amendment to the extent it required entities to report to the Commission and to state on their websites that any of their products have “not been found to be ‘DRC conflict free’”). Other parts remain in force in at least some sense, Keith F. Higgins, Statement on the Effect of the Recent Court of Appeals Decision on the Conflict Minerals Rule, SEC (Apr. 29, 2014), https://www.sec.gov/news/public-statement/2014-spch042914kfh, although the public statement of Acting Chairman Michael S. Piwowar says that “it is difficult to conceive of a circumstance that would counsel in favor of [the SEC] enforcing” the U.S. conflict minerals rules. Michael S. Piwowar, Statement of Acting Chairman Piwowar on the Court of Appeals Decision on the Conflict Minerals Rule, SEC (Apr. 7, 2017), https://www.sec.gov/news/public-statement/piwowar-statement-court-decision-conflict-minerals-rule. Energy is also focused on what the law of the European Union requires with respect to conflict minerals.53See generally Enrico Partiti & Steffan Van der Velde, Curbing Supply-Chain Human Rights Violations Through Trade and Due Diligence. Possible WTO Concerns Raised by the EU Conflict Minerals Regulation, 51 J.World Trade 1043 (2017) (assessing the EU regulatory strategy for supply chain due diligence obligations and provisions of WTO law regarding minerals regulation). In other words, and entirely predictably, the attention of Western Company is focused on legal compliance requirements that apply directly to it.
While this explains why the general counsel of Western Company is concerned with forced labor, child labor, human trafficking, and to a degree, conflict minerals, the question remains as to why worker health and safety seem to receive less concentrated attention. Perhaps the answer has two parts. First, Western Company is not itself bound by laws relating to worker health and safety. The workers are employees of the subcontractors of FTS, or perhaps FTS itself, but they are not employees of Western Company. Further, they are subject to health and safety laws in a faraway country.54Most often supply chain contracts simply require subcontractors to obey local law. See Locke, supra note 4, at 19. Assuming that there are violations, then, they are violations of laws of a different jurisdiction from Western Company, and those laws apply to different companies (i.e., FTS or subcontractors, but not Western Company). In short, violations of those laws do not subject Western Company to liability, at least not in any obvious way, and certainly they are little threat compared to violations of U.S. laws that apply expressly to Western Company.55For a more detailed and nuanced consideration of potential liability, see Ramona L. Lampley’s contribution to this symposium, Mitigating Risk, Eradicating Slavery, 68 Am. U. L. Rev. 1707 (2019). This is a practical as well as a legal explanation for why worker health and safety may receive less attention at Western Company. Western Company has no compliance obligation itself.
There is another reason too, which is practical and moral rather than practical and legal. Much regulation of worker health and safety requires measures that, with luck, will never be put to use. For instance, adequate and unlocked fire exits are necessary only if there is a fire (to state the matter simply). As long as there is no urgent need to evacuate, ordinary exits are perfectly adequate. In other words, they function like insurance functions: one only “needs” fire insurance if there is a fire. To be sure, not all regulation of worker health and safety works this way: some violations are likely to cause serious and immediate harm (e.g., exposure to dangerous glues or other toxic chemicals), and violating those regulations would be an evil in itself, or malum in seto use the formulation of the criminal law. Something like fire exits, however, is subject to the vagaries of moral luck. As long as there is no fire, everything is fine (sort of), and Western Company has not done anything terrible.
To understand the concept of moral luck better,56For the basic ideas, see generally Thomas Nagel, Mortal Questions ch. 3 (1979); Thomas Nagel, Moral Luck, in Moral Luck 57 (Daniel Statman ed., 1993); Bernard Williams, Moral Luck (1981); Bernard Williams, Moral Luck, in Moral Luck 35 (Daniel Statman ed., 1993); Bernard Williams, Postscript, in Moral Luck 251 (Daniel Statman ed., 1993). For a consideration in legal contexts, see generally John C.P. Goldberg & Benjamin C. Zipursky, Tort Law and Moral Luck, 92 Cornell L. Rev. 1123 (2007); Tony Honoré, Responsibility and Luck: The Moral Basis of Strict Liability, 104 Law Q. Rev. 530 (1988). For a consideration of the ideas in the context of contract law, see Aditi Bagchi, Managing Moral Risk: The Case of Contract, 111 Colum. L. Rev.1878 (2011). consider an example. If I leave the baby in the bath with the water running to fetch a toy downstairs, and then I become distracted while the tub fills, and the baby drowns, I have done something terrible. I have not murdered my child, but I have killed her, and I will bear the moral responsibility for having caused her death by my negligence (at least). On the other hand, if the baby is perfectly fine and is sitting happily in the bathwater when I am struck by my error and run, panic stricken, up the stairs, then I have been careless, but I have not done anything terrible. I have not killed my child. At least so it would seem,57As should now be apparent, how to assess my moral standing with philosophical rigor in these two situations is a problem. Should my moral standing really be so different because I have been lucky or unlucky? In addition to Nagel and the sources just cited, consider, for example, Nicholas Rescher, Moral Luck, in Statman, supra note 56, at 141; Brynmor Browne, A Solution to the Problem of Moral Luck, 42 Phil. Q. 345, 351 (1992); Margaret Urban Walker, Moral Luck and the Virtues of Impure Agency, 22 Metaphilosophy 14 (1991). But there is little if any disagreement that my experience, my understanding of my moral situation, and society’s understanding of it will differ quite markedly between the two situations. and this is often our experience.
To translate this idea and experience to the supply chain context: if Western Company traffics in persons, it is committing evil practices, and the same is arguably true if the trafficking is performed by subcontractors in the supply chain. (The latter situation will receive more attention below, as there are a variety of issues, like remoteness, causation, and knowledge or intent, that make the moral situation less clear.) Trafficking is not subject to moral luck. If Western Company does not provide adequate unlocked fire exits, and there is no need for them as things turn out, the moral situation is less clear because Western Company has been morally lucky. The concept of moral luck is the philosophical equivalent of “no harm, no foul.”
For many reasons, then, Western Company may be less concerned with worker health and safety than with trafficking. Cognitive biases, and particularly the availability of information coupled with an optimism bias, may reinforce this.58See Kahneman, supra note 37, at 249–52. Likely thinking goes like this: “While there have been factory fires and building collapses in Bangladesh, and in New York a century ago,59See, e.g., Mark C. Niles, Punctuated Equilibrium: A Model for Administrative Evolution, 44 J. Marshall L. Rev. 353, 379–92 (2011) (discussing the Triangle Factory fire). those are distant and unlikely events. They will not happen with our subcontractors in Thailand or Costa Rica (or wherever). We need to be attentive, and duly diligent, of course—but trafficking is an issue that everyone is talking about, that is featured in signs in airports and restrooms, and subject to a serious legal regime not unlike drug enforcement.” The individuals who run Western Company will probably see things this way; trafficking involves an evil act that should not be done. That the company might not get caught is a small consolation, as there is real harm. That various code violations take place with respect to worker health and safety is a bit of a problem, but not a big one so long as nothing bad happens. The violation is not evil in itself. And this intuition is reinforced by the knowledge of experienced individuals that the best Western factories, and indeed headquarters buildings, in the most developed countries, will have any number of building code violations. And the same is true for these individuals’ homes—even the CEO’s lavish residence no doubt has any number of building code violations if anyone were to look for them. So health and safety do not get the same priority.
2. Crafting agreements in the absence of consensus
There are two sets of problems here. One is that the actors in the developed world do not agree on the human rights standards that ought to apply. Partly this might be characterized easily, and largely accurately, as political, and some of this may be a matter of status. Management can be expected to hold different views from labor. But partly the matter is one of background, upbringing, and the like, for these are moral opinions, and they may well vary based on geography. In a rural setting where children in farming families routinely “help with chores,” i.e., work on the farm, general views on child labor may vary considerably from those held in the affluent suburbs in large metropolitan areas.60M. Neil Browne et al., Universal Moral Principles and the Law: The Failure of One-Size-Fits-All Child Labor Laws, 27 Hous. J. Int’l L. 1, 3 (2004) (recognizing different perspectives on child labor and arguing that policymakers should avoid “imposing a universal moral vision upon other groups in situations as emotionally, economically, culturally, and developmentally complex as that of child labor”).
With geography, status, and socioeconomic context in mind, the second set of problems should be quite apparent: views and priorities may differ considerably between the developed world and developing countries. What may seem like immoral exploitation could also seem like economic opportunity that is far better than the alternatives. On top of this are arguments about protectionism, which always lurks in such discussions. It is easy to see how imposing environmental, labor, or similar standards, thus raising costs of production in the developing world, will result in protection for industries in the developed world. This phenomenon has been dubbed the New Protectionism, and there is no shortage of literature and argument.61Indeed, there appear to be at least two pieces entitled The New Protectionism, including Carl J. Green’s from 1981, 3 Nw. J. Int’l L. & Bus. 1 (discussing “bilateralism” and “legal protectionism” as forms of new protectionism), and Moira L. McConnell’s The New Protectionism and Environmental Barriers to Trade Liberalization: Assessing the Bona Fides of Government Action, 2 Kan. J.L. & Pub. Pol’y 43 (1993) (examining whether environmental regulation can constitute either a trade barrier or a subsidy, and whether an adjudicator can go beyond the face of the legislation and assess the bona fides of a state’s legislation). While most of the discussion centers on environmental standards,62See, e.g., Seymour J. Rubin, A Predominantly Commercial Policy Perspective, in Environment and Trade: The Relation of International Trade and Environmental Policy 3 (Seymour J. Rubin & Thomas R. Graham eds., 1982) (noting that pollution control requires higher production costs, resulting in less competitive goods); Don P. Clark, The Greening of Protectionism—Industry and Environmental Coalitions to Oppose Trade Pacts, 19 World Competition L. & Econ. Rev. 105 (1995); McConnell, supra note 61, at 45. the same arguments can and have been made with respect to labor standards.63See generally Lance Compa, Labor Rights and Labor Standards in International Trade, 25 Law & Pol’y Int’l Bus. 165 (1993); Amit Dasgupta, Labour Standards and WTO: A New Form of Protectionism, 1 S. Asia Econ. J. 113 (2000); Brian A. Langille, Eight Ways to Think About International Labour Standards, 31 J. World Trade 27 (1997); Benn Steil, ‘Social Correctness’ is the New Protectionism, 73 Foreign Aff. 14 (1994). Free trade advocates generally see these sorts of standards as non-tariff barriers to trade,64See Labour Standards: Consensus, Coherence and Controversy, World Trade Org., https://www.wto.org/english/thewto_e/whatis_e/tif_e/bey5_e.htm (last visited June 1, 2019) (“[E]fforts to bring labour standards into the arena . . . are little more than a smokescreen for protectionism.”); see also Compa, supra note 63, at 187 (“[T]he labor rights argument is just a cover for blocking exports . . . “); Dasgupta, supra note 63, at 124 (“[T]rade restrictive policies based on humanitarian considerations were . . . camouflage for . . . protectionism.”); Moonhawk Kim, Disguised Protectionism and Linkages to the GATT/WTO, 64 World Pol. 426 (2012) (states impose labor regulations that purposefully restrict international trade, but with the appearance of an acceptable domestic policy). and while some make serious efforts at reconciling environmental and labor protections with the benefits of free trade,65Frank Emmert, Labor, Environmental Standards and World Trade Law, 10 U.C. Davis J. Int’l L. Pol’y 75 (2003); McConnell, supra note 61. there is no doubt that at least in theory labor and environmental protections will also have a trade protectionist valence. In such situations, the effort to raise labor standards in developing countries may hurt workers more than it helps them, as the argument goes.66See Gary Burtless, Workers’ Rights: Labor Standards and Global Trade, Brookings (Sept. 1, 2001), https://www.brookings.edu/articles/workers-rights-labor-standards-and-global-trade; Stephen S. Golub, Are International Labor Standards Needed to Prevent Social Dumping?, 34 Fin. & Dev. 20 (1997). And even those sympathetic to raising standards for working conditions recognize the strong link to anti-globalization.67Richard A. Greenwald, Labor, Liberals, and Sweatshops, in Sweatshop USA: The American Sweatshop in Historical and Global Perspective 77, 77 (Daniel E. Bender & Richard A. Greenwald eds., 2003) (“[I]n fact, the current antisweatshop movement is intimately connected to the anti-globalization movement.”); see also Globalization from Below: The World’s Other Economy (Gordon Mathews et al. eds., 2012).
So even within the same developed society, people of good will differ on how best to address these issues. Further, there can even be disagreement on the issues themselves, as with child labor. Everyone is against child labor—put in those terms. But they are not necessarily against a fifteen-year-old spending time working on the family farm if he is not missing school at the time. The United States permits quite a lot of child labor, despite serious injuries to some of those child workers.68See supra note 8. Outside the developed world, a child who works may be a child who is better nourished and whose family has prospects; that child may have no meaningful opportunity to go to school anyway; and the question may not be whether the child works but where and in what conditions.
This lack of consensus is exacerbated by rhetoric that can hide areas of substantial agreement. Not all human rights violations are the same, either practically or morally. Death and crippling injury are worse than very long working hours and a six- or seven-day workweek. We hesitate to make these judgments, and the examples can be manipulated to turn them around, but recognizing differences of degree can help because it can allow second-best solutions where first-best solutions—much less ideal ones—are impossible. It is useful to think of a spectrum of problematic issues ranging from the worst—such as death, slavery, or forced labor—to the controversial and arguably reprehensible that are nevertheless not as bad as death. Candor is helpful for closing deals and for achieving some consensus. If all can agree that forced labor should be eradicated from the supply chain, regardless of the indifference of public authorities, then there ought to be forward movement with respect to that issue. That deal can be closed. If there is disagreement with respect to some other issue, and no deal can be closed on it, then we have to take what we can get.69Unionization and collective bargaining rights require careful observation and thought. Theoretically, they may be separate from, say, issues of forced labor or health and safety. If a contractual regime may help improve matters with respect to forced labor and worker safety, it probably ought to be pursued, even if it does not lead to unionization rights. This argument sees the issues as independent, or at least separate. On the other hand, either theoretically or empirically, achieving significant improvement with respect to forced labor and worker safety (for example) may be impossible without unions that will protect workers. In other words, unionization rights may be “enabling rights” that allow workers to improve their rights against forced labor and unsafe working conditions. See Locke, supra note 4, at 18. In the end, though, Provost Locke’s empirical argument seems most tightly linked to public protections for workers—in combination with private protections. See id. at 17 passim. These public protections may protect unionization among other things. In any case, the evidence suggests that private compliance is well worth pursuing, and this conclusion holds even if private compliance alone is insufficient to lead to significant improvements. Private efforts are a part of the solution, and the MCCs aim to allow companies to pursue that part effectively.
As it turns out, there is plenty of room for agreement, and a serious desire to make the situation better. Those facts have been the force carrying forward the MCCs. Whatever can be agreed goes into the standards for a particular contract, or (more likely, we hope) in all the contracts for a particular company. The MCCs do not attempt a “one size fits all” prescription. In any event, a company that wants such a set of standards can choose from already existing offerings.70See supra notes 9–12 and accompanying text (discussing the UN Guiding Principles and other efforts). In short, the company can choose whatever standards it likes.
Visualizing how this might work can be helpful.71The following is discussed in Davies & Snyder, supra note 16, at 239–42. The first idea, which involves just the company’s own policies, might be considered one-dimensional. The policy may or may not include a commitment that is legally enforceable, but it is in any case a single point. When the company requires its suppliers to commit to protecting human rights, then the commitments might be considered two-dimensional: the policies adopted by one company—a single point—branch out across a plane of suppliers, and perhaps their suppliers and contractors as well. There is thus a web of commitments, but they all originate at the single point of the buyer who has required the commitments through the supply chains that are part of its business. See Figure 1.72Thanks to Adrian Simion for help with the figures for this Article.
Figure 1: Two-Dimensional Model