Unmasking the charade of the global supply contract: a novel theory of corporate liability in human trafficking and forced labor cases.

• Author: Bang, Naomi Jiyoung
• Position: I. Introduction through III. Economic Realities Test C. Introducing the Economic Realities Test 2. Expansion Under Other Federal Statutes, p. 255-292

1. INTRODUCTION II. GENERAL BACKGROUND A. Forced Labor Statistics and Background Information B. History and Evolution of the Global Supply Contracting System III. ECONOMIC REALITIES TEST A. Basic Theory of Joint Employment B. Common Law Test C. Introducing the Economic Realities Test IV. PILGRIM ECONOMIC REALITIES APPROACH A. The Global Supply Contract and Dependent Contractors V. THE TVPRA AND ECONOMIC REALITIES TEST A. TVPRA--Relevant Causes of Action (Global Contracting "Forced Labor" context) B. TVPRA Legislative History--Clear Intent to Abolish Slavery C. Legislative History of the FLSA VI. CONCLUSION I. INTRODUCTION

   In February 2007, an investigative trip to China by members of Students and Scholars Against Corporation Misbehavior (SACOM) resulting in the plug being pulled on Mickey and his other Disney pals. (1) As a result of SACOM's 2006 report outlining the "working class hell" conditions suffered by the laborers who manufactured Disney's products, and subsequent media outcry, Disney discontinued its relation with the plant. (2) It is difficult to reconcile the image of Disney's delicate princess dolls, complete with dainty accessories, in the hands of exhausted, sick workers working and living in a dangerous substandard factory and dormitory. (3) Yet, the Disney factory is representative of the overseas factories that constitute pivotal links in the global supply chain of many U.S. and foreign corporations.

   Although the global economy has enabled average people access to a diverse and ready supply of inexpensive clothing and electronics, the dark reality is that this access comes at great human expense. The by-products of these cheap products are human trafficking and forced labor. (4) It is not just global criminal gangs that use electronic communications and various modes of transport to exploit vulnerable and desperate people living in poor countries. Although less visible, corporations using global production chains, containing multiple levels of subcontracting and outsourcing, breed human trafficking and forced labor. (5) Corporations driving this dynamic easily avoid accountability given the extraterritorial location of the suppliers, and the appearance of "arm's length" contracts with their suppliers. (6) As Jorge Bustamante rightly points out, "[t]he practice of subcontracting ... labour can also be a gateway for the impunity for abuse of and violations against migrant workers." (7) The caginess of corporations in avoiding liability in the global contracting setting cannot be underestimated. Because corporations have circumvented the law, victims must find new theories of liability. This Article proposes a path of potential relief.

   Courts should apply the economic realities test as a vehicle to determine the existence of joint employment between a corporation and their contractor. (8) Under the theory of joint employer liability, corporations would be equally responsible for their contractors' acts in trafficking/forced labor cases pursuant to the Trafficking Victims' Protection Reauthorization Act (TVPRA). (9) Despite attacks from defense counsel, the economic realities test is legally sustainable and legislatively sound. This test was born in response to the Fair Labor Standards Act (FLSA) (10) and other progressive federal labor statutes that embodied strong Congressional intent to improve working conditions, and decrease economic advantage to those violating fair labor standards. (11) Numerous United States Supreme Court and circuit rulings refined and expanded the definition of "joint employer" and shifted the focus of inquiry away from employer control to the dependency of the worker. (12) The TVPRA's vivid legislative history shows congressional concern to decrease human trafficking, punish those who force labor, and address the problem of the foreign contractor. (13) There is a direct and compelling link between the legislative histories of the FLSA and the TVPRA. The economic realities test fits perfectly within the TVPRA's goals and objectives, and should be applied in all TVPRA cases.

   Moreover, due to the conflicting and conflating theories regarding issues of agency theory, premise liability, notions of duty and control, and varying standards of intent under secondary liability theories, courts would welcome clarification. By assisting the courts to understand the history, evolution and rationale behind the economic realities test, and the legal and legislative basis upon which it can be applied to today's global contracting practices. Ultimately, courts would be able to pierce the fiction that corporations are innocent of the slavery connected to production of their products and they would be held responsible for their contractors' actions. (14) As one legal scholar writes, "manufacturers not only conspire with their subcontractors in perpetuating sweatshops, they are primarily responsible for creating the problem." (15) As such, the corporations should be held accountable for their actions and greed.

   This Article does mean to condemn or expose the contemporary corporate global contracting system (although many renowned authors have written about it). (16) Rather, it hopes to guide the crafting of a legal theory of recovery from corporations involved in this system. The general judicial trend appears to be against finding the corporation responsible in the global supply context--both under primary and secondary theories of liability. In fact, courts, entrenched in antiquated notions of common law continue to dash hopes for financial recovery, further insulating those with the deepest pockets. Moreover, right before the publication of this Article, on April 17, 2013 the Supreme Court announced its decision in Kiobel v. Royal Dutch Petroleum, (17) which ruled that the Alien Tort Statute (ATS), which had been used by non-U.S, citizens to bring lawsuits in U.S. federal court to seek relief for certain violations of international law, including human trafficking had no extra-territorial application. (18) Therefore, it is even more imperative that other theories of liability are needed to hold corporations accountable.

   Although there are many possible trafficking scenarios, this Article focuses on the unknown nameless foreign worker who has been trafficked from his or her home country to a foreign country to produce goods for a U.S. corporation. It is not meant to minimize the plight of the vast numbers of domestic workers who toil in sweatshops throughout the United States--especially the undocumented, the immigrant, the under-aged, and the under-educated. (19) However, this Article chooses to put a face and name on the foreign worker since these victims have little or no access to information, resources, and assistance relative to their domestic counterparts in the United States, and therefore have fewer champions.

   Section I of this Article introduces the general issue of corporate liability in the global supply scenario and briefly summarizes various problems trafficking and forced labor victims face when seeking restitution against corporations.

   Section II sets forth a background of the concept of forced labor and human trafficking: its origins, evolution (including the concept of sweatshops), economic advantages to the corporation, and other related ramifications of the growing global contracting structure that is used to increase profits and deflect liability.

   Section III introduces the corporate liability theory of joint employment, the origins of the economic realities test, its expansion and adoption into other federal statutory labor schemes, recent trends, and confusion faced by courts in enunciating and applying the test.

   Section IV outlines and advocates for the application of the economic realities test as set forth in Usery v. Pilgrim (20) to be adopted by the TVPRA. This Article also discusses the specific importance of specific terms of the global supply contract and examination of the "independent" contractor's situation as crucial factors in the "economic realities" analysis.

   Section V sets forth legal arguments based on legislative evidence that demonstrates how and why the economic realities test can be used to substantiate a valid theory of corporate liability in human trafficking and forced labor cases brought pursuant to the TVPRA. This section sets forth the primary legislative tenets that undergird the legal foundation that holds up the economic realities test.

   Section VI concludes with suggestions and recommendations. The goal of this Article is to provide practitioners with the necessary tools to persuade courts to apply the economic realities test beyond its traditional applications under federal labor statutes, such as FLSA. (21)

2. GENERAL BACKGROUND

   1. Forced Labor Statistics and Background Information

      The International Labour Organization (ILO) estimates that "2.5 million people are in forced labor (including sexual exploitation) at any given time as a result of trafficking." (22) Forced labor practices account for at least one-third of all trafficking cases. (23) Despite media outcry against sweatshops, this number does not appear to be decreasing. (24) "A firm's goal is to maximize profit ... [and because] labor is such a large part of business costs, a small increase in the cost of labor can significantly increase the cost of production and decrease profit." (25) Therefore, "employers seek trafficked individuals as a cheaper labour source," which "constitute[s] a vast workforce supporting the global economy." (26) This is nothing new. Throughout U.S. history, Africans were enslaved to work on plantations and European peasants were brought to America "in one of several forms of debt-bondage known collectively as "indentured servitude." (27) Now, as was then, laborers save employers money not only through substandard wages, but also by enabling employers to circumvent the costs of providing health benefits and safe working...