Modern Slavery and Human Trafficking in the Construction Industry

By Camilla A. de Moraes, K&L Gates, London

Background

With an estimated 35.8 million people enslaved today,[1] it is undeniable that modern slavery and human trafficking is a significant global problem.  The construction industry in particular, with its high demand for migrant labour and complex procurement processes, has the potential for exploitation, and there have been high-profile cases such as in relation to the construction work for the 2022 football World Cup in Qatar.  However, in recent years, steps have been taken, both domestically and internationally, to tackle such human rights abuses.

In the United Kingdom, the Modern Slavery Act 2015 (the “Act”) is now in force and an Independent Anti-Slavery Commissioner has been appointed as a result.  There have also been amendments to the UK Companies Act 2013, which requires companies quoted on the London Stock Exchange to report on their human rights performance, and a new Immigration Act, which proposes changes to the way the current Gangmasters Licensing Authority operates.  On the European stage, the EU Non-Financial Reporting Directive requiring disclosure of human rights policies is in force, with member states required to bring into force laws to comply with it by 6 December 2016, and globally, a target to end modern slavery and human trafficking has been included as Target 8.7 of the Sustainable Development Goals, which will help shape development policy worldwide.

UK Legislation

The Act increases the power of law enforcement (both criminal and civil) surrounding slavery and trafficking.  It also provides provisions dealing with support and protection for victims.  However, the key provision for large-scale businesses is section 54 dealing with transparency in supply chains and which provides that any:

• UK or foreign company and other commercial organisations;
• that carry out any business involving goods and/or services in the United Kingdom;
• and have a global annual turnover (including subsidiaries)of £36 million or more;

must prepare and publish an annual slavery and human trafficking statement as soon as reasonably practicable after the end of each financial year.  The Act is not prescriptive in terms of what information must be included in the annual statement, and organisations with a financial year ending 31 March 2016 are the first to be required to publish a statement.

However, there are concerns that the Act does not go far enough.  For example, it is possible for a business to comply with the provisions of the Act by simply stating that it has taken no steps during the financial year to ensure that its business and supply chains are slavery-free.  Also, the legal sanctions for non-compliance are limited to a court injunction compelling the organisation to report, and in any event, the requirement to report only applies to organisations with a turnover greater than £36 million.

The US State Department’s Trafficking in Persons (“TIP”) Report, published in June 2016, in referring to the legislation in the United Kingdom said, “Media and NGOs report compliance so far has been incomplete, in part due to misunderstandings among businesses about what the law requires.  Critics noted the lack of monetary or criminal penalties for companies that did not comply with the reporting requirement.”  The annual TIP report ranks countries on their effectiveness in tackling forms of slavery, and whilst the United Kingdom received the top ranking for its efforts, the message is clear: it needs to do more.

Whilst criticisms in the TIP report focused on the lack of penalties for transgressions, existing labour market legislation does empower enforcement bodies to impose both civil and criminal penalties for breaches, and for the first time, a British company was recently found guilty of modern slavery in a landmark high court judgment.  Six Lithuanian men who were trafficked to the United Kingdom successfully brought a civil claim against the company, who were found to be guilty of: failure to pay the agricultural minimum wage, charging of prohibited work-finding fees, unlawfully withholding wages, and depriving the workers of facilities to wash, rest, eat and drink and is now required to pay compensation to the victims.

However, the United Kingdom is perceived as not doing enough in respect of victim protection.  Commentators have suggested that victims can be even more victimised if working practices are identified as an issue, and the TIP report found that the United Kingdom tends to deport trafficked victims rather than provide long-term care for them.

So how can the United Kingdom do more?

Other initiatives

In mid-July, the Chartered Institute of Building (“CIOB”) published a report titled “Building a fairer system: tackling modern slavery in construction supply chains”.  This report called for greater industry collaboration to eradicate unfair labour practices.  The report makes a series of recommendations for the construction supply chain, including:

• Mapping out supply chains and identifying areas of highest risk and tackling those first;
• Working directly with labour supply agents and increasing the proportion of directly employed labour;
• Collaborating with NGOs that can provide support and understanding of the challenges of different regions; and
• Setting long-term strategy by following international guidance from global organisations.

There is also a strong emphasis on providing training to staff at all levels of the business, something that CIOB is promoting with specialist providers.

The industry-wide recommendations are to:

• Participate in cross-industry initiatives, share best practices and draw on expertise from other sectors;
• Encourage and support the development of ethical recruitment companies;
• Influence and lobby clients and governments to accelerate change; and
• Encourage widespread adoption of ethical standards.

Although collaboration is a key element of tackling slavery, the TIP report found, “Construction companies expressed support for the principles behind the act [the Act], but have cited practical issues in supply chain oversight and challenges in cross-industry collaboration as potential barriers”, so it is by no means certain that it will be a straightforward process.

Conclusion

The Act is part of a cultural shift in terms of wider corporate social responsibility, greater transparency and accountability and a move to eradicate bribery and corruption.  However, in order to be truly effective (especially in light of limited sanctions for failures in reporting), any great change requires collaboration and really needs to be initiated at all levels of the supply chain.  It is also hoped that NGOs, shareholders and the press will play a key role in maintaining compliance and that the reputational damage of non-compliance will also incentivise relevant organisations.

Although the United Kingdom’s requirement to implement the EU’s Non-Financial Reporting Directive is somewhat uncertain by the recent Brexit vote, it is reassuring that slavery and human rights issues are likely to remain firmly on the United Kingdom’s agenda, especially given Theresa May’s appointment of Fiona Hill as co-chief of staff, who seemingly has a special interest in this area.

Ultimately, the requirements of the Act are an important step in forcing organisations to consider the role and responsibilities that they have in respect of human rights, but there is a long way to go to remove the widespread enslavement of people across the world.

[1] 2014 Global Slavery Index, http://www.globalslaveryindex.org/.