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California Law Requires Manufacturers, Retailers to Disclose Information About Supply Chains

KVDP (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia CommonsThe California Transparency in Supply Chains Act (CTSCA), Sen. Bill No. 657 (2009-2010 Reg. Sess.), was signed into law in 2010 and took effect in 2012. It requires manufacturers and retailers doing business in the state of California to “disclose their efforts to eradicate slavery and human trafficking from their direct supply chains.” Id. Additionally, it gives the state Attorney General access to a list of businesses required to make these disclosures. It is important to note at the outset that most manufacturing and retail businesses are not subject to the CTSCA’s disclosure requirements. The law only applies to businesses with “annual worldwide gross receipts” of $100 million or more. Id. Its provisions are important for all California businesses to understand, however, as it is part of a series of laws targeting human trafficking and forced labor.

The federal Victims of Trafficking and Violence Protection Act (VTVPA) of 2000 defines “‘severe forms of trafficking in persons,” in part, as “recruit[ing], harboring, transport[ing], provi[ding], or obtaining…a person for labor or services,” using “force, fraud, or coercion” in order to subject the person to “involuntary servitude,” slavery, or other forms of forced labor. Pub. L. 106-386 § 103(8)(B) (Oct. 28, 2000), 114 Stat. 1470. It defines “involuntary servitude” as a condition in which a person believes that they must perform services in order to avoid “serious harm or physical restraint” or “abuse…of the legal process.” Id. at § 103(5), 114 Stat. 1469.

The Legislature noted in the CTSCA’s preamble that human trafficking is illegal under state, federal, and international law. It further noted that, while various legislatures have passed numerous laws imposing criminal penalties on traffickers and protecting the rights of trafficking victims, few laws have “address[ed] the market for goods and products tainted by slavery and trafficking.” S.B. 657 at § 2(f). Market forces generally drive demand for less-expensive goods, and the Legislature acknowledged that consumers are in the best position to influence the market through purchasing decisions. The goal of the CTSCA is therefore to make information about trafficking and forced labor available to consumers, with the hope that consumers will reward businesses that avoid goods associated with forced labor, or that take direct action to fight human trafficking.

Businesses that are subject to the CTSCA must post a disclosure online, with “a conspicuous and easily understood link to the required information placed on the business homepage.” Cal. Civ. Code § 1714.43(b). If a business does not have a public website, it must provide a written disclosure within thirty days to any consumer who requests one in writing. The disclosure must indicate that the business engages in certain activities related to avoiding or preventing trafficking, including “verification of product supply chains,” “audits of suppliers,” and “internal accountability standards and procedures.” Id. at § 1714.43(c).

The Attorney General can bring an action for injunctive relief to enforce the disclosure requirements. The Franchise Tax Board must provide a list of businesses covered by the CTSCA on November 30 of each year. Cal. Rev. & Tax. Code § 19547.5.

Business lawyer James G. Schwartz has represented businesses and business owners in the Bay Area for over 38 years. We advocate for our clients’ rights and interests in a wide range of litigation and transactional areas. Please contact us online or at (925) 463-1073 today to schedule a free and confidential consultation with a knowledgeable and skilled business adviser.

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Photo credit: KVDP (Own work) [CC BY-SA 3.0], via Wikimedia Commons.