The Costs of Labor Trafficking and Employer Best Practices to Avoid Exposure
Published by Eric A. Welter and Brad W. Goldstein on June 3, 2016
Employers in industries heavily dependent on migrant labor should be aware of the risks and take proactive measures to comply with anti-trafficking laws.
Signal International (“Signal”) recently filed for Chapter 11 bankruptcy after a $14 million jury verdict encouraged the company to agree to a $20 million global settlement with a group of oil rig maintenance workers from India who alleged they were induced by false promises of U.S. residency and then subjected to poor working and living conditions and retaliation.
After Hurricane Katrina, Signal used Indian labor recruiters to bring over 500 laborers on H-2B guest worker visas to work as welders and pipefitters in order to repair damaged oil rigs. In February 2015, after seven years of legal battles spearheaded by the Southern Poverty Law Center, a federal jury in New Orleans awarded five guest workers $14 million in compensatory and punitive damages for labor trafficking, forced labor, racketeering, discrimination, fraud, false imprisonment and retaliation.
Shortly after the jury verdict, Signal settled 11 other trafficking lawsuits, including a lawsuit by the U.S. Equal Employment Opportunity Commission (EEOC), for a total of $20 million. As part of the settlement agreement, Signal issued an apology for the poor conditions and for failing to treat its guest workers with the respect and dignity they deserved. Although human trafficking violations are typically associated with criminal penalties, the Signal verdict and subsequent settlement highlight the potential for future civil suits against employers who engage in trafficking practices.
According to the National Human Trafficking Resource Center, there have been a total of 122,199 reported calls, webforms, and emails and 25,791 reported trafficking cases from December 2007 to March 2016.
A study conducted by the Urban Institute and Northeastern University found the industries that are most susceptible to trafficking violations are in the hospitality, agriculture, domestic services, construction, and restaurant sectors.
A number of government agencies, including the Department of Labor’s Bureau of International Labor, Wage and Hour Division, and the EEOC all play a role in monitoring labor trafficking. In addition to criminal penalties, trafficking cases typically involve violations of Title VII of the Civil Rights Act, which prohibits discrimination on the basis of national origin or race.
Discrimination includes harassment, setting different terms and conditions of employment, or unequal wages. Additionally, the Immigration Reform and Control Act of 1986 (IRCA) makes it illegal for employers to discriminate with respect to hiring, firing, or recruitment based on an individual’s citizenship or immigration status. Employers are also prohibited from retaliating against individuals for asserting their rights.
Employers should take proactive measures to ensure compliance with labor trafficking laws, especially if they operate in industries that are susceptible to experiencing challenges in this area.
Key actions that employers should take include the following:
- Employers should educate themselves on H-2B program requirements.
- Employers should conduct labor trafficking risk assessments to evaluate potential damage to their companies, including reputational injury and legal liability.
- Employers should develop a code of conduct or foundational compliance program establishing standard policies with regard to labor practices.
- Employers should train staff to be aware of potential labor trafficking issues and develop a system for addressing grievances.
- Employers should conduct internal audits and develop a monitoring system to ensure compliance with the company’s code of conduct as well as federal and state employment laws.
- Employers should create a remedial scheme to address violations discovered in audits.