Government Contractors Face New Regulations Regarding Human Trafficking

On March 2, 2015, a new federal rule titled “Ending Trafficking in Persons”—which applies to all new U.S. government contracts and future orders under existing contracts and is designed to prevent government support for human trafficking—went into effect. The rule amends previously existing Federal Acquisition Regulations to strengthen efforts to prevent, directly and indirectly, the occurrence of human trafficking by government contractors and subcontractors.

The final rule, which was issued by the Department of Defense (DOD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA), is intended to implement Executive Order (E.O.) 13627, entitled “Strengthening Protections Against Trafficking in Persons in Federal Contracts,” and Title XVII of the National Defense Authorization Act for Fiscal Year 2013. The rule further implements a long-held policy prohibiting government employees and contractors from engaging in trafficking in persons activities.

The rule should serve as a reminder to contractors that they must monitor their supply chains and have adequate systems in place to do so.

All Contracts

The new rule requires that all government contracts prohibit contractors, contractor employees, subcontractors, subcontractor employees, and their agents from:

1. engaging in severe forms of trafficking in persons during the contract term;
2. procuring commercial sex acts during the performance of the contract;
3. using forced labor in the performance of the contract;
4. destroying, concealing, confiscating, or otherwise denying access by an employee to the employee’s identity or immigration documents;
5. using misleading or fraudulent practices during the recruitment of employees;
6. using recruiters that do not comply with local labor laws of the country in which the recruiting takes place;
7. charging employees recruitment fees;
8. failing to provide return transportation upon the end of employment, for an employee who is not a national of the country in which the work is taking place and who was brought into the country for the purpose of working on a government contract or subcontract;
9. providing or arranging housing that fails to meet the host country housing and safety standards; and
10. if required by law or contract, failing to provide an employment contract, recruitment agreement, or other required work document in writing and in a language that the employee understands.

“Severe forms of trafficking in persons” is defined in the Trafficking Victims Protection Act of 2000 to include the recruitment, harboring, transportation, provision, or obtaining of a person for labor or services, through the use of force, fraud, or coercion for the purpose of subjection to involuntary servitude, peonage, debt bondage, or slavery and sex trafficking.

Contracts Outside the United States in Excess of $500,000

There are heightened requirements for contractors and subcontractors if any portion of the contract or subcontract is for supplies, other than COTS items, to be acquired outside the United States, or services to be performed outside the United States, and the estimated value exceeds $500,000. The contracting party must provide a certification that:

(A) it has implemented a compliance plan and procedures to prevent any prohibited activities and to monitor, detect, and terminate the contract with any subcontractor or agent engaging in prohibited activities; and

(B) after having conducted due diligence, either:

1. to the best of its knowledge and belief, neither it nor any of its agents, proposed subcontractors, or their agents, has engaged in any such prohibited activities; or
2. if abuses relating to any of the prohibited activities have been found, the prime contractor or subcontractor has taken the appropriate remedial actions.

“COTS items” are commercially available items sold in substantial quantities in the commercial marketplace (off-the-shelf items). The contractor will need to also provide annual certifications during the contract period and seek similar ones from its subcontractors.

With respect to the due diligence requirement, the U.S. government advised that the level of due diligence depends on the particular circumstances and that this is a business decision, requiring judgment by the contractor. In its comments to the proposed rule, the government also indicated that the prime contractor’s monitoring efforts will vary based on the risk of trafficking in persons related to the particular product or service being acquired and whether the prime contractor has direct access to a work site or not. The government also pointed to a number of governmental resources for guidance on how to establish effective monitoring for trafficking in persons.

The rule requires that all contractors inform their employees and agents of the rule’s requirements and the possible consequences to them if the requirements are violated, which may include termination of employment.

Compliance Plan

The compliance plan must include, at a minimum, the following:

1. an awareness program to inform contractor personnel about the government’s policy prohibiting human trafficking, the activities prohibited, and the actions that will be taken against personnel for violations;
2. a process for employees to report, without fear of retaliation, activity inconsistent with the policy, including the Global Human Trafficking Hotline phone number;
3. a recruitment and wage plan that only permits the use of recruitment companies with trained employees, prohibits charging recruitment fees to the employee, and ensures that wages meet applicable host-country legal requirements or explains any variance;
4. a housing plan, if the contractor or subcontractor intends to provide or arrange housing, that ensures that the housing meets host country housing and safety standards; and
5. procedures to prevent agents and subcontractors at any tier and at any dollar value from engaging in trafficking in persons and to monitor, detect, and terminate any agents, subcontracts, or subcontractor employees that have engaged in such activities.

A contractor must post the relevant contents of the compliance plan, no later that the initiation of contract performance, at the workplace and on the contractor's website.

Contracting parties and their subcontractors must disclose to the government’s contracting officer and the agency inspector general information sufficient to identify the nature and extent of an offense and the individuals responsible for the conduct and provide cooperation with government investigations.

Human trafficking violations that are identified by the U.S. government are posted by the contracting officer in the Federal Awardee Performance and Integrity Information System (FAPIIS). A contractor’s failure to comply with requirements of the rule could also mean termination of its contract with the government, suspension of payments until remediation occurs, requiring the contractor to terminate a subcontract, or suspension or debarment of the contractor.

If you would like further information on this rule, please contact John P. Vail, john.vail@quarles.com or (312) 715-5042, or your Quarles & Brady attorney.