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Corporate Conduct

Under this proposed law, workers at an overseas company who believe they are paid less than a "living wage" could sue a U.S. customer of their employer "subcontractor."

February 17, 2000
Related Topics:
Corporate Code of Conduct Act (H.R. 2782)

The Corporate Code of Conduct Act (CCCA) would require U.S. corporations to adopt "corporate codes of conduct" governing their overseas workplaces, as well as the overseas workplaces of suppliers and affiliates. Although international corporate codes of conduct are currently voluntarily adopted, this bill would require corporations to implement codes of conduct, with specific terms. Some of these terms exceed existing U.S. labor laws. The bill would also allow overseas employees to sue their local employers' U.S. parent and even customer companies for denial of broad labor "rights."

The CCCA would cover any U.S.-based legal entity that employs 20 or more people abroad. The 20-employee threshold would include not only direct employees of a company and its subsidiaries, but employees of "subcontractors, affiliates, joint ventures, partners or licensees," although these terms are not defined in the bill. This means an otherwise purely domestic U.S. business that directly employs no one abroad will come under the law if, for example, it buys ("subcontracts") supplies from abroad, or if it belongs to some "affiliat(ion)" that includes foreign member firms.

The CCCA would require covered U.S.-based companies to adopt codes of conduct, which would have to guarantee each item on this list of specific rights:

  • A safe and healthy workplace

  • Freedom from child or forced labor

  • Freedom from discrimination (race, gender, national origin, religion)

  • Free association/collective bargaining

  • A living wage, meaning enough for an average-sized family to buy all necessities including child care and transportation, plus have discretionary income left over

  • Freedom from mandatory overtime for anyone under 18

  • Freedom from pregnancy testing or forced birth control

  • Freedom from retaliation for exercising employee rights

  • Good governance of the employer entity

  • Corporate cultures that promote free expression

  • Core International Labor Organization/United Nations labor/human rights standards

  • Compliance with U.S. federal environmental laws (i.e., extending U.S. law overseas)

  • Overseas suppliers ("subcontractors") and affiliates of U.S. businesses in compliance with all these rights

  • U.S. businesses disclosing publicly the names of their overseas suppliers and affiliates, and spelling out terms of their affiliations

  • U.S. companies monitoring compliance with all these rights.

The bill would require the U.S. government to give preference in awarding U.S. contracts to companies in compliance with the law, and would extend this preference to companies that use the services of the U.S. Department of Commerce, the Overseas Private Investment Corporation, and the Export-Import Bank of the U.S. The CCCA would also give a civil cause of action to any aggrieved individual.

Rep. McKinney (D-FL) introduced this bill in the House on August 2, 2001, where it was referred to several committees with jurisdiction. The bill has garnered 24 Democratic cosponsors.

The greatest potential impact of the bill concerns the civil cause of action potentially available to any aggrieved individual, which could include punitive damages or enable class actions. For example, under this law workers at an overseas company who believe they are paid less than a "living wage" (even if they receive the legal minimum), or who believe their workplace is not "safe and healthy," could sue a U.S. company that is a customer of their employer. In other words, the U.S. company is considered a customer because it pays the overseas company as a subcontractor.

But the U.S. defendant would not have a complete defense even if it had promulgated a compliant code of conduct -- because the overseas-worker-plaintiffs could allege a violation of their right to have the code effectively enforced (enforcement is a separate right written into the bill). If enacted, all major U.S. companies (and many smaller U.S. companies) will be vulnerable to possible foreign-workplace-context lawsuits in U.S. courts, where they could have to defend the work conditions of overseas suppliers/subcontractors and affiliates.

In addition, the CCCA seeks to guarantee many rights that are already guaranteed under local domestic laws abroad, even in third-world countries. For example, every or almost every third world country already boasts comprehensive laws on workplace safety, child labor, discrimination, free association/collective bargaining, minimum wage, mandatory overtime, and the environment. And most third-world countries have adopted more International Labor Organization conventions than the U.S. The bill does not address the shortcomings of third world countries' existing labor laws. Instead, it seems to suggest that U.S. courts should sidestep international sovereignty (home rule) principles and monitor overseas employment practices, which would establish a dangerous precedent for other countries to try to regulate the U.S. workplace.

Finally, the CCCA seems to impose standards on overseas workplaces that actually exceed corresponding U.S. domestic rules. This would create an anomaly-a U.S. law would hold overseas workplaces to a higher standard than U.S. law requires on U.S. soil. For example:

  • The bill requires that employers abroad pay a "living wage," defined as enough for an "average-sized family" to buy all necessities including "child care," "transportation," and "discretionary income." But no law inside the U.S. goes so far. U.S. law allows paying full-time workers just $10,712 per year before withholdings ($5.15 per hour times 40 hours times 52 weeks). The bill's sponsors champion a higher U.S. minimum wage, implicitly acknowledging that $10,712 (less withholdings) is not enough for an "average-sized" American urban family to buy all its needs including "child care," "transportation," and "discretionary income."

  • The bill requires that U.S. companies' codes of conduct applicable abroad would comply with a listed set of International Labor Organization conventions. But the U.S. has not ratified all the listed conventions.

To Learn More:

  • View this bill -- enter the bill number "HR 2782" under "Search by bill number."
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