January 1st is often the date that laws enacted during the prior calendar year go into effect. While many new laws are widely publicized, others seem to slip by unnoticed until a business is informed that it has violated some rule that it never knew existed. One law, that is surprising a number of companies is the California Transparency in Supply Chains Act of 2010 (the “Act’). Signed by then Governor Arnold Schwarzenegger, the Act requires companies doing business in California to, by January 1, 2012, post information on their websites informing consumers what steps the company takes to ensure that its supply chains are free from slavery and human trafficking. Interestingly, unlike other laws, whether a company is subject to the Act is not determined by the number of individuals employed by the company or the fact that the company has contacts with areas of the world in which slavery and human trafficking are prevalent. Instead, the Act applies to all companies operating in California that have over 100 million dollars in annual worldwide gross receipts.
If a company satisfies the basic criteria to be covered under the Act, the company must post information on its website indicating what, if any, actions the company takes with respect to the following:
evaluating and addressing the risks of human trafficking and slavery in the company’s product supply chains;
- requiring the company’s direct suppliers to certify that the materials incorporated into company products comply with laws regarding slavery and human trafficking;
- conducting audits of the company’s suppliers to evaluate compliance with company standards on human trafficking and slavery;
- maintaining accountability standards and procedures for employees or contractors that fail to meet the company’s standards regarding slavery and human trafficking; and
- providing employees and managers, who have direct responsibility with supply chain management, with training on the mitigation of human trafficking and slavery risks.
For companies that do not have websites, the Act requires that the above information be contained in written disclosures to be provided to consumers within thirty (30) days of the company receiving a request from a consumer for the information. The stated intent of the Act is to provide consumers with information the Legislature believes is needed in order to make purchasing decisions based on the consumer’s desire to eliminate slavery and human trafficking. Accordingly, the focus of the Act is providing information to the average consumer, not simply letting the government know what acts a company does or does not perform. Given the risks associated with a company’s failure to comply with the Act, it is recommended that all businesses operating in California that have anywhere close to 100 million dollars in annual worldwide gross receipts discuss the requirements of the Act with legal counsel and determine how best to proceed.
For more information about a company’s obligations under the California Transparency in Supply Chains Act of 2010, contact Kevin Grant or Mark Kruthers in Dowling Aaron Incorporated’s Fresno office at (559) 432-4500.