Employer Pays Verification: A Critical Component of Forced Labor Due Diligence
Debt bondage, due to the imposition of recruitment fees and costs on foreign migrant workers, remains the most pervasive and entrenched form of forced labor in global supply chains today. Reimbursement is an important remedy but, on its own, it is not a solution to the underlying root causes of this ongoing labor abuse.
Until forced labor due diligence includes credible verification that the employer, not the worker, has paid the fees and costs associated with recruitment upfront, workers will continue to be charged leaving them vulnerable to forced labor.
This short article explores why and how employer pays verification should be incorporated into forced labor due diligence.
Increased attention to the issue of worker-paid recruitment fees and related costs by civil society and migrant rights advocates, underpinned by the threat or imposition of trade sanctions such as Withhold Release Orders issued by U.S. Customs and Border Protection in the last couple of years, means employers are increasingly providing remedy to workers in the form of reimbursement. This is a welcome development, but it’s conciliatory. The need to reimburse workers itself signals a failure in forced labor due diligence – and a violation of international standards and the laws of many countries. Only a fundamental shift in the underlying recruitment business model away from the predominant worker pays approach to an employer pays approach will protect some of the most vulnerable workers in supply chains.
Unless an express obligation is placed on employers to pay the quantifiable, legitimate, and necessary costs associated with ethical recruitment, foreign migrant workers will continue to shoulder the burden of recruitment costs. The Malaysian rubber glove sector is a case in point. Since 2019, several companies in the sector have faced credible allegations of forced labor at their facilities—due to recruitment-related debt bondage—resulting in some of the largest worker reimbursement initiatives on record. Each of the glove companies that disclosed reimbursing recruitment fees in the last couple of years had a “Zero Fees to Workers” policy. None paid the full and true cost of ethical recruitment or took adequate steps to prevent their agents and sub-agents from exacting payments from workers in their countries of origin. As a result, workers recruited under those policies still paid exorbitant fees to recruitment agents and other intermediaries that exposed them to debt bonded forced labor. This way of doing business is not confined to the rubber gloves sector or to Malaysia.
Who is responsible for paying recruitment fees and costs? “Zero Fees to Workers” language is increasingly common in companies’ codes of conduct and related guidance, but these policies often don’t bother to answer the question of who is responsible for payment. A relatively small number of leading companies that includes Nike, Target, Apple, Patagonia, Hewlett Packard Enterprise, and Coca-Cola have embraced the Employer Pays Principle and include an express employer obligation to pay for these fees and costs in their codes, standards, or contracts. This remains far from the norm. The ILO General Principles and Operational Guidelines for Fair Recruitment do not contain such a provision nor do the codes or standards of many industry bodies including the Responsible Business Alliance. The issue is further complicated by a patchwork of regulations in major migrant worker sending countries like Nepal, India, Bangladesh, the Philippines, Indonesia, Myanmar, Vietnam, and others that permit, but do not require, agents and employers to pass on certain recruitment costs to migrant workers subject to prescribed limits. These regulations exacerbate the vulnerability of workers and give cover to unethical employers and agents who avoid responsibility for paying for ethical recruitment while charging workers sums that vastly exceed the actual costs and applicable legal limits.
In these circumstances, how can buyers, investors, and stakeholders conduct effective forced labor due diligence, particularly when social audit models are known to be inadequate to the task of detecting forced labor indicators? Verité’s experience working on labor migration for more than 20 years is that there is an extremely high correlation between employers avoiding responsibility for the full and true cost of ethical recruitment and those costs being marked up excessively to cover corrupt payments and generate outsized profits before being passed on to desperate overseas jobseekers.
Fortunately, responsible companies, investors, regulators, and stakeholders increasingly focus on evaluating whether employers have made verifiable payments to cover the full and true cost of ethical recruitment as a predictor of debt bondage risk. In sum, incorporating employer pays verification into forced labor due diligence is a best practice for reasons including:
- If the employer cannot verifiably demonstrate that they pay these costs upfront, it is virtually certain that workers will be charged exorbitant fees before they depart their country of origin;
- When employers do pay the full and true cost of ethical recruitment, they are less likely to overlook when their agents also charge fees fraudulently—so-called “double-dipping”—to workers, leading them to implement controls to prevent and remedy these exploitative practices;
- Verification of employer-paid recruitment fees and costs can be conducted efficiently and effectively without putting workers at risk of intimidation or retaliation;
- Regulators like U.S. Customs and Border Protection look for clear and convincing documentary evidence of contractually enforceable employer relationships with recruitment agents and verification of recruitment fee and related cost payments; and
- Verification of employer-paid recruitment costs will be an important element of how companies operationalize the risk assessment expectations in emerging mandatory human rights due diligence laws.
There are several ways for buyers, investors, and stakeholders to incorporate employer pays verification into their human rights due diligence strategy. While standard social audits have proven inadequate at detecting forced labor risk, purposefully-conducted and focused investigations of a company’s recruitment practices can home in on the contractual relationships between a principal and its recruitment agents to identify gaps and risky practices. Verité’s CUMULUS Forced Labor Screen™ scrutinizes these relationships and goes a step further by requiring screened employers to provide evidence of payment of recruitment fees and costs.
For more information, contact Declan Croucher at dcroucher@verite.org.
Photo credit: Map from Shutterstock/Dikobraziy
