The U.S. Department of Justice and state law enforcement are expected to investigate and prosecute businesses that benefit from forced labor or sex trafficking in “reckless disregard” that their business venture has engaged in such exploitation.
Since the passage of the federal Trafficking Victims Protection Act (TVPA), virtually every state has enacted some form of anti-human trafficking legislation creating criminal and civil liability for corporations that benefit from labor and sexual exploitation.
TVPA-focused corporate anti-human trafficking compliance is paramount to identify indicia of forced labor or sex trafficking in the supply chain or business operations, prevent exploitation, protect victims of human trafficking and avoid potentially significant corporate criminal and civil liability.

Since the U.S. Congress enacted the Trafficking Victims Protection Act (TVPA) in 2000, federal and state criminal prosecutions of sex trafficking and forced labor—as well as victim-focused human trafficking litigation—have been consistently increasing throughout the United States. Following recent amendments to the TVPA, which we have previously explained here, as well as last year’s enactment of the Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA), which we have described here, federal and state law enforcement agencies as well as state attorneys general are now expected to broaden their efforts to investigate and prosecute domestic and foreign corporations that benefit financially from forced labor in their supply chain as well as sexual exploitation within their business operations.

Corporate Criminal Prosecution Under the TVPA

As the TVPA is the first comprehensive federal law to address human trafficking, its purpose is to combat trafficking of persons, especially into the sex trade, slavery, and slavery-like conditions through prevention, through prosecution and enforcement against traffickers, and through protection and assistance to victims of trafficking.

In particular, the TVPA imposes criminal liability upon corporations that benefit financially from human trafficking in “reckless disregard” that their business ventures engaged in such exploitation. And because the TVPA creates extraterritorial jurisdiction over trafficking offenses committed overseas, a corporation that is present in the United States may still be held criminally liable for corporate human trafficking even where the exploitation occurs abroad.

Therefore, for instance, the U.S. Department of Justice may investigate and criminally charge an international hotel chain headquartered in the United States if it consciously disregarded a substantial risk that it was benefitting financially from renting out hotel rooms to sex traffickers in Central America. Similarly, federal prosecutors may charge a U.S. technology manufacturer with violating the TVPA if it consciously disregarded a substantial risk that it was benefitting from the use of forced labor in its Asian supply chain.

Companies charged with criminal violations of the TVPA may face up to $500,000 in fines, or even twice the economic benefit conferred from the violation. Moreover, executives and other company employees who cause the entity to engage in a TVPA criminal violation may also be prosecuted under the statute and, if found guilty, face up to 20 years of imprisonment if, for example, their company benefited from forced labor within the supply chain.

And aside from criminal prosecution, a company may also be held civilly liable in a victim-initiated civil lawsuit in U.S. District Court if the victim-plaintiff establishes by a preponderance of the evidence that the entity benefitted from participating in a venture that it knew or “should have known” engaged in forced labor or sex trafficking. In other words, in addition to exposing companies to potential criminal liability, the TVPA imposes civil liability for corporate negligence towards forced labor in their supply chain as well as sex trafficking within business operations.

State AG Corporate Human Trafficking Civil Enforcement

On March 21, 2018, following the overwhelming support received in the U.S. House of Representatives, the U.S. Senate almost unanimously passed FOSTA, a historic piece of legislation which amended the Decency Act by allowing victims of human trafficking to bring certain TVPA civil claims against social media companies that benefitted from human trafficking if they knew or “should have known” about the exploitation.

Additionally, FOSTA amended the TVPA to grant authority to every U.S. state attorney general, as parens patriae, to commence a civil enforcement action in federal district court on behalf of its citizens against a social media company or any other entity or individual that, in violation of the TVPA’s sex trafficking provisions, benefitted financially from a victim’s sexual exploitation in “reckless disregard” that its business venture engaged in the trafficking.

Thus, for instance, a state attorney general may bring a civil enforcement action against a social media platform that received direct payments, revenue-generating online traffic or other benefits from an online profile or user account promoting sex trafficking if the company recklessly disregarded the fact that its platform or website was being used to perpetrate sexual exploitation or trafficking of minors (for example, because of the nature of the user’s posts or photos).

State Criminal Prosecution of Corporate Human Trafficking

Moreover, since the passage of the TVPA, virtually every state has enacted some form of corporate anti-human trafficking legislation. Many of those jurisdictions, including Alaska, Florida, Hawaii, North Carolina, Washington, Wisconsin and the District of Columbia, have specifically followed the TVPA’s criminal provisions by authorizing state law enforcement to investigate and prosecute a company that benefits from either forced labor or sex trafficking in “reckless disregard” that the business venture has engaged in such exploitation. Accordingly, under these state laws, a company doing business in the state may be exposed to corporate criminal liability if state prosecutors establish that the business consciously disregarded a substantial risk that it was benefitting financially from a trafficking venture.

Corporate Anti-Human Trafficking Compliance

In conclusion, to avoid potentially significant criminal and civil liability and unintentionally contributing to human trafficking, companies should consider incorporating TVPA-focused anti-human trafficking due diligence and compliance into their own compliance framework. Doing so is particularly critical for companies operating or relying on third parties located in high-risk countries that might benefit from forced labor. In addition, companies should proactively conduct employee training on how to identify signs of forced labor or sex trafficking, perform an internal review of existing policies and procedures to identify areas that may be subject to exploitation by traffickers (and make needed corrections), and assess their existing and prospective suppliers’ and contractors’ practices.

Forced labor and sex trafficking are horrific forms of modern-day slavery, a multi-billion dollar criminal industry where traffickers use force, fraud or coercion to control their victims. Proactively engaging in TVPA-focused anti-human trafficking compliance is thus necessary from both corporate social responsibility and risk management perspectives. Indeed, not only is it an effective way to play a significant role in the global fight against exploitation, but it also reduces business and legal risk by mitigating a company’s exposure to potentially significant civil and criminal corporate liability.

Summer associate Rose Lapp contributed to this client alert.

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