Free Trade Agreements (FTAs) between countries facilitate the movement of goods and services by eliminating tariffs, reducing non-tariff barriers, and providing the parties with increased access to financial and service sectors. One important trend for U.S. employers is the U.S. government's willingness to enter into FTAs that incorporate certain obligations with regard to labor and employment issues. On Oct. 5, 2015, the United States entered into just such an FTA. Among other commonly addressed trade issues, the TPP includes a specific chapter on "Labour" that potentially creates new labor obligations on the state parties.
The Trans-Pacific Partnership (TPP) is a multilateral free trade agreement among 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam. The TPP mandates, among other things, certain fundamental rights for workers in each state, which are articulated under the standards of the International Labor Organization (ILO), a United Nations agency dedicated to promoting decency in labor and work. It requires each party to ensure acceptable conditions of work for its work force. It further creates an extra-judicial complaint mechanism that would allow private entities—such as unions—to complain that a state party is not in compliance because it is allowing employers within that state to violate workers' rights, which are protected under the TPP.
It also requires each party to encourage companies to adopt corporate social responsibility (CSR) initiatives. In addition, the TPP seeks to prohibit the importation of goods produced by forced labor. And, the TPP adds three related bilateral side agreements between the United States and Brunei, Malaysia, and Vietnam, respectively, that place additional burdens on the latter three countries to strengthen workers' rights.
The TPP has not yet been adopted as law in the United States. On Nov. 6, 2015, the Obama administration released the full text of the TPP. Whether Congress approves the TPP may not become clear until later in 2016, especially given the political uncertainty of a presidential election year.
Fundamental Workers' Rights
The TPP requires adherence to certain ILO fundamental workers' rights which may prompt calls to modify current U.S. law. It calls for each state to "adopt and maintain" laws that protect the following rights set forth in the International Labour Organization Declaration on Fundamental Principles and Rights at Work and its Follow-Up (1998) (ILO Declaration):
(a) Freedom of association and the effective recognition of the right to collective bargaining;
(b) Elimination of all forms of forced or compulsory labor;
(c) Effective abolition of child labor, and a prohibition on the worst forms of child labor; and,
(d) Elimination of employment discrimination.
(e) (Art. 19.3.1(a)-(d)).
As a party to the TPP, the United States would be required to "adopt and maintain" laws that protect these rights. Because the United States has ratified ILO Conventions on the Abolition of Forced Labor (No. 105) and on the Worst Forms of Child Labor (No. 182), current law is already in compliance with Article 19.3.1(b) (elimination of forced labor), and part of Article 19.3.1(c) (elimination of the worst forms of child labor).
However, with regard to the other ILO standards in the TPP, the status of U.S. compliance is open to debate. In the past, scholars, political activists, and others have argued that U.S. law does not sufficiently support employees' rights to organize, the right to bargain collectively, the treatment of child workers, and employment discrimination.1 These arguments may now find a stronger voice in the face of a U.S. requirement to adhere to the mandates of Article 19.3.1(a), (c), and (d). While a review of the arguments for and against enhancements under U.S. law with regard to these ILO fundamental rights is beyond the scope of this article, it is clear that the TPP will lead to political debate and, potentially, greater employment and labor protections than exist under current U.S. law.
The TPP requires each party to "adopt and maintain" laws governing acceptable conditions of work with respect to "minimum wages, hours of work, and occupational safety and health." (Art. 19.3.2). Unlike Art. 19.3.1, which mandates compliance with existing ILO fundamental rights, the TPP allows the individual states to determine what "acceptable conditions of work" should be in their respective jurisdictions. (Art. 19.3.2, fn. 5). Accordingly, if an individual party currently has laws that establish work conditions such as minimum wage, hours of work, and occupational safety and health, among others, then that country likely will not be required to change or modify its laws as a result of the TPP.
The United States has established numerous laws at both the state and federal levels that govern and mandate minimum conditions with regard to minimum wages, hours of work and occupational safety and health. Thus, it does not appear that the U.S. implementation of the TPP would require any change to those laws. As for those countries that do not currently have such laws, the TPP provides no standard for what would be "acceptable."
Similar to other Free Trade Agreements that the United States has signed, the TPP includes a complaint mechanism that allows both a state party as well as a private entity in a member country to file a complaint against any state party for failing to comply with the obligations under the TPP.2
The TPP does not explicitly state that a private party—such as a union or individual worker—may complain that a party has violated its rights. However, Article 19.9 allows "public submissions" to a party's "contact point"3 on issues "directly relevant" to the Labour Chapter. Therefore, for example, a worker in the United States may complain to the U.S. contact point that his or her rights guaranteed under the Labour Chapter—such as the ILO fundamental rights that are, arguably, not protected by U.S. law—have been violated.
Once a public submission is made to a party's contact point, that party must provide a timely response. It is unclear, however, if a private party, such as an employer whose employment practices are the subject of allegations in a Public Submission, will be required to or will have the right to respond to the Public Submission.
Notably, it appears that a private party residing in one party's territory might be able to make a submission to the contact point of another party.4 For example, if a Vietnamese worker had a complaint about working conditions at a U.S.-owned company operating in Vietnam, the worker could conceivably make a submission to the U.S. contact point. While one party's authorities cannot "undertake labour law enforcement" in the territory of another party (Art. 19.5), parties are required to cooperate with each other on "labour laws and practices, including the effective implementation of the…ILO Declaration." (Art. 19.10.6(i)). Therefore, in the example above, the Vietnamese worker's submission to the U.S. contact point may trigger "cooperation" between Vietnam and the United States to ensure that the Vietnamese worker's rights are or have been protected under the TPP.
The TPP also establishes a Labour Council5 that meets every two years, and, inter alia, reviews reports from the contact points and "perform[s] any other functions as the parties may decide." (Art. 19.12.3). Under this broad mandate, it is possible that a private party, such as an employer whose labor practices are implicated by a public submission to a contact point, could be required to present evidence before the Labour Council. Moreover, the Labour Council allows for "interested persons" to submit their "views" on "matters related to the" Labour Chapter. (Art. 19.14). This section creates yet another forum for a worker to bring a complaint related to his or her labor rights.
As a result of these mechanisms, it is likely that implementation of the TPP will result in greater attention to, and enforcement of, labor rights of workers in the United States and overseas, who are employed by U.S.-owned or controlled companies. Employers may find themselves embroiled in responding to such submissions, at least indirectly, not only to defend their decisions but also to maintain their brand's reputation. For example, soon after the TPP text was made public, on Nov. 13, 2015, the United Food & Commercial Workers International Union (UFCW) and a coalition of Mexican unions filed a complaint against a Mexican supermarket chain under the labor side agreement to the North American Free Trade Agreement (NAFTA) and the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.6 From the AFL-CIO's account of this complaint, it appears that this complaint may be a "test" by the unions of the strength of labor protections in free trade agreements. It is likely that the fate of this particular complaint will feature in congressional hearings on whether to approve the TPP.
Article 19.7 of the TPP represents a significant departure from other free trade agreements entered into by the United States in that it requires that "[e]ach party shall endeavor to encourage enterprises to voluntarily adopt corporate social responsibility initiatives on labour issues that have been endorsed or are supported by that party." No previous FTA has made such a requirement.
Although this provision maintains that adoption of CSR initiatives is voluntary, its inclusion increases the risk that a government or third party will place greater pressure on companies to implement and/or to raise their social responsibility standard. In Canada, for example, plaintiffs have brought negligence actions against companies for alleged violations in the companies' global supply chain based on a theory that the standard of care is provided by the companies' stated CSR goals and international standards.7
Claimants may now be able to rely on the TPP to further bolster their argument that companies should be held accountable to their stated CSR commitments and that those commitments must be consistent with the rights provided by the TPP. Employers in jurisdictions that are party to the TPP will need to carefully monitor their compliance with any CSR promises they make, and the potential legal ramifications of their stated aspirations.
Article 19.6 of the TPP requires parties to "discourage" the importation of goods produced "in whole or in part" by forced labor. (Art. 19.6). Like the "acceptable working conditions" directive in Art. 19.3.2, this provision also leaves it to the individual parties to achieve this goal "through initiatives it considers appropriate."
This provision reflects an effort to deter forced labor in global supply chains, which will likely result in additional government scrutiny on employers' supply chains and any use of forced labor therein.8
Three Side Agreements
The TPP includes three bilateral side agreements between the United States and Brunei, Malaysia, and Vietnam, respectively. In addition to the general requirements in the TPP, the side agreements require specific legal reforms in each jurisdiction. The side agreement between the United States and Vietnam is garnering particular attention, specifically the provisions affording greater protections to unions.
It requires Vietnam to enact laws that allow workers to form "grassroots" labor unions without having to seek authorization from the government or join the government-sanctioned labor confederation. Instead, these grassroots unions could affiliate with each other and/or seek assistance from any international worker organization operating in Vietnam. The benefits of the TPP to Vietnam are conditioned on that country implementing the legal reforms in the side agreement. Five years after the agreement takes effect, the United States could withhold trade benefits if it is determined that Vietnam has not met its obligations under the side agreement.
The TPP is currently before Congress. In his 2016 State of the Union address, President Barack Obama urged Congress to approve the TPP because it is "the right thing to do."9 However, in light of significant bipartisan congressional opposition, and the political volatility of an election year, it may not become law in 2016. Even so, its impact on labor and employment in the United States and for U.S. employees and employers could be significant.
1. See Weissbrodt, D. and Mason, M., "Compliance of the United States with International Labor Law," 98 Minnesota Law Review 1842 (2014) (arguing that ILO standards provide greater rights than U.S. law with regard to the right to organize, right to bargain collectively, right to strike, rights of noncitizen workers, treatment of children, anti-union discrimination, and treatment of women); see also Complaint Against the Government of the United States Presented by the United Electrical, Radio, and Machine Workers of America, supported by Public Services International, Report No. 344, Case No. 2460, ¶991 (holding that South Carolina labor laws result in the banning of certain trade unions and therefore violate Conventions 87 and 98 of the ILO); Charnovitz, S., "The U.S. International Labor Relations Act," 26 ABA J. LAB. & EMP. L. 311, 318 (2011) (arguing that there is a substantial record of U.S. non-compliance with ILO standards).
2. See, e.g., North American Agreement on Labor Cooperation (NAALC)—the side agreement on labor right to the North American Free Trade Agreement (NAFTA).
3. A contact point will be a designated office within a party's "labour ministry of equivalent entity." In the United States, this office will likely be under the U.S. Department of Labor.
4. Note that the public submissions process is to be conducted "in accordance with [the party's] domestic procedures." (Art. 19.9.1). Therefore, those domestic procedures of the contact point should be consulted to ensure that there is no bar to a private party outside that party's territory making a submission to that party's contact point. Because contact points have not been established yet, it is unclear whether "domestic procedures" will include such bars.
5. The Labour Council comprises senior governmental representatives designated by each party.
8. See https://www.littler.com/publication-press/publication/california-laws-are-being-used-advance-human-rights-claims-based (arguing that recent California class actions claiming that companies have violated California consumer fraud and unfair competition laws resulting from alleged forced labor in their global supply chains are part of wider national and international efforts to scrutinize global supply chain violations).
Trent M. Sutton is Office Managing Shareholder in Littler’s Rochester office. Lavanga V. Wijekoon, an associate in the firm’s Chicago office, contributed to this article.
Reprinted with permission from the Feb. 5, 2016, edition of the New York Law Journal. © 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. Further duplication without permission is prohibited. ALMReprints.com – 877-257-3382 - email@example.com.