On January 1, 2012, the California Transparency in Supply Chains Act of 2010 (the "Act") will go into effect. The Act is codified in California Civil Code § 1714.43. The legislation applies to every retail seller and manufacturer that is doing business in California and has annual worldwide gross receipts in excess of $100 million, even if the company is organized or domiciled outside of California. It is estimated that the Act will impact approximately 3,200 companies.

Companies that fall within the scope of the Act are required to provide consumers with information regarding their efforts to eradicate slavery and human trafficking from their supply chains and to educate consumers and employees on how to purchase goods produced by companies that responsibly manage their supply chains.

The Act does not require companies to eliminate slavery or human trafficking. The Act does, however, require that companies falling within its scope disclose on their websites:

  • The actions, if any, they are taking to use third parties to verify the risks of slavery or human trafficking in their supply chains;
  • Whether they require their direct suppliers to certify that the materials incorporated into the companies' products comply with laws regarding slavery and human trafficking in the countries in which they are doing business;
  • Whether they conduct audits of their suppliers to evaluate compliance with company standards on human trafficking and slavery;
  • Whether they maintain accountability standards and procedures for employees or contractors that fail to meet corporate standards; and
  • Whether they provide employees and managers who have direct responsibility for supply chain management with training on the mitigation of slavery and human trafficking risks.

The disclosures must be made available on the companies' website with a conspicuous link to the disclosure placed on the companies' homepage. Companies that do not have a website must provide written copies of the disclosures within 30 days of receiving a written request from a consumer.

The exclusive remedy for a violation of the Act is an action brought by the State Attorney General for injunctive relief. There is no private right of action. However, since the Act does not limit remedies for violating any other state or federal law, the California Unfair Competition Law and the Consumer Legal Remedies Act may allow competitors, consumers, or others to seek damages, injunctive relief, and attorney's fees for failure to comply with the Act or any misstatement in a disclosure made in response to the Act.

There are no affirmative obligations on companies to perform diligence regarding the existence of slavery or human trafficking in their supply chains. However, employers that fall within the scope of the Act may find it prudent to consider whether it is appropriate to adopt policies or procedures to mitigate the risk that slavery or human trafficking exists in their supply chains.