On November 18, 2011, the Department of Defense (DoD) issued a final rule amending DFARS 242.302 to require surveillance of contractor compliance with human trafficking rules as part of contract administrative functions. “Administering Trafficking in Persons Regulations,” 76 Fed. Reg. 71830, does not change any contractor obligations. Instead, it addresses DoD’s failure to include in contract administrators’ responsibilities the duty to monitor contractor compliance with anti-trafficking rules that have been in place since February 2009. The final rule sets out a single, general statement that requires contract administrators to “maintain surveillance over contractor compliance with trafficking in persons requirements for all DoD contracts for services incorporating the clause at FAR 52.222-50, Combating Trafficking in Persons” or its Alternate I equivalent for overseas contracts.

The emergence of this rule now – more than seven years after contractors became obligated to enforce the U.S. Government’s zero-tolerance policy regarding trafficking – is telling. It reflects a resurgence in media and Congressional interest in the treatment of third country nationals (TCNs) deployed with U.S. forces abroad. A recent New Yorker article highlighted alleged abuses against these workers.[1] Members of Congress also expressed outrage at the failure to implement the stated zero tolerance policy at a recent House Committee on Oversight and Government Reform subcommittee hearing titled, “Are Government Contractors Exploiting Workers Overseas? Examining Enforcement of the Trafficking Victims Protection Act.”

On a regulatory level, issuance of the new rule reflects findings in legally-mandated studies evaluating trafficking compliance.[2] A January 2011 study found that DoD contracting officers generally “lack[ed] an effective process for obtaining information pertaining to trafficking within DoD.” Id. at i. A prior study published in 2010 observed that contractor-initiated reporting to DoD was the only method for DoD to obtain timely and relevant information on trafficking incidents. Id. at 9. As DoD rarely issues rules designed to emphasize the existence of present regulations, we can presume that these findings contributed to the issuance of the new rule. The rule mandates that DoD’s contracting personnel proactively engage to ensure compliance.

Background of Trafficking Rule

Under the February, 2009, FAR clause 52.222- 50 - Combating Trafficking in Persons, contractors and their employees are forbidden to: (1) engage in a “severe form of trafficking;”[3] (2) procure commercial sex acts; or, (3) use forced labor in the performance of the contract. The clause, or its Alternate I version for contracts performed outside the United States, applies to all contracts and subcontracts, including those for commercial items. FAR 22.1705. Contractors and subcontractors are obligated to educate employees on prohibited trafficking activities. Contractors and subcontractors must discipline employees found to have violated the rule, and must notify the contracting officer of violations and action taken against employees. FAR 52.222-50(c)-(d). Failure to comply can trigger a host of consequences, including termination for default, suspension of contract payments, loss of award fee, and debarment. FAR 52.222-50(e).

Historical Administration of the Trafficking Rule

Prior to this new rule, some oversight procedures were in place within DoD. Specifically, DoD Inspectors General, the Department of State, and the U.S. Agency for International Development are required to investigate a sample of U.S. Government contracts with a heightened risk of trafficking.[4] DoD’s January 2011 report focused on contracts worth $5 million or more in the U.S. Central Command area of responsibility, which includes Iraq, Afghanistan, and Kuwait.[5] Of 368 contracts examined, forty-seven percent omitted mandatory FAR clause 52.222-50 entirely or included an outdated or incorrect version. Id. at 5-6. Twentyone percent of the contracts did not contain any form of the clause, while twenty-six percent contained an incorrect version. Id. The report noted that the absence of the trafficking clause could negatively affect both contractors and contracting officers alike. Contractors might remain unaware of the government’s “zero tolerance” policy and self-reporting requirements and contracting officers might be unable to apply remedies when violations occurred.

The January 2011 report identified only one trafficking-related incident involving a DoD contractor or sub-contractor employee. In that case, the employee was fired by the contractor and barred from the installation by the commander. Id. at 7. But in November 2011 testimony before a House Committee on Oversight and Government Reform subcommittee, the chief operating officer of the Army and Air Force Exchange Service reported that the Exchange’s enforcement and surveillance efforts had “liberated several [TCNs] from involuntary servitude.” He noted that those individuals had been able to “return to their own countries.”[6]

Effects of the New Surveillance Rule And Recommendations for Compliance Procedures

Because of the new surveillance rule for contract administrators, contractors are likely to see increased interest in their anti-trafficking policies and internal compliance systems to address education and prevention of human trafficking. Contractors should anticipate greater scrutiny of their employment practices and compliance with reporting requirements. The 2011 DoD report offers some useful examples of successful DoD efforts within the U.S. Central Command’s area of responsibility. Id. at 11. These examples can serve as a guide for contractors seeking to ensure compliance, especially on overseas contracts.

The Army and Air Force Exchange Service (Exchange Service) hires local nationals throughout the world. The Exchange Service issues a “Bill of Rights” for employees listing their right to: hold their own passport; receive agreed-upon wages on time; take lunch and work breaks; and leave the place of employment. The document is posted on employee bulletin boards in English and eight other languages.

The contracting officer in Kuwait charged with overseeing the Exchange Service routinely conducts “passport checks” of employees in stores and concessions to ensure that the employees have possession of their own identity documents. The contracting officer’s representative also regularly inspects housing conditions to ensure the contractors comply with minimum health and maintenance standards. The Navy Exchange Service in Bahrain requires all managers, associates, and vendors to take trafficking training. Quality assurance programs and audits incorporating trafficking compliance have already been adopted in Kuwait by the Army Contracting Command (ACC) and Defense Contract Management Agency (DCMA). The ACC interviews contractor employees. The interview questions have been translated into five common employee languages, enabling quality assurance specialists to pose standard questions concerning pay, living conditions, and retention of passports. The DCMA conducts trafficking audits of contracts they administer by questioning contractors concerning their knowledge and understanding of FAR clause 52.222-50. The DCMA in Iraq likewise conducts routine inspections of employee camps to review health, sanitation, housing suitability, employee pay and timeliness, and passport retention. The creation of new reporting mechanisms for trafficking incidents, enhanced training for contracting officers, and increased attention on the Hill will likely yield an upswing in enforcement of the clause. Contractors should consider the following procedures to educate employees about trafficking. The focus should be on preventing trafficking, particularly on overseas contracts where the risk of hiring forced labor is highest:

  1. Conduct training for all employees on the government’s policy of “zero tolerance” on trafficking. The training should cover what constitutes trafficking and the obligation to disclose violations to the contracting officer.
  2. Establish an employee “Bill of Rights” that lists the rights of employees to hold their own passport, receive agreed-upon wages on time, take lunch and work breaks, and leave the place of employment.
  3. Ensure that communications with local employees are translated into appropriate languages.
  4. Inspect employee living conditions to ensure compliance with health and safety standards.
  5. Routinely question employees to ensure their rights are being respected. Use periodic interviews to identify any instances of forced labor or involuntary servitude.
  6. Conduct due diligence on any labor recruiting agencies used to recruit foreign workers. Common recruiting abuses include debt bondage, forcing recruits to pay large sums of money in order to obtain the work billets, holding of passports, and failure to pay wages.

Conclusion

The anti-human trafficking clause in the FAR is not new. But until now, contractors have faced little scrutiny from contracting authorities on compliance. The emergence of a new effort to mandate surveillance of contractor compliance with trafficking rules may change the landscape for contractors. Contractors should review their compliance programs to strengthen systems to prevent, identify, and remedy forced labor and trafficking violations. This is particularly important for contractors operating in “heightened risk” areas such as Iraq, Kuwait, Afghanistan, and other overseas locations.

Anti-trafficking compliance is not only about the federal regulations. With the amendment of the Trafficking Victims Protection Act in 2005, the U.S. Government also gained extraterritorial criminal jurisdiction for prosecution of human trafficking by federal contractors, their employees, and subcontractors at any tier.[7] This new surveillance rule, along with increased data collection and enhanced case referral mechanisms, could lead to criminal allegations. As a result, contractors should verify the robust nature of their compliance efforts, including enhanced due diligence and monitoring of labor suppliers.