Lead Your Industry By Preventing Slavery and Human Trafficking In the Supply Chain

On January 1, 2012, California’s Transparency in Supply Chains Act, (“SB 657”)
California Civil Code Section 1714.43(a) becomes effective.

This means that every “retail seller” and “manufacturer” “doing business” in California that has annual “gross receipts” in excess of $100 million (as of January 1, 2011) will need to:

1) To disclose to what extent, if any, it evaluates and addresses the risk of slavery and human trafficking in its products supply chain and whether a third party conducted the evaluation.

2) To disclose whether it audits its suppliers and whether the audits are independent and unannounced.

3) To disclose whether it requires its direct suppliers to certify that materials of the products comply with applicable laws on slavery and human trafficking.

4) To disclose whether it holds employees and suppliers accountable and if so, what the internal accountability standards are for employees or suppliers who fail to meet the standards.

5) To disclose whether it trains employees on mitigating the risk of slavery and human trafficking in the product supply chain.

The required disclosures must be posted on the company website with a conspicuous and easily understood link to the information on the homepage. (If the company does not have a website, a consumer must be provided the disclosures in writing within 30 days of requesting it.)

In the event that you might wonder how big an issue slavery and human trafficking is, here are some staggering statistics provided by CASTLA*:

· According to CIA estimates, as many as 15,000 to 17,500 men, women and children are trafficked into the United States every year.

· States such as California, Florida, New York, Nevada and Ohio are particularly vulnerable to human trafficking because of factors such as: proximity to international borders, number of ports and airports, significant immigrant population, and large economy that includes industries that attract forced labor.

· Los Angeles is one of the top three points of entry into this country for victims of slavery and trafficking. The diverse communities of this sprawling city make it easier to hide and move victims from place to place, making it very difficult for law enforcement to locate potential survivors.

· It is the fastest growing criminal enterprise in the 21st century – a nine billion dollar industry.

SB657 was enacted with the intent to inform consumers as to which companies are acting socially responsible so that consumers can choose not to patronize those that are not socially responsible, and to even the playing field for socially responsible companies that refuse to work with suppliers that use forced labor in competing against companies that have reduced costs because they do.

What is interesting about SB657, however, is what it does NOT do. It does NOT require anything beyond the disclosures set forth above. For example, a company can comply with the Act my stating that it has no policy regarding and does not monitor labor conditions involved in the production of its products or the materials incorporated in its products. It also does not have to actively ensure that its suppliers monitor labor conditions. Also, it does NOT apply to companies with annual gross receipts less than 100 million dollars. Last, it’s remedy for violating SB657 is an action by the State attorney general for injunctive relief. In other words, there is no financial penalty, which in itself undermines its “bite,” so to speak. (The Act does not limit remedies for other statutory violations that give private right of actions, injunctive relief, damages and attorneys fees.)

Despite these limitations, SB657 gives all companies that manufacture or sell products and their suppliers an opportunity to demonstrate leadership by going beyond the statutes disclosure requirements. Companies can “raise the bar” and act beyond the basic disclosure requirements of the statute. These “above and beyond” actions may include:

1) Raising awareness in the industry about slavery and human trafficking with press releases and PR campaigns that show their company's commitment to eradicating slavery and human trafficking.

2) Auditing the companies supply chain and ensuring that there are multiple avenues for employees to file grievances in the event that they are aware of unsafe work conditions, unfair labor practices and other conditions which give rise to human trafficking.

3) Training their suppliers about steps to take in preventing human trafficking and slavery in their countries and industries.

4) Refusing to do business with suppliers known for employing recruitment agencies that make the workers pay broker/agent/ recruitment fees or work visas.

5) Donating to nonprofits and organizations dedicated to eliminating human trafficking around the world.

Some online resources* on the topic include:

· Verite has a website, which is dedicated to stopping human trafficking and has many downloadable documents on topic.

· Apple has been transparent with its audit and report: It's audit was conducted a nongovernmental organization, Verite and the Fair Labor Association.

· The Human Rights Organization just put out a 2011 report.

Finally, companies that do not have to comply with the statute because they do not have receipts less than $100 million or do business in California can also take a stance against slavery and human trafficking thereby making them attractive as potential partners already in compliance to companies that are required to comply with it.

For companies that do not do business in California, note that on August 1, 2011 Rep. Carolyn Maloney (D-NY) introduced H.R. 2759, the Business Transparency on Trafficking and Slavery Act, a bill modeled after the California Transparency in Supply Chains Act. The bill would require companies to disclose efforts to identify and address the risks of human trafficking, forced labor, slavery, and the worst forms of child labor in their supply chains.

* I do not endorse or do business with any of these businesses or organizations.

An Occasion For Reeducation from the Lebromination

Lawsuit Prevention Strategies Employers Can Gain From Dan Gilbert’s Reaction

Most employers do not lose employees in the public and spectacular way that Dan Gilbert’s Cleveland Cavalier’s lost Lebron James to the Miami Heat on July 8, 2010. Yet, almost all business owners and CEOs can relate to the potential damaging effect that a key employee’s abrupt exodus can reek on future business profits and worth. That is why it is critical that business owners and managers learn from the mistakes that Gilbert made in writing an Open Letter to Fans on the Cavalier’s website in immediate reaction to James’ decision. The Open Letter not only created potential for legal ramification and lawsuits, but was a blistering example of poor leadership in the wake of an employment crisis.

Nevertheless, using it as an example of how employers/managers should not react when an employee announces his/her departure, the following Lawsuit Prevention Strategies emerge:

Lesson #1: Amend Before You Send
Obviously, for many managers and employers, business is not always “just business” and can become very personal. Gilbert, who felt he had a personal relationship, an expectation of loyalty and an alliance with Lebron James, expected James to respond in kind with a decision to re-sign with the Cavaliers. Feeling deeply wronged, Gilbert’s Open Letter was a reactionary, scathing rebuke of Lebron James departure. He said,

“This shocking act of disloyalty from our home grown "chosen one" sends the exact opposite lesson of what we would want our children to learn… this heartless and callous action can only serve as the antidote to the so-called "curse" on Cleveland, Ohio. The self-declared former "King" will be taking the "curse" with him down south…and will unfortunately own this dreaded spell and bad karma.”

Ouch! Making a common mistake that managers make in anger that often creates litigation, Gilbert posted his comments on the web without first getting advice about the legal ramifications of this publication. Had he consulted an employment lawyer or even the Cavalier’s counsel (presumably he did not), he would have been advised to amend his comments and informed that brutal and personal criticisms about one’s former employee can leave an employer and company open to devastating liability. Suppose, for example, the Miami Heat decide to drop James, fearing that they signed a “problem” employee. Although unlikely, this is a scenario that does occur frequently in today’s corporate America. In this case, Lebron James (or the former employee) can sue Gilbert (his past employer) for interference with future contract, defamation and intentional infliction of emotional distress. Perhaps a Cavalier fan will feel justified or empowered by Gilbert’s stating,

“Some people think they should go to heaven but NOT have to die to get there.”

If they harm James or his family, he can sue Gilbert personally for the foreseeable damages incurred.

Lesson #2: Minimize the Damage, Don’t Compound It
No one wants to lose a key employee and the worst way to do so is without notice or a plan for succession, but when that does happen, as it does in business, management must act in a way that minimizes the damage done. In the case of Gilbert’s Open Letter, not only did he compound the damage done by receiving a fine for $100,000 from Commissioner David Stern, but he also undermined the future of the Cavaliers’ ability to attract free agents that could succeed James in talent and experience. Will free agents desire to work for Gilbert in light of his unprofessionalism and vitriol? If so, it will be with Rod Tidwell-esque familiarity - “Show Me the Money.” That is, Gilbert will be paying a premium for his demonstrated unattractiveness as an employer. Consequently, his actions have cost the Cavalier’s even more than the loss of James, alone.

Lesson #3: Show Leadership in Crisis
Finally, Dan Gilbert may go down in history as the biggest example of poor sportsmanship that there ever was. Soon after James announced his decision to leave the Cavaliers, Gilbert changed the price of the Lebron James Fathead poster (pictured above) to $17.41. Fathead is a company owned by Gilbert and the new price is a reference to the birth year of Benedict Arnold, a U.S. general who defected to the British side during the American Revolutionary War and whose name has become synonymous with “traitor.” Rather than finding innovative ways to lament the past, Gilbert should be using the days after James’ announcement to reinvigorate his remaining employees, talent and fans for the future. In the wake of a key employee’s departure, remaining employees look to management for reasons to stay, reasons to reinvent and reasons to remain optimistic. Managers and owners must use the crisis as a leadership opportunity to remind those “left behind” that the “company” is not defined by one employee and that the remaining employees extra efforts to sustain the entity throughout uncertainty are appreciated and recognized.

Can you think of other example of good/bad leadership in the wake of a key employee’s departure? Let me know.

California’s 4th Dispenses “Wild Justice”

On December 10, 2009, in Haberman v. Cengage Learning, 180 Cal.App.4th 365 (2009) the California Court of Appeals for the 4th Circuit affirmed the trial court’s summary judgment in favor of the employer on the employee’s claim that she was sexually harassed and retaliated against. The ruling in this case reminds me of a famous quote:

“Revenge is a kind of wild justice, which the more man's nature runs to, the more ought law to weed it out.” (Francis Bacon Sr.)

In this case, the Court of Appeals did not ignore the peculiar timing of the allegations made by Cengage Learning’s employee and ruled in favor of the employer, weeding out the “revenge” lawsuit at the summary judgment phase. The facts of this case reveal it as a “revenge” lawsuit.

Cengage Learning, a textbook publishing company, employed Alicia Haberman as a sales representative from 2004 through 2008. During her employment at Cengage Learning, Haberman underperformed, consistently failing to meet her annual sales goals. For years, this underperformance went virtually ignored, but in 2007, when Cengage Learning hired on a new district sales manager, Rick Reed, he began to hold Haberman accountable to her projected sales goals. Reed gave Haberman verbal and written notice of his expectation of her improvement. He created an action plan for her improvement as it pertained to her “gap to goal.” He discussed his concerns over Haberman’s failure to improve with the President, Vice-President and national sales manager of Cengage Learning. He gave Haberman a final chance to demonstrate improvement. On September 10, 2007, Reed told Haberman that if she did not show improvement she would be placed on a Performance Improvement Plan (PIP). Finally, on October 10, 2007, Reed placed Haberman on a PIP. Presumably, failing to meet the PIP would be grounds for dismissal.

A few days later, Haberman conveniently remembered that she had been sexually harassed for the past three years by the company’s national sales manager, Eric Bredenberg. On October 12, 2007, she made a complaint with Cengage Learning’s Human Resources department stating that she had “enough” and was being harassed. In November, she took a medical leave of absence and never returned to work. (Her employment was terminated effective August 31, 2008.)

In November 2007, Haberman filed a complaint in state court against Cengage Learning, Rick Reed and Eric Bredenberg alleging sexual harassment, retaliation, breach of contract and intentional infliction of emotional distress. The trial court granted the defendant’s motion of summary judgment. On appeal, the Court of Appeals reviewed the trial court’s decision and considered all the evidence set forth.

In her complaint, Haberman alleged she had been sexually harassed by Bredenberg in 2005 with comments he had made. These comments included “Wow. You look so pretty.” A school administrator was “pretty hot for being an older woman.” A comment that a supervisor’s father, named Richard, was called by his son of the same name, “Big Dick.” A comment that she was “drop dead gorgeous.” When driving his car behind her in a parking garage, a comment on the phone that he was “coming up right behind her and that it felt pretty good.” A comment that a text book author had “the hots” for her. A comment that his grief counselor advised him to wait before entering into another relationship and “did she know someone who just wanted to have sex?” In addition, these conversations were not one-sided. Court papers showed Haberman also sent emails and made comments to Bredenberg, such as, “Thank you Eric! You are too good!” “I think the picture of the week should have been a muscle pose of you!!!” In addition, Haberman alleged that another sales person who failed to meet sales goals was not placed on a PIP; therefore, her discipline was a mere pretext for harassment.

Usually, California trial courts do not grant summary judgment in harassment cases because any questions of fact should be decided by a jury after hearing the evidence rather than a judge based on his/her reading of the paperwork. However, in this case, the Court of Appeal carefully evaluated the evidence and concluded that the trial court correctly decided the motion and affirmed the court’s summary judgment. The Court found that although Haberman alleged harassment from 2004 through 2007 that the comments were sporadic, isolated, occasional and trivial falling short of meeting the “severe and pervasive” standard for a hostile work environment case. Second, the court rejected her allegation of retaliation since the alleged retaliatory conduct – the decision to put her on the PIP - actually predated her complaint to human resources and therefore could not have been in retaliation for her complaint. The Court similarly disposed of the breach of contract claim and intentional infliction of emotional distress claim.

What Proactive Lawsuit Prevention Strategies Did Cengage Learning Implement That Saved It from a Costly Lawsuit?

Cengage Learning Implemented Progressive Discipline and Gave Employees Ample Opportunities for Improvement
Cengage Learning provided Haberman with clear performance standards. Therefore, her supervisor had a clear, objective, well documented reason for placing Haberman on the PIP. She had been given many opportunities to improve. She had been given many warnings about her failure to improve. These disciplinary actions were documented. She had been given many opportunities and resources for improvement. Therefore, the court did not find her placement on a PIP a pretext to mask any harassment.

Cengage Learning Had a Grievance Procedure with Various Avenues for Employees to Complain
Once Haberman decided to complain, she did not have to complain to her direct supervisors, Rick Reed or Eric Bredenberg. She knew she could complain to her human resources (HR) department. Therefore, the fact that she never complained about the alleged ongoing harassment to another manager or to HR until after her job security was undermined made the timing of her complaint seem vengeful.

Cengage Learning’s Supervisors’ Did Not Date, Sexually Proposition or Physically Touch Their Supervisees
This case could have easily survived summary judgment if the alleged harassment went only one or two steps beyond inappropriate comments. If Bredenberg had sexually propositioned Haberman or even inappropriately touched her, the Court most likely would have allowed a jury to evaluate whether the conduct was “pervasive” or a “quid pro quo” thereby costing Cengage Learning many more thousands of dollars in litigation expenses.

What Proactive Lawsuit Prevention LEADERSHIP Strategies Should Cengage Learning Have Implemented? (In other words, how can you and your company better protect yourself from “revenge” lawsuits?)

To recap from my previous blog, Proactive Lawsuit Prevention Leadership Strategies invoke the highest standards of conduct. These strategies ask employers to internalize all the externalities inherent in employee relations, even the conflicts which may not necessarily give rise to litigation under the current laws or the externalities that a business is not forced to “pay for” by order of a court. Using Haberman v. Cengage Learning as an example, the company in this case could have demonstrated leadership and better protected itself with the following actions:

Cengage Learning Should Train Their Supervisor’s On the Appropriate Use of Email and Technology
Especially in today’s high tech world, companies must educate their managers about the appropriate use of technology in the corporate environment. The casual and sometimes inappropriate “conversations” documented time and again in email communications between Bredenberg and Haberman are glaringly obvious as “unprofessional” when presented as evidence in litigation. Email communications, voicemails, PDAs and the use of social media are becoming fodder for plaintiff’s counsel in these cases. Techno-harassment is emerging in increasing frequency in the case law. Cengage Learning should have trained its managers to anticipate that email is discoverable and to only put into email communication information that a manager would feel comfortable reading out loud in front of a jury.

Cengage Learning Should Train Managers Not To Talk About Their Sex Lives
Whether the details of a person’s sex or romantic life can trigger a sexual harassment lawsuit or not, managers should not discuss the details of their own romantic or sexual escapades with their coworkers or subordinates nor should they ever ask about someone else’s. This is an area that can easily offend the person listening to these stories or make others uncomfortable. Because the intent of the accused is often irrelevant or secondary to the offense of the receiver of harassment, these stories are unsuitable and too risky in the workplace and among coworkers.

Cengage Learning Should Train Managers to Always Treat Like Cases Alike
Although Cengage Learning was able to demonstrate that Haberman’s placement on a PIP was appropriate and that the other employee who was not placed on a PIP only missed sales goals for two years, (rather than the three years that Haberman missed) this was a near miss for Cengage Learning. The Company should ensure that performance standards and discipline are consistent and objective, rather than based on the subjective opinions or decisions of individual supervisors. If Cengage Learning had objective performance standards that it applied consistently, than Haberman would have been disciplined about her underperformance in the years prior to Reed’s hire. His suddenly holding her accountable would not have triggered her backlash lawsuit or incurred the “revenge” allegations. Treating like cases alike also increases the likelihood that a claim of discrimination or harassment is defeated.

Can you identify any other strategies that a company in this situation can implement to protect it from a “revenge” lawsuit?