Following up on our recent update, the California Department of Justice has started issuing notifications to California businesses stating that they are subject to the requirements of the Transparency in Supply Chains Act of 2010 (SB 657). DOJ has also issued a long-awaited guidance document explaining its interpretation of the Act’s requirements.
Compliance letters
The letter informs the recipient that DOJ has determined the recipient is a retail seller or manufacturer doing business in California with annual worldwide gross receipts in excess of $100 million. The letter requests that the recipient submit compliance or inapplicability information to DOJ through the Corporate Compliance Portal on the Attorney General’s website.
Guidance
The newly-issued Resource Guide provides a detailed summary of the Act, model disclosures, and recommendations. DOJ has developed its model disclosures and recommendations by reviewing actual disclosures companies put up to comply with the Act (despite no guidance when the law took effect), including screenshots of real examples. Key points include:
- Conspicuous format: direct link at the top or the bottom of the homepage with a clear title, such as “California Supply Chains Act.” The disclosure page should be dedicated to the Act’s required disclosures.
- Verification: confirm whether the company verifies its supply chain, and whether it uses a third-party verifier. Include:
- Methodology for verifying supply chain to evaluate risks of human trafficking and slavery
- Frequency of verification
- Whether the methodology addresses labor brokers or third party recruiters
- Audit: confirm whether the company audits compliance, and whether audits are independent and unannounced. Include:
- Audit methodology
- Selection of auditors
- Timeline
- Frequency
- Number of announced/unannounced audits.
- Certification: confirm whether suppliers must certify compliance with laws regarding slavery and human trafficking. Include:
- Description of certification requirement
- Consequences for violations
- Whether suppliers must certify compliance with labor laws of the countries in which they operate
- Any other measures taken
- Internal accountability: confirm whether the company has internal procedures for assessing compliance. Include:
- Description of standards and procedures
- Parties responsible for monitoring compliance
- Link to the company’s code of conduct
- Description of preventative and corrective actions
- Any measures to educate workers regarding fair labor, including whistleblower protections
- Training: confirm whether the company trains employees and management involved in supply chain management. Include:
- Description of employees being training (category/type)
- Topics covered
- Duration and frequency of training sessions
The guidance also provides two examples of disclosures DOJ deems inadequate.
To date, we are unaware of any DOJ enforcement of the Act, but issuance of this guidance, along with an alert to consumers from Attorney General Kamala Harris, suggests the DOJ could be gearing up. Of note, the only legal remedy for non-compliance is injunctive relief (i.e., a court action to force a company to put up a disclosure), and the guidance is just that – it is not binding – and since the DOJ is not authorized to implement the Act, it is not owed deference by the courts. However, it is possible that the DOJ could assert a CA Unfair Competition Law claim (whether or not that is permissible under the statute is a different issue).
