I. Background
Fair labour advocates have documented the increasing use of foreign labour recruiters (FLRs) by business owners to bring temporary foreign workers to the United States,Footnote 1 and the associated fraud and abuse often permeating these practices.Footnote 2 Many FLRs are complicit in the trafficking of workers: ‘[R]egardless of visa category, employment sector, race, gender, or national origin, internationally recruited workers face disturbingly common patterns of abuse, including fraud, discrimination, severe economic coercion, retaliation, blacklisting, and human trafficking … [T]hese abuses are systemic rather than visa specific.’Footnote 3 Cases brought in federal courts chronicling FLR abuses are also increasing.Footnote 4
The number of temporary workers in the USA grew from three to four million workers from 2012 to 2018.Footnote 5 The H-2A program tripled in size from 80,000 approved jobs in 2008 to over 257,000 in 2019.Footnote 6 In 2013, 44 percent of employers hiring under the H-2A and H-2B programs alone planned to use third-party recruiters.Footnote 7 Studies based on worker interviews show that 80–94.5 percent of workers are recruited through intermediaries.Footnote 8
Federal action proposing a robust framework for regulating FLRs was passed in the Senate in 2013 as part of comprehensive immigration reform, but heavy lobbying from business interests, including the U.S. Chamber of Commerce, ensured that the Republican-led counterpart legislation in the House died in Committee.Footnote 9
II. Documented Abuses by FLRs in California
California is the leading US destination for temporary foreign workers, receiving 20 per cent of the total number annually. As of 2019, this constituted 150,000 individuals. Research into California’s agriculture industry revealed that of 1,000 workers interviewed, over 300 were trafficked for labour and all had contact with a recruiter.Footnote 10 Recruiting fees ranged from US$2000 to US$5000. Pay was reduced to about US$1.50 per hour by fees imposed on the workers for transportation, food, rent and visa processing. Identification documents were confiscated on arrival, with freedom of movement severely restricted. Threats of deportation were constant.Footnote 11
III. California Takes Action
In 2013, California Senator Steinberg introduced SB 516 based on the federal model passed in the Senate. The law:
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(1) Establishes a registration program for FLRs
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(2) Requires FLRs to provide comprehensive information to foreign workers, in a language they understand, about the terms of proposed work in California;
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(3) Prohibits FLRs from charging a recruiting fee, soliciting workers’ services in the absence of a bona fide contract from a potential employer, or unilaterally changing the terms of employment;
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(4) Institutes reporting obligations for those employers using FLRs and mandates use of registered FLRs;Footnote 12
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(5) Imposes civil and criminal penalties on FLRs and employers who violate the law;
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(6) Provides the California Department of Labor with substantive enforcement authority; and
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(7) Provides aggrieved workers with a civil cause of action to redress harms.
SB 516 passed both houses of the California Legislature with bipartisan support (Sen: 38–0; Ass: 54–24). The Governor returned the bill to ensure the fees covered the program’s costs.Footnote 13 SB 477 addressed these concerns, again passing both houses of the Legislature with overwhelming bipartisan support (Sen: 34–0; Ass: 66–10). The Governor signed the bill in September 2014 with an effective date of 1 July 2016, making it the first law on either the federal or state level requiring FLR registration.
Significantly, from the business community’s perspective, the law imposes few obligations on employers. Those who directly recruit temporary workers are exempt. Those using an FLR only need to provide the California Labor Commissioner with the FLR’s name. Most importantly, employers avoid liability for an FLR’s conduct if they use a registered FLR.
IV. Barriers in Implementation
The intent of SB 477, as reflected in its legislative history and accompanying fiscal analysis, makes clear that SB 477 was designed to cover all FLRs regardless of the visa categories, with two limited exceptions.Footnote 14 Yet, the law has been interpreted as applying solely to FLRs recruiting H-2B workers. To remove any doubt about the law’s scope, AB 1913 (Kalra) was offered to provide the necessary technical correction.Footnote 15 Through successful lobbying, the California Chamber of Commerce, aligned with the Growers’ Association, derailed the process by alleging that SB 477 was never intended to cover all temporary workers.
Without this legislative fix, the law covers only about 3,000–5,000 workers, rather than the intended 130,000–150,000.Footnote 16 Moreover, four years after the bill’s effective date, not a single FLR has registered with the state. In May 2020, the California Division of Labor Standards notified 200 employers it believes may have violated the law, signalling that enforcement actions are beginning.
V. Why Businesses Should Support Legislation Regulating FLRs
Unscrupulous FLRs charge both employers and workers fees for their services. This ‘double dipping’ often takes the form of excessive costs for recruiting-related activities. Some FLRs engage in blatant fraud, recruiting workers for non-existent jobs, doctoring versions of legitimate documents, and fabricating websites and profiles of employers they purport to represent, sometimes using the names of real employers who are certified to offer temporary work visas.Footnote 17 These disreputable recruiters vanish when an employer or worker seeks to hold them accountable for their misdeeds.Footnote 18
A. Employer Liability for Labour Contractor Malfeasance
Employers may be held responsible for the damages arising from the illegal conduct of FLRs they hire. In Ulloa v Fancy Farms, Inc.,Footnote 19 the Court held a Florida strawberry grower liable for illegal recruiting fees collected by its FLR. Federal regulations require that an employer contractually forbid a recruiter from seeking or receiving such fees. The Court held that the farm employer could reasonably have foreseen that its failure to contractually prohibit the contractor from assessing recruiting fees would result in the workers having to pay them.
This case represents one of the first times a grower has been held responsible for illegal placement and hiring fees paid to a recruiter. Given this precedent, employers should anticipate similar liability in the future, especially in California where the practice is rampant.Footnote 20
B. Liability for Financial Gain Derived from Knowledge, or Reckless Disregard, of Labour Trafficking by Others
The Trafficking Victims Protection Reauthorization Act (‘TVPRA’) imposes criminal and civil liability on third-party beneficiaries of the actions of traffickers if they knowingly benefit, ‘financially or by receiving anything of value,’ from participation in a venture which they knew or should have known violates the Act.Footnote 21 A growing number of federal criminal cases, Footnote 22 as well as civil actions, Footnote 23 have been brought against businesses under this section.
Use of TVPRA provisions by aggrieved workers carries much greater risks to employers than claims under other employment statutes. The TVPRA, for example, has a ten-year statute of limitations versus the Fair Labor Standards Act’s two-year statute for federal minimum wage and overtime claims, relaxed standards for establishing an employment relationship between the parties, and immigration protection to foreign workers allowing them to press their claims.Footnote 24 Cases brought under the TVPRA have resulted in very high compensatory and punitive damage awards.Footnote 25
C. Unscrupulous Labour Contractors Unfairly Compete with Businesses and Legitimate FLRs
Fraudulent activities enable FLRs to reduce foreign worker wages below nationally established levels, creating a competitive disadvantage for employers who pay the prescribed amounts.Footnote 26 Placing workers in a heightened state of vulnerability through abusive recruiting practices harms not only the workers, but also the broader labour pool by triggering a downward force on labour standards. Domestic workers are further harmed as they become more expensive to hire than their foreign counterparts, especially in the H-2A system.Footnote 27
Precisely because of the direct link between the illegal fees collected by unscrupulous contractors and labour trafficking, a number of private sector businesses have banded together with non-governmental organizations to eliminate recruiting fees in their supply chains. The Leadership Group for Responsible Recruitment’s pioneering effortsFootnote 28 are supported in the global investment community by organizations including the Interfaith Center on Corporate Responsibility that also champion the elimination of recruiting fees and other forms of financial intimidation applied to workers, seeing them as a ‘concealed gateway to conditions of forced labor.’Footnote 29
Efforts within specific industries to eliminate abusive practices in their supply chains are also becoming more widespread. In 2018, the American Apparel and Footwear Association launched ‘a proactive industry effort to address potential forced labor risks for migrant workers in the global supply chain’ in promulgating its ‘Commitment to Responsible Recruitment’, which includes a commitment that no worker should pay for his or her job. As of February 2020, 144 companies have signed the Commitment.Footnote 30
SB 477’s provisions are strikingly similar to these voluntarily adopted practices. As such, they represent contemporary ‘best practices’ as identified by the global business community itself and should be readily embraced and endorsed by all reputable businesses.
VI. Conclusion
Companies that support the proposed legislative fix to SB 477 and reintroduction of a comprehensive federal provision governing FLRs’ conduct will directly benefit from this needed oversight. Consumers are increasingly attuned to unconscionable supply chain practices, showing their displeasure through boycotts and willingness to pay more for products from responsible companies.Footnote 31 Supporting regulatory provisions that go beyond voluntary commitments benefits businesses by reducing reputational risk, enhancing their standing as trustworthy companies, and increasing customer satisfaction. Information on bona fide FLRs further allows companies to improve operations by eliminating unnecessary middlemen and planning more effectively over the long term.Footnote 32 Employers further benefit through their ability to secure employees willing to provide essential services and jobs in key areas that many American workers are unwilling to perform, even under a competitive compensation formula that is not artificially depressed by exploitative labour practices. The business community will be best served if it encourages individual enterprises, as well as related trade associations, to support advocacy efforts increasing SB 477’s protections.
