New Law Increases Government Scrutiny of Contractor Compliance with Anti-Trafficking Provisions

President Biden recently signed bipartisan legislation reinforcing anti-human trafficking prohibitions. The End Human Trafficking in Government Contracts Act of 2022 builds on the existing anti-human trafficking framework at Federal Acquisition Regulation (“FAR”) § 52.222-50 (Combatting Trafficking in Persons) by requiring agencies to refer contractor reports of potential human trafficking activity directly to an agency suspension and debarment official (“SDO”). Prior to this legislation, contractors have been required to notify their contracting officer and the agency inspector general upon receiving “[a]ny credible information” that a human trafficking violation had occurred. See FAR § 52.222-50(d)(1). Now agencies will be required to refer these reports to their SDOs, creating additional risk for contractors that disclose potential violations.

This legislation – which passed Congress unanimously – demonstrates the federal government's ongoing focus on anti-human trafficking matters – a focus that has been shared across presidential administrations. For instance, in 2015, President Obama significantly expanded the FAR's anti-human trafficking prohibitions, and in 2019, President Trump sought to undertake a comprehensive review of the government's anti-trafficking efforts and released a list of “best practices” to guide contractors. President Biden now joins this ongoing, bi-partisan effort to increase government contractors' focus on human trafficking by signing the recently-passed legislation.

Despite the federal government's longstanding efforts to prevent human trafficking in its supply chain, many questions remain concerning how to comply with the requirements. Below are three of the most common questions we encounter in applying the FAR's anti-human trafficking provision:

• How should a contractor implement the employee notification and discipline requirements? FAR § 52.222-50(c) requires contractors to (1) notify their employees concerning the FAR's anti-trafficking rules, and (b) take action against employees who violate them. Although these requirements appear straightforward, in practice, contractors often face questions as to the level of guidance employees must be provided and whether certain conduct must be prohibited even if it is legal in the place of performance outside the United States, is unrelated to contract performance, and/or occurs outside of employment hours. Uncertainly also remains about whether certain conduct rises to the level of requiring disciplinary action. Now, with the possibility of an SDO review following a report of a potential human trafficking issue, the importance of answering these questions correctly is heightened.
• When does an event of potential non-compliance rise to the level of “credible information” constituting a reportable event? Under FAR § 52.222-50(d)(1)(ii), a contractor is required to notify immediately its contracting officer and the agency inspector general when it receives “credible information . . . from any source” alleging that one of its agents (e.g., an employee) has engaged in human trafficking activity. This “credible information” standard is not defined, and it is unclear what information is sufficient to qualify. Further, although the reporting needs to be “immediate,” it is unclear based on the FAR provision alone the level of investigative activity a contractor may undertake to ensure the information is credible prior to making a report. Given that agencies are now required to forward reports to SDOs, establishing standards for determining whether a contractor has received “credible information” and determining an appropriate timeline for “immediate” reporting will become increasingly important, as contractors will want to ensure that they are responsible in timely reporting necessary information but not submitting reports based on incomplete, inaccurate, or incredible sources.
• For contractors required to institute a compliance plan, what level of due diligence is required? Under FAR § 52.222-50(h), contracts with an estimated value exceeding $550,000 that involve the delivery of goods or services outside the United States must be covered by an anti-human trafficking compliance plan. This compliance plan, among other things, requires the contractor to conduct due diligence on its supply chain and certify to the best of its knowledge that neither it, nor its agents or subcontractors, are engaging in prohibited anti-human trafficking activities. Although many contractors have implemented such compliance plans, taken measures to conduct the due diligence, and submitted certifications to the U.S. Government, questions remain as to the level of diligence sufficient to meet the rule's standards. For instance, many contractors question whether diligence must be conducted beyond their first tier of suppliers, whether site visits to subcontractor locations are necessary as part of the diligence, and whether lower-risk geographical areas or industries may be subject to a lesser standard of diligence in favor of focus on more high-risk areas. Similar to the points above, these questions are likely to remain a focus for contractors, particularly if SDOs begin to take an interest in contractors' compliance plans (and associated certifications) in response to disclosures of potential human trafficking violations.

The End Human Trafficking in Government Contracts Act of 2022 represents the next chapter in the federal government's ongoing efforts to prevent human trafficking activity in its supply chain. Given that this focus has broad bipartisan support and the compliance obligations imposed on government contractors continue to expand, we expect that these issues will become increasingly acute for companies that conduct business with the U.S. Government. Now that reports of potential human trafficking activity will be referred to SDOs, companies would be well advised to review their anti-trafficking compliance programs to ensure they meet FAR standards and assess their readiness to demonstrate their status as a responsible contractor attune to the FAR's anti-human trafficking requirements.