Corporate Social Responsibility And Labour Rights:

An International Labor Lawyers Perspective

Earl V. Brown, Jr

The term: corporate social responsibility has many meanings in many different
contexts; it can be viewed as just an opportunistic advertising slogan, or as a sincere
effort at ethical social behaviour, or as strategy for sustainable corporate development in a
world of increasing media scrutiny. The term labor rights, however, is more precise.

Since 1948, when the Universal Declaration of Human Rights was promulgated, core
labour rights have been recognized by international lawyers as not mere articulations of
economic interests but as full-fledged human rights. Workers have the right to form
and join trade unions, and to just and favorable conditions of work [and]
remuneration... precisely because establishing such rights pertaining to employment is
essential to maintaining an existence worthy of human dignity It was also
understood in 1949 that these substantive human rights entailed, necessarily, concomitant
rights to an effective remedyfor acts violating such fundamental rights.1

But implementing worker rights in a private sector economy is difficult, even in stricter
law enforcement environments. Law and regulation are inevitably reactive and slow
processes; access to legal and administrative systems to compel enforcement is always
relatively expensive. Private employers have the initiative, the ability to act first. They
can hire and fire, cut pensions and benefits, shut down plant and move production. It is
then up to government and workers to react to these often economically preemptive
moves.

Over time, employer interests also have the economic power to dominate the most
aggressive regulators and strictest courts. Workers and their organizations can only
intervene in legal environments that seem to cater to the employers. Government
regulators and legal responses are too slow and too often a critical step behind. In many
cases, the determined employer can violate core labor rights over time with relative
impunity.

Labor and Employment Law Counsellor

1
Articles 8; 23, Universal Declaration of Human Rights, G.A. Res. 217A (III),
10 Dec. 1948, 3 U.N. GOAR Supp. (No. 11A) 71, U.N. Doc. A/810, 7 (1948).

1
One principal means employers have adopted to evade legal obligations to workers is by
manipulating the corporate form so that the responsibility for labor law compliance is
shifted down the subcontracting chain. Profit flows up the chain of legal entities, but
responsibilities and liabilities to workersfor wages, decent work places, compensation
for factory deaths and injuriesare rolled down the chain, to the least resourced and
responsible business entity. Such manipulations of the corporate form are all too often
motivated by a desire to gain competitive labor cost advantages.

In market economies, a failure to broadly implement labor laws can cause a downward
spiral in overall labor standards. This occurs when labor enforcement is not able to
remove abusive labor practices from the competitive equation between employers. The
logic is simple. Employers who violate basic standards, such as timely payment of
minimum wages and overtime for work performed, obtain a competitive labor cost
advantage. This illegally derived advantage rewards the law violator and undermines the
incentives to comply with labor law standards for other employers.

Unaided, market mechanisms seem unable to correct this downward dynamic. To the
contrary, the working of the labor market seems to exacerbate it. The market rewards the
employer who evades fundamental labour norms. The cheat lowers his labor costs and
therefore can bring his goods to market more cheaply. This downward spiral brings
with it successive rounds of lowered labor standards. This is one reason that labour rights
can never be severed from labor law remedies, and the state of labor law enforcement and
implementation, as the Universal Declaration, with its insistence on effective remedies
in all areas of human rights, including labour rights, shows.

In this complex economic context, corporations have increasingly adopted policies or

codes of conduct with respect to a range of social norms, including labor standards.
Some are very general statements, too vague to actualize and seemingly designed for
public relations. Others are detailed procedures for complying with labour laws,
including complex wage and hour and occupational health and safety requirements. But
even the most detailed statements of the corporate commitment to implementing labor
and employment laws must necessarily remain aspirational if the internal corporate
organization does endow labor compliance officers with sufficient authority. Without that
authority to override production and sales officials, these most detailed and serious of the
codes of conduct will remain ornaments on a shelf.

Another, more fundamental problem afflicts codes of conduct. The corporation asserting
its social responsibility to workers is often a brand that cannot afford to have its brand
image tainted by allegations of worker abuse in the minds of socially concerned

2
consumers. Yet the very labor cost dynamic set forth above makes this exercise to protect
the brands social image a problematic one. The brand is seeking ever-lower labor costs
to maximize profits. One strategy in this search for lower labor costs entails shedding
home base employees and shifting production to low labor cost environments. Most of
the employees and entities to be held to the labor norms articulated in the code of conduct
are consequently down the supply chain; legally independent entities outside the direct
reach of the corporation promulgating the code. The brand then seeks to reintegrate the
issue of labor law compliance by enforcing its code of conduct by means of tenuous
contractual requirements imposed on distant and independent subcontractors.

These subcontract labor clauses are supremely difficult to implement. The brands
compliance officers, even if they are nominally empowered to enforce labor rights
clauses both within the corporation and externally, have a monumental task. Often they
are deceived by the subcontractor, and often overridden by their own production and
sales colleagues. Some brands go so far as to subcontract their compliance efforts to
outside auditors, who then ship out untrained personnel at high hourly rates to audit
subcontractor factories.

It is often the brand that establishes the labor cost dynamic within which labor law
compliance unfolds. More often than not, the brand is engaged in subcontracting
production precisely to damp down the costs of social compliance, including labor law
compliance. They have shed their own home country workers, and the attendant labor
law and pensions costs. They move factories from developing country to developing
country in search of the lowest social costs. In bargaining with subcontractors, these
brands impose social responsibilities downstream while ratcheting down the costs of
production. They pay the subcontractor less but demand social responsibility in the
bargain; in short, they demand a state of social responsibility for which they are unwilling
to pay.

This is not to gainsay the sincerity of many corporate officers in promulgating social
responsibility as an overriding corporate objective. It is, after all, a flat legal requirement
that corporations obey social laws, including labor laws. Codes of conduct, seen in that
legal light, are simply tools to insure compliance with existing legal obligations.
Advocates of codes of conduct and other corporate social responsibility initiatives would
also argue that extending the labor law compliance obligations beyond the confines of the
corporation to subcontractors is a voluntary step that goes beyond legal requirements.

This may be true as a matter of legal technicality. However, the market dynamic that
drives corporations to lower costs counsels that advocates of worker rights continue to

3
press for public enforcement of the labor standards. Labor standards, like other social
standards, are in the end public goods and affect the entire society. Workers, who are
adequately housed and paid, have leisure time and opportunities to nurture and educate
their families, are essential to a developed democratic and consumer society. Labor law
compliance is a public good and a public responsibility that can never be privatized or
commodified in some corporate auditors compliance program.

No doubt there is too much made in US law (my home jurisdiction) of adversary systems
and conflicts of interest. The US labor relations set-up has been widely criticized as too
lawyer driven and adversary. Many of these criticisms are telling. But, at the end of day
it is also true that private companies have their own self-interest in mind and cannot
therefore be relied upon to substitute for public enforcement of public norms.

This public enforcement need not be bureaucratic or beset by courtroom litigation. The
jurisdictions of the European Union exhibit many creative and non-conflictual models for
enforcement of public labor norms. Consultation duties, that is requirements that
employers provide timely information to workers and their representatives on future
economic plans, on occupational health and safely hazards and on training, work to
promote non-adversarial labor law compliance. A duty to bargain with worker
representatives at all levels reinforces compliance in ways that do not involve lawyers
and litigation.

In a private enterprise system with a vast diversity of economic actors, all furiously
perusing their own interests, labor law compliance and corporate social responsibility is
best attained by installing mechanisms by which workers and employers can
autonomously adjust grievances, including those arising from the implementation of
basic labor law standards which should constitute the floor for labor cost competition.
Labor law should set the floor below which labor standards cannot fall. If workers
encounter substandard conditions, those are most quickly and inexpensively (therefore
most efficiently) remedied in bargaining with the employer. This most efficient solution,
however, requires partnerships in industrial relations that include autonomous
mechanisms for worker voice. Without trade unions to channel work voice effectively
and resolve disputes before they become legal or political issues, corporate social
responsibility to workers will remain an aspiration.

This is not to deny, for example, that codes of conduct have not served to eliminate in
some sectors some of the most abusive practices, such as use of carcinogens and other
practices. But, to bow to Shakespeare, labor rights implementation without workers
organizations is like staging Hamlet with the Prince of Denmark!

4
Earl V. Brown, Jr
Labor and Employment Law Counsellor
American Center for International Labor Solidarity
Bangkok, Thailand
Tuesday, November 14, 2017