Lawyers Weekly: Global business requires due diligence on human rights

An article by Donalee Moulton of the Lawyer's Weekly:
The Lawyers Weekly

Vol. 30, No. 11

(July 16, 2010)

FOCUS ON BUSINESS LAW

Doing business in the global marketplace means adhering to human rights legislation in a myriad of countries. Savvy companies are doing their due diligence in an effort to avoid legal problems, protect their reputations and send an important message to employees and customers.

In fact, said Michael Torrance, a lawyer with Ogilvy Renault LLP in Toronto, "human rights due diligence is an issue of growing importance for multinational business."

Here's why. First, Torrance noted, "the marketplace, including individual consumers and business partners, are increasingly demanding that those they do business with are not involved in human rights violations."

"There is always a chance of reputational risk," stressed Connie Reeve, a partner with Blake, Cassels & Graydon LLP's Employment & Labour group in Toronto.

That risk is elevated in virtual reality. "There have been enough examples of companies that have been embarrassed because they have a branch in less privileged parts of the world where children are working, people are working terrible hours[...]. There can be terrible public relations effects when this happens," said Karen Bock, a partner in the Employment & Labour Group at Davis LLP in Toronto.

There can also be money problems. "Investors, particularly institutional investors, are beginning to consider so-called 'social risks' in making investment decisions," noted Torrance. "Due diligence in respect of human rights is seen as a method of social risk management, which can make a company more favourable to investors."

Avoiding problems starts by making a commitment to compliance visible. "The most basic thing a company should have is a policy that expresses their views with respect to discrimination and harassment," said Reeve.

That policy will need to be reviewed as companies move into new territories, noted Bock. "It's rare that you find policies that are one-size-fits-all."

For example, she said, how equal opportunity is dealt with in the U.S. and Canada can be quite different. "Many U.S. companies are required to collect diversity information from employees. In Canada, it's almost the exact opposite approach, and [companies] may run into trouble if they require employees to report that information."

Companies will need to ensure their policies are compliant in the country, state or province in which they are operating. For many companies, their general human rights policies will provide a solid foundation on which to build. "The [general] policies often set a high bar and do not require a lot of revision," said Reeve.

Having a policy is an important step. "The employer, by having a written policy, is saying this matters," said Bock. But "the best companies go beyond having a policy. They train their managers. Some also have hotline numbers [for employees] to reach beyond the local area," noted Reeve.

At its core, noted Torrance, "due diligence involves ascertaining what risks exist, and mitigating such risks through the implementation of policies, practices, and procedures regarding human rights. This process allows a company to act intelligently and consistently, and reduces the likelihood that employees will make decisions that do harm to the company's reputation."

Due diligence requires companies to inform and educate their employees. It also requires them to enforce policies. If they don't, the courts may do it for them. Such legal accountability is a third driver in the area of human rights and due diligence.

Torrance, who writes a blog on corporate social responsibility, noted that the law often has not kept pace with the forces of the market and non-governmental organizations. The latter have created social expectations for business and human rights that have had a real impact on business practices.

"However," Torrance said, "in some cases, the state has begun to act as a sort of 'meta-regulator' creating liability for failure to meet human rights standards, but leaving the question of compliance to self-regulation by the corporate actor itself."

There is also a strong possibility that human rights violations will be a greater focus for employees in the future. "There are likely to be more complaints as workers become more educated," said Reeve.

"From the point of view of human rights commissions across Canada," she noted, "they are always interested in whether a company has enforced their policies. It's always relevant."

In the global marketplace today, enforcement is only one aspect companies must consider. "There is also an emerging international law custom regarding 'complicity' in human rights violations that requires business to avoid contributing to or facilitating the human rights violations of third parties," said Torrance.

"Not knowing about such violations," he added, "will be no justification if the company ought to have known - meaning that they could have known if they had conducted a due diligence process."