In April 2015, the California Department of Justice began, for the first time, to send letters to companies regarding compliance with the California Transparency in Supply Chains Act (the “Act,” the full text of which may be reviewed here). The Act, effective January 1, 2012, requires qualifying retail sellers and manufacturers to disclose, via conspicuous and easily understood links on their Internet home pages, the extent, if any, to which they:
Engage in verification of product supply chains to evaluate and address the risks of human trafficking and slavery;
Conduct audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains;
Require direct suppliers to certify that materials incorporated into the product comply with local laws on trafficking and forced labor;
Maintain internal accountability standards and procedures for employees and contractors failing to meet company standards regarding slavery and trafficking; and
Provide training on human trafficking and slavery to company employees and management who have direct responsibility for supply chain management.
The April 2015 letters from the California Department of Justice generally request that each company respond within 30 days with either: (1) an explanation as to why the Act does not apply to them; or (2) a link to a disclosure which complies with the Act.
Presumably in connection with the sending of the letters, last week the California Attorney General published a resource guide for companies on complying with the Act (The California Transparency in Supply Chains Act: A Resource Guide (2015), a complete copy of which may be downloaded here). The guide includes models not only of the content required in disclosures, but also of the desired formatting and presentation of such disclosures on Internet home pages. The guide also makes clear that the California Attorney General expects qualifying companies to disclose not only the extent to which they engage in the activities listed above, but also the extent to which they do not engage at all in any of the above activities, in order to fully comply with the Act.
Generally speaking, a retail seller or manufacturer will qualify under the Act if it does business in California and has annual worldwide gross receipts in excess of $100 million. The Act requires the California Franchise Tax Board to provide lists to the California Attorney General of companies which may be qualifying retail sellers or manufacturers, although the lists are not made publicly available. The last list prepared by the California Franchise Tax Board purportedly identified around 1,700 companies. The recipients of the April 2015 letters sent by the California Department of Justice are likely tied to the last list of potentially qualifying companies prepared by the California Franchise Tax Board.