France has put the force of law behind corporations’ moral duty to respect human rights and minimize adverse environmental impacts. Under the 2017 French legislation known as the “Duty of Vigilance” or “Duty of Care” law, certain large companies have an affirmative obligation to prevent human rights violations and environmental abuse – both within the company itself, as well as its subsidiaries and even subcontractors and suppliers.
The law originally carried the threat of multi-million-euro fines for failure to comply. Although the fines were removed from the legislation after judicial review, violations could still pose serious consequences for companies that fall short of their obligations.
Companies covered by the law should develop, implement and enforce due diligence plans to identify and thwart corporate activities that threaten fundamental human rights and environmental integrity. The law requires companies to follow the U.N. Guiding Principles on Business and Human Rights in the execution of vigilance plans.
Due to the novelty and complexity of the legislation, it is understandable that uncertainty remains in the business community regarding the scope of the law and what steps are necessary for compliance. Labor Solutions offers a suite of tools and services to assist companies in their efforts to comply with the law.
Which Companies Must Comply?
The French Duty of Vigilance law applies to the largest companies in France. According to the legislation, companies must comply with the law if:
The company is established in France.
and
The company has had at least 5,000 employees in France, both at the main company and at its subsidiaries, at the end of the two previous fiscal years.
or
The company and its subsidiaries have at least 10,000 employees in France and in other countries.
What Does the Duty of Vigilance Law Require?
The law mainly focuses on the creation and implementation of a vigilance plan to identify and prevent corporate abuses from infringing on basic human rights or adversely impacting the environment. According to the law, the plan must include:
Identification, analysis and ranking of potential risks
An outline of procedures to periodically asses compliance on the part of the company’s subsidiaries, subcontractors and suppliers
Steps to address risks and prevent violations
A method for identifying potential or existing risks in cooperation with representatives of relevant trade unions
A monitoring system to assess the effectiveness and efficiency of the program
The company’s stakeholders should play a role in developing the plan. The company must include its vigilance plan and reports on implementation in its public annual report.
What Are the Potential Consequences for Failure to Comply?
If a covered company fails to create, implement or publish a vigilance plan as required by the law, any “concerned parties” may file a complaint. The company will be given formal notice of its obligation to comply.
The company will have three months to bring its affairs into compliance. If the company remains in violation of its obligations under the law, a judge could impose a civil fine.
The law initially called for the imposition of civil fines up to €10 million for failure to comply – and fines up to €30 million if actual human rights or environmental violations resulted from the company’s failure to meet its Duty of Vigilance obligations. However, since the fines were censored during judicial review, it remains unclear what sort of penalties a company may face if it is found to have violated the law’s requirements.
A company that violates the Duty of Vigilance law could also be held liable for paying compensation related to human rights violations or environmental abuses that could have been prevented if the company had complied with its legal obligations.
What’s the Bottom Line for Companies Affected by the Duty of Vigilance Law?
While the full extent of potential financial exposure remains unsettled under the French Duty of Vigilance law, it is clear that compliance is the best option for avoiding costly fines and tort liability – not to mention negative publicity that could tarnish a company’s reputation.
Labor Solutions provides tech-based tools and in-person services to assist companies in their efforts to comply with the French Duty of Vigilance law in order to avoid negative consequences for violations of the law.
Some of the ways we can help your company comply with the Duty of Vigilance law include:
Creation of an effective vigilance plan
Establishing procedures to ensure compliance
Designing systems to identify and address potential risks
Drafting reports outlining the company’s efforts in compliance with the law
Conducting surveys of stakeholders to further compliance
Comprehensive consulting services to assist with the overall integration of compliance efforts
We are prepared to discuss how we can work with your organization to better understand the law’s requirements and to develop a plan to ensure compliance.
Sources:
European Coalition for Corporate Justice
International Review of Compliance and Business Ethics