In the recruitment sector of the global labour market, there is a concerning practice that puts migrant workers at significant risk. The requirement to pay recruitment fees often results in people falling into debt bondage, a clear indicator of forced labour. Once trapped in a cycle of high debt, they find themselves unable to leave until the debt is fully paid. It is long overdue for a binding framework to be put into place to prevent this practice.
What is the problem with recruitment fees?
Recruitment fees are payments that many migrant workers are forced to pay to recruitment agencies to secure jobs abroad. Potential employees are lured by the promise of high wages, leaving loved ones behind in the pursuit of their dream jobs and the hope of being able to provide for their families. The dark side of these promises is the hidden fees the workers are expected to pay. Some of the fees include recruitment costs, travel expenses, visa costs, and other unspecified charges. These fees can be as high as 8000 USD, leaving the workers in debt that takes years to pay off.
A rocky path towards a European solution…
On 24 May, the Corporate Sustainable Due Dilligence Directive(CSDDD) was finally adopted by the Council after years of extensive negotiations within the European Union.
The aim of the CSDDD is to foster sustainable and responsible behaviour amongst corporations and to anchor human rights and environmental considerations in the operations and governance of companies. The Directive is intended to help prevent human rights abuses and environmental harm perpetrated across business activities, requiring companies to map out potential harm caused by actors in their supply chains and put into place measures to prevent and mitigate harm.
The proposal for CSDDD was first adopted by The European Commission in February 2022. However, getting the CSDDD passed has been a challenging endeavour because of resistance, it seems, against the idea that businesses have to take responsibility for ensuring sustainable behaviour throughout their operations.
After the EU Parliament and Council had reached an agreement on the CSDDD in December 2023, the Directive was scheduled for an affirmative vote in the Council of the European Union on 9 February 2024. The vote was postponed after Germany opted out at the last minute, following the German political party FDP’s decision to retract their support for the Directive in a national vote. FDP stated that the Directive would create disproportionate bureaucratic hurdles and legal uncertainty for businesses.
After this incident, the following negotiations led to a revised version of the Directive with a vastly limited scope. On 24 April the European Parliament, in its final plenary setting, voted in favour of the proposal with 374 votes against 235 and 19 abstentions. Now that the Directive was also formally endorsed by the Council on 24 May, all that remains is for it to be signed and published in the EU official journal. When the Directive enters into force, member states will have two years to implement the rules into their national laws.
Though severely skimmed down from its original form, the CSDDD represents a significant step towards holding businesses accountable for violations of human rights and environmental obligations.
Does legislation really make a difference?
Holding corporations accountable for human rights violations perpetrated in their supply chains is long overdue. Countries such as Norway, France, the Netherlands, and Switzerland have already taken the lead in implementing due diligence legislation. Ironically, Germany has also implemented due diligence legislation, though not as far-reaching as the CSDDD.
The Norwegian Transparency Act aims to ‘promote enterprises’ respect for fundamental human rights and decent working conditions’. The Act places a duty upon enterprises to carry out due diligence in accordance with the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. This includes reporting on the findings of the due diligence conducted and the efforts made to mitigate those findings.
An example of this is Equinor’s follow-up. In the 2022 annual report, this Norwegian energy company presented a risk assessment in accordance with the Transparency Act. Page 54 specifically states that their ‘Introduction of a standalone Human Rights statement is a direct response to the Norwegian Transparency Act and Human Rights Due Diligence Act’ and that, to ensure compliance with the Act, they ‘created an internal procedure for capturing and processing information requests’.
The risk assessment performed to ensure compliance with the Transparency Act uncovered a forced labour indicator, namely the use of recruitment fees amongst one of their suppliers. Together with its subsidiary, Equinor provided remedies to the workers affected, including compensation for undue payments. Compensation was provided to 1,791 workers in 2022.
Governments are responsible for holding businesses accountable
The long history of corporate human rights abuses clearly shows what happens when corporations are not held accountable for their conduct. Legislation is a key mechanism to solve this problem.
Today, there are 169 million migrant workers worldwide, which accounts for five percent of the global workforce. It is imperative that we address the serious challenges migrant workers face because of recruitment fees being imposed on them.
Equinor’s example illustrates that mandating businesses to perform due diligence assessments and to mitigate adverse impacts has the potential to protect the human rights of migrant workers. It needs to become unacceptable for corporations to turn a blind eye to the damaging practices occurring in their supply chains. Though the Norwegian Transparency Act alone is insufficient to end the practice of migrant workers being subject to recruitment fees, it demonstrates that human rights protection and binding legislation go hand in hand.
The CSDDD has wider-ranging obligations than the Norwegian Transparency Act, including a provision on civil liability, putting more pressure on companies to ensure compliance with the Directive. However, the changes to the scope of the CSDDD have led to a situation where the Norwegian Transparency Act mandates a larger number of companies to conduct human rights due diligence compared to the total number of companies covered by the CSDDD across the entire EU. Hopefully, the Norwegian Transparency Act can serve as a positive signalling effect on the EU concerning the relevance of human rights due diligence in companies of all sizes.
It remains to be seen how effectively the Directive will be implemented. Let’s hope companies will see the new legislation less as causing ‘disproportionate bureaucratic hurdles’ and more as an opportunity to use their position and influence to prevent human suffering in their supply chains.