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FAR Council Issues Final Rule on Ending Trafficking in Persons

January 30, 2015

On January 29, 2015, the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration issued a long awaited final rule that significantly affects contractors’ anti-human trafficking obligations under government contracts.  See 80 Fed. Reg. 4967 (Jan. 29, 2015).  The final rule implements Executive Order 13627 and parts of the National Defense Authorization Act for Fiscal Year 2013, making changes to Federal Acquisition Regulation  subpart 22.17 and FAR Contract Clause 52.222-50. 

The former rule, FAR 22.1700-05, Combating Trafficking in Persons, and its associated contract clause, FAR 52.222-50 expressly addressed anti-human trafficking efforts.  These provisions prohibited contractors, subcontractors and their employees from engaging in the trafficking of persons, procuring commercial sex acts, and using forced labor in the performance of a contract. 

The new FAR rule provides clarity by defining the meaning of “agent,” “subcontract,” and “subcontractor,” while also adding to contractors’ reporting and compliance obligations.  The final rule incorporates the definition of “agent” used in 52.203-13.  The terms “subcontract” and “subcontractor” are defined in accord with the definition of those terms at FAR 3.1001.  Specifically, subcontract “means any contract entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract.”  Two important aspects of contractors’ obligations are clarified by the new rule:  (1) the certification and compliance plan requirements, and (2) the requirement to disclose information to the agency Inspector General. 

Importantly, contractor certification of a compliance plan is not required for commercially available off-the-shelf (COTS) item contracts; but, if any portion of the contract or subcontract is for services or non-COTS supplies, is to be performed outside the United States, and has an estimated value exceeding $500,000, the contractor must certify that it has a compliance plan in place before contract award.  When a contractor certifies according to the new rule, it is stating that it (1) implemented a compliance plan and procedures to prevent, monitor, and detect prohibited trafficking in persons activities; and (2) conducted due diligence to confirm its agents, proposed subcontractors, and their agents do not engage in prohibited activity, or, if the due diligence uncovered prohibited activity, the contractor took appropriate remedial and referral actions. 

When a contractor receives credible information—regardless of the source—of a violation of the rules against trafficking in persons, the contractor must promptly notify the Contracting Officer and agency Inspector General.  Contractors are required to cooperate fully in investigations by the contracting agency and other responsible Federal agencies by providing reasonable access to facilities and staff—both inside and outside the United States.

The new FAR rule kept in place many of the prohibitions added in the proposed rule.  Thus, the final FAR rule expressly prohibits contractors, subcontractors, and their employees and agents from engaging in certain activities, including:

  • Misleading or fraudulent recruitment practices;
  • Charging employees recruitment fees;
  • Failing to pay for return transportation of employees;
  • Providing or arranging housing for employees that fails to meet host country housing and safety standards; and
  • Failing to provide, if required, an employment contract, recruitment agreement, or other required work document in writing in a language the employee understands.

Contractors should ensure they have implemented a compliance plan appropriate to the size and complexity of the subject contract, flowed down the required clause to subcontractors, and affirmatively communicated the rule to subcontractors.  The minimum requirements for a compliance plan include:

  • An awareness program informing employees of the Government’s policy prohibiting trafficking-related activities, and the actions that will be taken against the employee for  violations;
  • A process for employees to report activity inconsistent with the policy, without fear of retaliation, including making available the Global Human Trafficking Hotline phone number and email address;
  • A recruitment and wage plan that only permits the use of recruitment companies with trained employees, prohibits charging recruitment fees to employees, and ensures that wages meet host-country legal requirements or explains any variance;
  • If the contractor or subcontractor intends to provide housing, a housing plan that ensures housing meets host-country housing and safety standards; and
  • Procedures to prevent agents and subcontractors at any tier and any dollar value from engaging in trafficking in persons.

Contractors also must diligently report trafficking in persons activity of a subcontractor as soon as it becomes known to the contractor.  This is of particular importance because the FAR Council chose not to fully shield a prime contractor from its subcontractors’ actions—instead, culpability will be determined on a case-by-case basis.  The penalties a contractor may incur for violating this new FAR rule include:

  • Requiring a contractor to remove an employee(s) from the performance of the contract;
  • Requiring the contractor to terminate a subcontract;
  • Suspension of contract payments until appropriate remedial action has been taken;
  • Loss of award fee for the period in which the contractor was determined non-compliant;
  • Declining to exercise available option periods;
  • Termination of the contract for default or cause; or
  • Suspension or debarment by the agency suspending and debarring official.

If a contractor is found in violation of the rule, the Contracting Officer or agency suspending and debarring official, in determining the remedy, may consider mitigating factors such as whether the contractor had a Trafficking in Persons compliance plan or an awareness program at the time of the violation, was in compliance with the plan, and has taken appropriate remedial actions for the violation, such as reparation to victims.  The Contracting Officer may also consider aggravating factors such as the contractor’s failure, after being directed by the Contracting Officer, to abate an alleged violation or enforce the requirements of a compliance plan.

The regulations become effective March 2, 2015.  Any existing indefinite-delivery/indefinite-quantity contracts will be modified by the Contracting Officer to include the clause for future orders.  Contractors should review and modify their policies and programs to come into compliance with the requirements of the final rule.