Hot Goods Part II: Rooting out Forced Labor in Supply Chains Using the FLSA

Part I of this blog analyzed the extraterritorial application of the “Hot Goods” provision of the FLSA. This post discusses whether the remaining provisions of the FLSA can be applied overseas. The short and sweet answer is rarely. The extraterritorial application of the FLSA is technically not prohibited, but its usability depends on very narrow facts. To better understand the FLSA’s extraterritorial application, we need to dig into its history.

The relevant history of the FLSA

Congress passed the FLSA in 1938 to protect the rights of workers and prevent unfair competition. Those covered by the FLSA include any company engaged in interstate commerce and making over $500,000 in annual sales.

In 1957, Congress amended the FLSA to include the Foreign Workplace Exemption, which explicitly stated all wage, labor, and age standards could not be enforced when the work occurred entirely outside the United States. Congress amended the FLSA, speaking directly to how it believed the act should be applied extraterritorially, in direct response to the Supreme Court holding in Vermilya-Brown, where the Court applied FLSA labor standards to a US military base in Bermuda. Since the passage of the Foreign Workplace Exemption, courts have repeatedly refused to apply the wage, labor, and age standards overseas. However, several provisions of the FLSA were excluded from the Foreign Workplace Exemption, leaving open the possibility of extraterritorial application.

One other notable exception is for employees who are employed both abroad and domestically during the workweek. See Wirtz v. Healy (N.D. Ill. 1964) (holding travel agents who performed services both inside and outside the United States during the work week were covered by the FLSA).

Can the excluded provisions be used in international supply chains?

Technically, yes. Courts have found that where FLSA provisions were excluded from the Foreign Workplace Exception Amendment, extraterritorial application is not precluded. In Reyes-Fuentes v. Shannon Produce, a US district court indirectly supported this argument, holding other provisions of the FLSA, also excluded from the Foreign Workplace Exception Amendment, apply abroad. In this case, a group of 14 Mexican agricultural workers legally worked for the defendant in Georgia under a temporary work visa. Based on violations of the FLSA that occurred during their time of employment in the United States, the victims were joined in an FLSA suit against the defendant. After returning to Mexico, the claimants asserted they were retaliated against for involvement in the initial FLSA litigation. The court ultimately ruled the anti-retaliation provision of the FLSA does apply extraterritorially, even though the act occurred in Mexico, reasoning “Congress has specifically defined the statute's extraterritorial reach through §213(f),” limiting this exemption only to the substantive labor conditions outlined in the Foreign Workplace Exception Amendment.

Under this line of reasoning, other provisions of the FLSA should also apply extraterritorially to companies covered by the FLSA. Specifically, FLSA sections  209, 214, and 215(a)(3) discussed below, may provide an avenue in some cases. However, very few sets of facts would fit these provisions, making it likely that these statutes will rarely, if ever, be used to benefit supply chain workers.

The Potential Extraterritorial Provisions:

Section 209 extends the evidentiary obligations and penalties of 15 U.S.C. 2 §§49 and 50 to all companies involved in a FLSA claim. These provisions mandate companies produce documentary evidence and witnesses for any hearing or investigation brought under the FLSA. Section 50 further outlines the fines and punishments for failing to comply with the obligations previously stated. Given Congress did not include these evidentiary obligations in the Foreign Workplace Exemption, a court will likely find they apply extraterritorially. However, there are very few extraterritorial claims available under the FLSA, so there may never be a hearing or investigation that would require companies to the disclose documents and witnesses. 

Section 214, which describes how employers can use certification schemes established by the Secretary of Labor to avoid compliance with minimum wage standards, should also apply extraterritorially. Certification schemes are preapproved forms of employment where certificate holders agree to comply with articulated requirements and regulations in exchange for noncompliance with wage and hour provisions of the FLSA.

For example, section 214 provides a certification scheme for student labor that allows employers to pay students “at a wage rate not less than 85 per centum of the otherwise applicable wage rate in effect under section 206 of this title or not less than $1.60 an hour, whichever is the higher, of full-time students.”

If the company can certify the prospective employment is aligned with regulations based on a particular scheme, it will not be held to the standards of the FLSA. Section 214 outlines requirements to maintain compliance with the certification scheme and specifically states the companies employing these schemes are subject to the regulations promulgated by the Secretary of Labor. Theoretically, if a foreign workplace is engaging in a certification scheme, the regulations would apply abroad. Of course, this is only useful if the substantive provisions of the FLSA apply at the workplace, because otherwise there would be no reason for the employer to seek an exception through certification. The only example we can imagine here may be cruise ship workers.

Many Americans and foreigners work for American cruise ship lines, often remaining at sea or in foreign countries for weeks. For cruise ship workers to be covered by the FLSA, they must be categorized as “seamen,” working on a truly owned American vessel (not a ship simply flying a flag of convenience), and be directly engaged in American commerce. If cruise ship workers meet these requirements, they should be entitled to the protections of the FLSA, regardless of how long they are outside the United States. Hypothetically, then, the owner of an American vessel would be expected to comply with the FLSA as to seamen, and the owner would be able to seek certification to pay student workers less than the minimum wage.

Finally, the antiretaliation provisions of the FLSA should also apply extraterritorially. These provisions are found in section 215(a)(3) and prohibit employer retaliation against employees based on the following acts: filing a claim under or related to the FLSA, testifying in an FLSA proceeding, or serving on an industry committee.

All employees who experience retaliation are entitled to sue under this provision of the FLSA. However, if an employee wishes to bring a retaliation claim based on a claim under or related to the FLSA, the original FLSA violation must have occurred in the United States. This is exactly what happened in the Reyes-Fuentes Case. The plaintiff was originally denied adequate wages while working in the United States, he was joined in an FLSA claim to remediate this harm, and when he returned to Mexico he was retaliated against.

However, this is an unusual fact pattern. In the rare case that a worker experiences an FLSA violation, leaves the country, and is subsequently a victim of retaliation abroad for having asserted her rights in the US, she would have recourse under the FLSA.  

But, there are two more forms of retaliation explicitly prohibited by the FLSA. Employees can bring a claim based on their employer retaliating against them after testifying in a FLSA claim or serving on an industry committee, regardless of where their workplace is. If the FLSA covers the company, regardless of the foreign workplace, any employee retaliated against for serving on an industry committee could have an FLSA retaliation claim.

In the end, we don’t see much promise in using the FLSA to address supply chain abuses where the labor violation occurred abroad. While there might be a few cases at the margins, this isn’t a scalable strategy with the potential for broad impact. If you disagree, we’d love to hear your thoughts in the comments.

Mallory Miller is a third year law student at the University of Denver. Charity Ryerson is the Legal Director at Corporate Accountability Lab.


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