Nestle Loses Appeal on Child Slave Labor Case

January 12, 2016

Nestle, the world’s largest food producer, may have been getting cocoa on the cheap in a less than humane manner – by benefiting from child slave labor. Now, I say may because while the company is being sued over the issue, they have not been found guilty of it yet. However, since it, along with two other companies, just lost its appeal to the US Supreme Court to have the case dropped, we will likely hear a lot more about the issue in the future.

In the meantime, though, let’s look at just what is going on in some business deals the chocolate producers are having with farms in the Ivory Coast in Africa.

The Slave Child Labor Ring in Africa’s Ivory Coast

 

There is a pretty well-documented problem with child labor on the Ivory Coast. For example, statistics from circa 2014 show that there are about 1.12 million child laborers in the area. However, that is about a million less child workers than there were just a year later. So not only is there a problem, and not only is the problem not getting better, but it is actually getting pretty significantly worse.

In fact, a survey conducted by Tulane University, and commissioned by the US Department of Labor, suggests that the number of children illegally working on coca farms has increased by 21% in the last five years.

This increase has not been the result of nobody trying to stop it, either. Over the years, increased government and industry regulations have popped up regularly in an effort to decrease this problem. However, as the rules and restrictions have increased, so too has the world’s demand for chocolate increased.

Other startling stats from the survey include:

  • Between 2009 and 2014, the number of children under the age of 17 who were illegally working under hazardous conditions in the Ivory Coast rose by 46%.
  • The number of children under the age of 17 who were performing hazardous tasks slightly dropped in Ghana; however, the number of children in Ghana working with hazardous chemicals increased from 15% to 33%.
  • In the same years where child labor was expanding, the world’s cocoa production increased by 43% in the Ivory Coast and 35% in Ghana.

While the report authors make a point to say that the increased demand for cocoa did not directly lead to the increased child labor, they did note that the changes to the way cocoa is being produced is a factor in the problem.

Of course, a big part of the problem is money. The typical cocoa farmer in the district makes on average 50 to 65 cents a day in comparative US currency. That means there is not a lot left over to hire workers. Because of this, the most viable option for farm production is through using their own children.

Now, while efforts have been conducted to reduce the problem, as long as the desire for chocolate keeps rising and more definitive steps are not taken, it is predicted that the problem will only get worse.

 

 

Nestles Alleged Involvement

Nestle isn’t out there running a farm of children workers, of course. However, the lawsuit against them does claim that they knew about the problem, but used the cocoa from the farms anyway because of the price. They are being accused of providing financial, as well as technical, support to the operators of the child slaves.

It was that involvement that angered the International Labour Rights Forum, the original filers of the lawsuit. This group, according to Abby McGill, the company’s campaign director, fights to bring accountability to supply chains as well as to get victims involved in these cases redress.

In order to do this, the Forum sued Nestle along with two other companies for their actions in using the child slave labor.

The Suit and the Appeal

Nestle had pretty good precedent telling them that they should not be worried about this suit. After all, they had Kiobel vs. Royal Dutch Petroleum in their favor.

In 2013, the US Supreme Court heard a case about violations of human rights laws in Nigeria. Basically, the suit claimed that the respondents, of which Shell was one, were complicit with the abuses and should be liable for helping perpetrate the abuse. As such, they brought a claim under the Alien Tort Statute and filed the case in the United States District Court for the Southern District of New York.

The case eventually made its way up to the Supreme Court where the judges ruled in favor of the corporations. However, this ruling was not because they viewed the companies to be innocent in their dealings. It was because of a lack of US involvement.

Basically, what the court unanimously said is that the Alien Tort Statute presumes that the court won’t extraterritorially apply US law to foreign cases. The idea is that we do not want US law to clash and conflict with the law of the nation in which the actions are taking place. Therefore, in order for a US law to be applied to a case, the actions of the parties much concern US territory with “sufficient force.”

This ruling has shown itself to be beneficial for companies but harmful for human rights advocates quite a few times. That has been because since the Kiobel ruling, courts have frequently dropped cases similar to Nestle’s for not touching on US issues enough. Nestle had every reason to believe that the same thing would happen here. However, it didn’t.

Instead, the court allowed the plaintiffs in the Nestle case to update their suit to make sure they meet the standard set out by Kiobel. In other words, the plaintiffs could amend their complaints to show that the Nestle case somehow touched on US territory. This might have been done because of urging by the US Chamber of Commerce who wanted the case heard.

Basically, what it comes down to is how the statute is interpreted and what exactly constitutes an issue that touches upon the US.

Since Kiobel, there have pretty much been two interpretations of this ruling by district courts:

  1. The first is that the actual act has to have taken place on US soil. In the Nestle case, that would mean the actual child labor had to have taken place on US territory. Clearly, under this ruling, Nestle would not be too concerned.
  2. However, the second, and the one in which the court ruled, assumes that in order to touch on US issues and be applicable, the “touch and concern” element is not limited to the tort itself. In other words, you can look at the other issues around the tort.

In this case, the second interpretation is bad for Nestle. That is because by looking outside of the tort itself, you can see a whole host of issues that could potentially hurt Nestle’s case by helping to show they had an intention to aid and abet child slavery.

As examples, look at the following actions the company is being accused of:

  • They set out to get the cheapest labor even knowing it might be obtained through child slavery.
  • They had enough say in the Ivory Coast’s cocoa market to stop the problem, but didn’t.
  • In the US, they lobbied against regulations that would require slave free labeling.

All in all, what the lower court eventually ruled is that if a company directly benefits from a human rights violation that it had the ability to stop, then even under the most stringent of tests the proof is met that the company acted with purpose.

Because of this, Nestle appealed to the US Supreme Court hoping to have their case dropped because of the previous Kiobel ruling. However, the Court agreed with the appeals court that allows the plaintiffs to amend their complaints to meet the Kiobel standard. Therefore, the plaintiffs, which include three former child slaves, may now go back and show how Nestle, as well as the other two defendants, Archer-Daniels-Midland and Cargill, touched upon US territory with their actions.

If the plaintiffs can show some level of culpability on US territory, it could lead to an unfavorable ruling for the cocoa companies, but it could also have drastic results for companies of all kinds.

Human rights violations do not just affect those in the chocolate business, of course, and by opening up this standard for Nestle, the court could be bringing in a trend where other companies are found liable for their actions that harm human rights all over the world.

The Takeaway

The first, and also the most important, takeaway from this story is that you should not violate human rights no matter how profitable those violations make your company or how much money they save you. However, there are other points to it as well.

For example, this case goes to show that the relative freedom companies have enjoyed since Kiobel could be changing. If the measurement for just what constitutes an issue touching on and concerning the US is lowered, then more companies will be open to suits that they may have spent the last couple of years thinking they could avoid.

Hopefully, none of this applies to your company. But if it does, then make sure to start taking steps to distance yourself from being associated with human rights violations. And if you are in the power to prevent those violations from happening, then you may want to consider exerting that power. After all, you don’t want to find yourself in Nestle’s shoes, especially if it turns out that the court eventually rules against them.

Ashley Shaw

By

Ashley Shaw is an experienced Legal Writer with years of experience. After receiving her JD, she worked for years in a corporate environment writing on business and employment law topics

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