European Commission publishes employment and recruitment sector guide: Corporate responsibility to respect human rights

The European Commission has published guidance for the employment and recruitment sector on meeting the corporate responsibility to respect human rights under the UN Guiding Principles on Business and Human Rights (UNGPs). The guidance sets out the steps required under the UNGPs to “know and show” a respect for human rights and has translated this into the particular context of employment and recruitment agencies.

The guidance is of relevance not only to employment and recruitment agencies, but to all companies globally, who rely on agencies for the recruitment of direct hire employees or the supply of workers. The sector guide will be particularly relevant for personnel engaged in corporate governance, ethics and compliance or human resources functions, and those whose role includes managing business relationships with employment and recruitment agencies. It is also intended to be helpful to groups who are interested in promoting respect for human rights in this business sector, including trade unions.

1. Background: understanding the framework of human rights protection in business

The corporate responsibility to respect human rights is one of the “three pillars” of the UN “Protect, Respect and Remedy” Framework on business and human rights.

Under the UNGPs, businesses have a responsibility to respect human rights wherever they operate in the world. This means that businesses should have in place policies, procedures and mechanisms to avoid infringing on the human rights of individuals and address negative human rights impacts with which they are involved.

The UNGPs also set out the duty of states to protect against human rights abuses by businesses through policies, legislation, regulations and adjudication and the need for greater access to effective remedy for victims of business-related human rights abuses. International frameworks such as the OECD Guidelines for Multinational Enterprises, ISO 26000 and the Global Reporting Initiative have been updated to reflect the UNGPs.

Although not legally binding, the European Union is committed to the implementation of the UNGPs and the European Commission’s guidance for the employment and recruitment sector is a step towards this.

The European Commission has also published guidance for oil and gas companies, companies engaged in the information and communications technologies (ICT) sector and small and medium-sized enterprises. For further information on the oil and gas sector, please refer to our e-bulletin here.

2. Employment and Recruitment Agencies: risk factors

The European Commission guidance reviews the operations of (i) recruitment companies supplying “direct hire employees” to clients (usually on a “one-off” basis); and (ii) businesses supplying “agency workers” to user enterprises (usually on a longer term/on-going basis).

A wide range of internationally identified human rights are engaged in the employment and recruitment context. These include the right to privacy, freedom of association, favourable conditions of work and collective bargaining, as well as the prevention of forced labour, child labour and discrimination.

The guidance identifies a number of human rights risk areas in the employment and recruitment sector. These include:

• the difficulty of identifying potential human rights breaches in the complex set of relationships and long supply chain sometimes found in the context of agency work;
• the unregulated nature of employment and recruitment agencies’ activities and lack of workers’ human rights protection in some jurisdictions;
• the practice of some employment and recruitment agencies of passing fees for their services to the worker; and
• challenges faced by migrant workers, such as a lack of protection under their host state laws or where their immigration status is linked to their employer as their sponsor.

3. Addressing the risk: putting business responsibility for human rights into practice

Whilst largely drafted from the point of view of employment and recruitment agencies, the guide serves as important guidance for businesses engaging with employment and recruitment agencies, and indeed for all employers who want to ensure compliance with their corporate responsibility to respect human rights in their labour hiring practices.

The guidance identifies six core elements of the corporate responsibility to respect human rights under the UNGPs and explains how each applies to the operations of recruitment and employment agencies. The core elements are:

• having a publicly available human rights policy commitment to respect human rights and having processes for embedding that commitment into the company’s culture;
• assessing actual and potential human rights impacts by understanding the operating context, drawing on expertise and consulting with affected stakeholders;
• integrating the findings of impact assessments and acting to prevent or mitigate the impacts;
• tracking how effectively impacts are addressed by developing indicators and incorporating stakeholder perspectives;
• communicating how impacts are addressed; and
• remediating negative impacts the company has identified it has caused or has contributed to, including by establishing or participating in effective operational-level grievance mechanisms.

The guidance explains that assessing, integrating, tracking and communicating (which together are what the UNGPs refer to as “human rights due diligence”) should start at the earliest stages of entry into a new country/market and at the pre-contract stages of new business relationships and recruitment processes. It emphasises that human rights due diligence should be on-going and not a one-off impact assessment undertaken at the start of a business relationship or saved for annual reports.

4. Practical steps for managing human rights risks in business relationships

Under the six core elements, some key practical considerations for companies stand out.

Companies need to commit to, develop and review policies which explain their expectations of staff, business partners and others in its value chain regarding respect for human rights. Companies should therefore review existing policies to ensure that they meet the requirements of the UNGPs and consider implementing further policies and procedures, as necessary to ensure compliance.

A company’s commitment to its human rights policies should be embedded into its relationships with its business partners from the outset and should not be seen as a “negotiable extra”. As well as integrating the management of human rights risks into new contracts, companies should review existing contracts with business partners throughout the supply chain, assess the risks of negative human rights impacts in those relationships and use leverage to address any human rights impacts identified.

Trade unions are identified in the guidance as important partners for consultation on actual or potential negative human rights impacts on workers placed by an employment or recruitment agency. Companies should be prepared to engage in consultation with such trade unions or other appropriate employee bodies to address human rights impacts in the supply chain.

The guidance recommends that companies consider formal reporting on human rights performance (e.g. in annual reports or investor updates), even if this goes further than the minimum requirements of national state law. There has already been a move by some legislatures to require some companies to report on their human rights policies (see for example, the UK Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, expected to be in force from 1 October 2013). For further information on human rights in narrative reporting please see item 2 of our e-bulletin here.

5. The future of human rights in business

The European Commission guidance reflects the increasing pressure on companies to address human rights risks linked to their business activities and the growing financial, legal, reputational and operational cost of failing to do so (including the risk of claims being brought by NGOs under the complaints mechanism of the OECD Guidelines for Multinationals).

The UN, European Union and a number of national governments, including the US and the UK, have committed to the implementation of the UNGPs and the UK national action plan on business and human rights is expected to be published shortly. The European Commission guidance acknowledges that EU member states will have taken steps under the Temporary Agency Work Directive and the Posted Workers Directive to implement national legislation protecting the rights of agency and migrant workers. For more information on the UK’s implementation of the Temporary Agency Work Directive please see our employment blog.

Financial institutions providing funding to businesses will put greater emphasis on human rights considerations in the future as a consequence of aligning their own policies and procedures to meet their responsibilities under the UNGPs. Shareholders and business partners will also increasingly require companies to demonstrate a respect for human rights as they take steps to limit their exposure to human rights risks.

In summary, it is clear that business and human rights is an evolving area of risk and compliance for companies and that complying with national law may not sufficiently demonstrate a respect for human rights if the laws relating to labour rights, environmental protection and rights of affected communities are absent, weak or unenforced.

The European Commission’s employment and recruitment sector guide on implementing the UN Guiding Principles on Business and Human Rights can be found here.

For more information about business and human rights more generally, please see the resources under the Public International Law tab on this blog, or contact Louise Moore, Partner,  Stephane Brabant, Partner, Peter Frost, Partner, Annabel Gillham, Senior Associate Johanna Hull, Associate, or your usual Herbert Smith Freehills contact.