Preparing for evolving labor and human rights expectations
Labor and human rights issues have risen to the top of corporate agendas, but even the most committed companies can have problems with execution. We offer a few strategies below.

Proactively manage labor and human rights risks To minimize risks – and create value – companies should develop standards and implementation plans to put labor and human rights principles into operation. Actions to consider include:
+ Adopt a global labor and human rights policy stating the company’s expectations of employees, suppliers, business partners, and other relevant parties. Make the statement publicly available to internal and external stakeholders.
+ Implement a comprehensive due diligence process to identify and assess actual and potential adverse labor and human rights impacts and levels of risk based on geographic scope, rights identification, social responsibility risk, and the legal framework.
+ Ensure the risk assessment is integrated into an enterprise-wide strategy. Assign responsibility for addressing labor and human rights impacts to the appropriate level and function within the company. Make sure operational policies, standards and controls enable the company to identify and respond to those impacts.
+ Train board and key staff on how to respond appropriately when situations arise. Consider internal and external reporting to stakeholders about the company’s response to labor and human rights impacts to provide transparency and accountability.
+ Use qualitative and quantitative indicators and feedback from internal and external sources to assess whether your policies and practices are effective, including surveys, audits and grievance mechanisms focused on labor and human rights practices.
Close the gender pay gap
Gender pay equality can be a challenging topic for organizations, but HR professionals and in-house legal counsel can add real value by understanding the legal landscape and trends and getting ahead of the narrative. Some of the most popular steps companies are taking include:
+ Use of pay grades or bands

+ Guidance to managers on pay awards

+ Review of gender split of salary increases across teams
+ Equal pay audit / analysis of equal pay risk
+ Recruitment campaigns targeting women

Multinational employers also need to decide whether any action plan could, or should, be a global one. For example, collecting data for diversity monitoring purposes is still an emerging concept and its introduction can even raise suspicions of discrimination. There may also be questions about whether steps to promote female employees will fall afoul of prohibitions against positive discrimination in certain jurisdictions.34


Manage misclassification claims Countries are demonstrating a greater willingness to crack down on the use of independent contractors and/or temporary employees in place of full-time, permanent employees. Misclassification claims can carry significant risks including tax liability, extended employment rights (dismissal protection, leave and severance entitlements, and statutory benefits), pension entitlement and IP rights. To manage these risks, global employers should:
+ Carefully structure contracting arrangements, including indemnity provisions
+ Treat contracting workforces differently to the employee population – particularly where they are on-site
+ Limit use and duration – only use contracting workforces on specific, non-integral activities
+ Educate and train managers and use controls to ensure reality matches the commercial terms and
+ Audit vendors and supply chains
The challenges ahead
During the next few years there is likely to be growing social and political unrest, coupled with rising concerns about the impact of technology on jobs and workers. These developments are destined to place a spotlight on companies’ efforts to advance SDGs, including decent work for all and gender equality.
At the same time, the issue of what constitutes “decent work” is becoming more difficult to answer in the modern economy. Globalization, advances in technology, and growing demand from companies (and many workers) for flexibility have led to a rise in non-standard employment. But there is an increasing debate about the type and quality of work, with the debate intensifying as employment laws and social insurance programs have failed to keep pace with new staffing models.
Going forward, we expect to see more government action and regulation in relation to gig economy workers. For example, the Taylor review in the UK recommends changes in the employment rights of self-employed workers and possibly new definitions of worker status. In the US, some workers’ groups are pushing for legislation to charge a fee on gig-economy transactions to help provide portable benefits to workers, with legislation being introduced and drafted in different states.
The expectation is that companies will get into a competitive situation in the war for talent —evidence suggests that employees are less likely to join companies perceived as not having tackled the gender pay gap issue.
Monica Kurnatowska,
Partner
Amid ambitious global goals, varying regulatory approaches
While coalitions are driving progress on common goals such as the eradication of slave labor and gender equality, legislative approaches vary. As a result, companies are facing a patchwork of laws at the regional, national, and local levels.
In the US, for example, a number of city, county, and state governments have enacted measures aimed at combating gender pay discrimination that are more stringent than current federal law. The measures range from lowering the bar for equal pay lawsuits (by fundamentally altering how equal pay claims are analyzed in court), to anti-pay secrecy requirements, to banning questions about salary history.
These varying legal regulations can make a ‘‘one-size-fits-all” approach impracticable. “Before rushing to undertake studies and publish numbers, employers must understand what is meant by pay gaps in each country. They need to consider not just the message in any narrative they publish alongside their data, but whether this is, or needs to be, consistent with what they are saying elsewhere,” says Kurnatowska.
The cooperative forces influencing labor and human rights
One noteworthy development in the labor and human rights area has been the emergence of greater cooperation among advocacy groups as they press for changes in public policy directed at companies.27 Trade unions in particular are extending their influence and are partnering with NGOs and other activist groups to build coalitions on issues such as contingent workers, worker health and safety, wages and hours, freedom of association, and collective bargaining.
A byproduct of the cooperation among advocacy groups has been a growing focus among investors on environment, social, and governance (ESG) factors. Approximately 41% of US shareholder proposal submissions in 2016 involved concerns about diversity, equal employment opportunity, labor and human rights, and sustainability.28 Gender pay equity also emerged as a key focus in 2017, with nearly 30 high-profile companies facing shareholder proposals asking them to report on the pay gap between male and female employees and the company’s plan to close that gap.29
National and local legislators are increasingly making CSR-type reporting and disclosure mandatory and holding companies accountable.
Kevin Coon,
Partner
There has also been a proliferation of measures that place greater obligations on companies to protect labor rights and human rights. “All of this is emblematic of a growing global trend,” says Kevin Coon, a Baker McKenzie partner based in Toronto. “National and local legislators are increasingly making CSR-type reporting and disclosure mandatory and holding companies accountable.”

This relatively new type of “transparency legislation” does not require companies to take any specific actions, but rather requires each of them to publish a statement about what steps they have taken. And the information disclosed gives stakeholders the ability to apply pressure and drive change. For example, the Business and Human Rights Resource Centre maintains a public track record of companies’ statements under the UK Modern Slavery Act, with over 2000 statements from companies in 27 sectors, headquartered in 31 countries.30 As an investigative reporter from The Times noted, this registry is an important tool for journalists to identify companies that aren’t meeting the mark.31

Similar forces are converging to focus attention on gender equality and the pay gap. “The topic of gender pay equality is being escalated from various sectors of the organization on an increasingly regular basis,” says Susan Eandi, head of Baker McKenzie’s Global Employment and Labor Law Practice Group in North America. “For the Board and C-suite, it is a highly visible issue that shareholders are demanding be addressed. For business leaders and sales departments, it is a topic on which customers are asking their vendors to take a public position. For marketing departments, it is an avenue to distinguish the company from its competitors. All of those constituencies are clamoring before legal requirements are broached and champions of corporate social responsibility even weigh in.”

There is longstanding legislation in many countries requiring that men and women receive equal pay for equal work. More recently, the focus in the US, the UK, Australia and Germany has turned to pay transparency, with an increasing number of countries making gender pay information publicly available.32 Various voluntary initiatives have also been developed, such as the UK Workforce Disclosure Initiative supported by 79 major investors, which ask multinational companies to supply data relating to their direct and supply chain workforce.
“The expectation is that companies will get into a competitive situation in the war for talent—evidence suggests that employees are less likely to join companies perceived as not having tackled this issue,” says Monica Kurnatowska, a Baker McKenzie partner based in London.

Moving forward, reporting will become even more mainstream. For example, the newly launched “Action Platform Reporting on the SDGs,” co-managed by GRI and the UN Global Compact, is developing a single methodology for measuring and reporting business progress on the SDGs to ensure businesses produce more comparable data.33

In September 2015, all 193 Member States of the United Nations adopted a plan to tackle the most important economic, social, environmental and governance challenges by 2030. At the core of “Agenda 2030” are 17 Sustainable Development Goals (SDGs) which establish important targets for the international community‎ focused on issues such as gender equality, decent work, and good governance.
Notably, this cooperation extends beyond nations to include the business community. The UN Global Compact includes more than 9,500 companies from 145 countries, with 28% of Fortune 500 companies represented. All signatories are committed to aligning their operations with universal principles on human rights, labor, environment, and anticorruption.
Transparency and accountability are central to achieving the SDGs, and businesses are going to face growing expectations in this area as governments, NGOs, the media, unions, investors, and other stakeholders become more vocal in seeking to advance labor and human rights protections within companies and along their supply chains. At the same time, national and local laws to address labor and human rights issues vary widely, posing compliance challenges.
Sources
27 EY Center for Board Matters, Four takeaways from proxy season 2016; http://www.ey.com/Publication/vwLUAssets/EY-four-takeaways-from-proxy-season-2016/$FILE/EY-four-takeaways-from-proxy-season-2016.pdf

28 Baker McKenzie, Managing Risk: International Labor and Human Rights (2016); https://f.datasrvr.com/fr1/317/53002/Labor_Human_Rights_Brochure_final.pdf

29 EY Center for Board Matters, 2017 Proxy Season Review; http://www.ey.com/Publication/vwLUAssets/ey-2017-proxy-season-review/$File/ey-2017-proxy-season-review.pdf

30 http://www.modernslaveryregistry.org/

31 Id.

32 Baker McKenzie, “Gender Pay Gap Reporting,” 17 August 2017; http://www.bakermckenzie.com/en/insight/publications/2017/08/gender-pay-gap-reporting-infographic

33 United Nations Global Compact Progress Report: Business Solutions to Sustainable Development (2017); https://www.unglobalcompact.org/docs/publications/UN%20Impact%20Brochure_Concept-FINAL.pdf

34 Baker McKenzie, International Horizon Scanner: What's on the horizon in 2018 for US multinational employers?; http://www.bakermckenzie.com/scanner2018

The expanding web of social and economic challenges that exist throughout the world is stimulating demand for new actions from governments and businesses. 
Globalization 3.0: The employment challenge
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