Can we use the legal system to hold corporations to account in the US? Jeff Monahan looks at the opportunities and limitations. – By Jeff Monahan Typically an arms race is a competition between enemy states to innovate and design the most dangerous tec …

Walton Pantland

corporate-accountability

Can we use the legal system to hold corporations to account in the US? Jeff Monahan looks at the opportunities and limitations.

– By Jeff Monahan

Typically an arms race is a competition between enemy states to innovate and design the most dangerous technology in order to gain the upper hand.  It requires (I imagine) meticulous testing and attention to detail on both sides of the conflict.  In the business of outsourcing product labor, however, each side competes to pay the least amount attention as possible while not innovating at all.  This arms race creates danger as the byproduct of having the upper hand in the court room.

Companies that engage in outsourcing labor do so by contracting with a foreign factory as opposed to buying the land and setting up the factory themselves.  This way they can avoid liability for accidents that happen on site.  The more contact a company like Walmart, Adidas, or Gap has with the factory that makes their products, the more likely they are to be found liable for what happens.  This stems from legal principles of agency, which essentially say that the less control a company exerts over a subordinate employee or subsidiary, the less they can say that a resulting accident was the company’s fault.  This makes sense, but it means that the companies have an incentive to keep as far away from the actual production factory as possible.  Full accountability is placed on the foreign factory.

The factories in developing countries that employ the workers have the incentive to remain profitable and stay in business, of course, but improving safety conditions can be expensive and cut away at those profits.  In many of these countries unionization is difficult or illegal, and without strong unions to keep the factory in check and demand improvements their incentive to avoid the cost runs unbridled.  Factory tragedies like the ones in Tazreen and Pakistan are the result.  It’s like the pre-union days in the U.S. and U.K: there is no remedy for on-site injuries.  And even if the factory is sued en masse their pockets aren’t deep enough to cover the damages.  That’s why we boycott and protest Walmart and Adidas until they cover the rest.  Again, there is very little accountability.

The reason that U.S. corporations cannot be sued for injuries or lost salaries is because the laws are not written to cover them.  There are only a couple federal statutes that a foreign union could sue under, but the laws are not written to cover them because corporations fork up millions of dollars to lobby legislators to draft them that way.  The rationale they offer for not holding them liable is the fear of frivolous lawsuits against the company – they think they would get sued for everything.  There is some merit to this fear: lawsuits bring bad publicity and companies may be forced to settle claims that have no basis in the first place.  But the alternative currently in place causes far greater harm.

Forced to choose between two evils, the legislature chose the one that favors corporations, and the result is that full responsibility for sweatshop safety is placed on the foreign factories that house them.  With no law designed to hold Walmart, Gap, or Adidas liable, the only hope would be for a court to interpret a law in a way that reaches them.  The workers are not a party to the contract between the corporation and the factory, however, and although courts have skewed laws to protect third party plaintiffs before, they are unlikely to do so in this context.  The court will not and should not make the laws, and without a strong indication that a law was intended to provide protection, a court would keep the burden on the lawmakers for any change.

How can we use the law?

So, it’s up to the legislature, which is heavily influenced by corporations’ deep pockets, but also controlled by the people.  This leaves two options: we can either affect the laws or we can affect the companies who exploit them.  Call your state rep and tell him or her that the Alien Tort Claims Act (ACTA) or Racketeer Influenced and Corrupt Organizations (RICO) Act should be amended to hold corporations liable for egregious accidents that they have the money, power, and moral obligation to prevent.  Doing so could potentially force companies to run their own factory abroad if the international owners are not trustworthy enough to do it themselves.

Once you have called your state rep, e-mail the company themselves and ask them why they don’t take the responsibility to manage a factory.  We would be thrilled to hear their responses.  And finally, if all else fails, join organizations like ours and help us raise awareness and activate a change.  The law may not be on our side, but if we work together in solidarity we will make the difference.


This work is licensed under a Creative Commons Attribution-NonCommercial License.
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Walton Pantland

South African trade unionist living in Glasgow. Loves whisky, wine, running and the great outdoors. Walton did an MA in Industrial Relations at Ruskin, Oxford, and is interested in how trade unions use new technology to organise.

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