New supply chain law: first compensation for migrant workers

For years, migrant workers at Taiwanese suppliers to Bosch, Continental and Hella have risked falling into debt bondage. According to documents that SWR exclusively available, first workers are now partially compensated.

The new Supply Chain Due Diligence Act (LkSG) has been in effect for companies with more than 3,000 employees since January 1st. It obliges companies to react to abuses when purchasing material from abroad. documents that dem SWR are available exclusively, indicate that the law is already having an effect. The specific case concerns Taiwanese companies that produce for German automotive suppliers.

Modern Forced Labor

The criticism focused on several long-standing Taiwanese suppliers to Bosch, Continental and Hella. Many foreign workers come from Vietnam and in the past had to pay the equivalent of up to 6,150 euros to find jobs – a sum that corresponds to three to four times the annual wage of the Vietnamese minimum wage.

Some workers also had to deposit the equivalent of 950 euros, which they only get back if they fulfill the three-year contract period. Those affected reported that most of the workers and their families took on considerable debt.

Debts for agency and contract fees by employers are not uncommon in Asia, according to a recent study by the United Nations’ International Labor Organization (ILO). Accordingly, the transition to forced labor is fluid. According to the latest figures, 27.6 million people worldwide are affected by this modern form of slavery, and the trend is rising. More than half of them live in Asia.

Companies react to media reports

Last year, “Le Monde Diplomatique” and “The Diplomat” reported on concrete cases of this form of modern forced labor in Taiwan. It was about Chin Poon Industrial (CPI), which produces electronics for Bosch, Continental and Hella, and about Shinkong Synthetic Fibers Corporation (SSFC), which supplies Continental with synthetic fibers.

From documents and statements from those affected who SWR exclusively available, CPI now reimburses migrant workers, at least in part, for recruitment fees. Vietnamese workers confirmed that SWRthat they received the first tranche in December as promised, with another to follow in March.

CPI pays or reimburses fees

Upon request, Bosch will confirm to the SWRthat the media reports gave the reason: “We took the information about the employment situation of our supplier CPI very seriously and clarified the matter with the supplier.” CPI has further developed its personnel policy after talks and “according to the information currently available to us, since the beginning of December 2022 it has paid recruitment and service fees that are incurred for the recruitment of foreign specialists in Germany and abroad by the placement agencies involved,” says Bosch. This also gradually applies retrospectively to recruitments before December 2022; CPI reimburses the foreign professionals for the costs incurred as a result.

A press spokeswoman from Hella specified this SWR CPI’s pledges: “Based on the information and migrant workers’ employment contracts that we had access to, current migrant workers will have their recruitment fees fully reimbursed in two steps.” In the meantime, CPI has also set up a complaints hotline for its employees, where employees have the opportunity to raise open issues.

Upon request, CPI confirmed the workers’ compensation and quoted a total amount of the equivalent of EUR 737,000.

Preventive effect of the Supply Chain Act

Experts see this as a first success of the supply chain law that has been in force since January. The chairwoman of FEMNET eV, Gisela Burckhardt, who was awarded the Federal Cross of Merit in 2021 for her commitment to the rights of textile workers in the Global South, attests that the new law has an important preventive effect. “I think a lot of companies are only now trying to get to know their supply chain,” she says in an interview with the SWR.

“In the past everything was voluntary, but now it has a different meaning,” Burckhardt continues. The preventive effect of the Supply Chain Act is that companies are currently making great efforts to set up grievance mechanisms because the law prescribes them. “That’s why it’s initially a positive sign when more complaints come to light, because it shows that those affected have confidence in the complaints system.”

All three companies dodge the specific question of whether the compensation and other measures taken by CPI within the framework of the new supply chain law. With regard to supply chain responsibility, Bosch refers to existing supplier contracts, Hella to the corporate culture and Continental to the binding code of conduct for business partners “Continental resolutely rejects any form of forced labour, modern slavery, bonded labor, human trafficking or any other form of work that is not performed voluntarily ,” a company spokeswoman said SWR.

Lack of Civil Liability

But there are also doubts as to whether the new supply chain law is far-reaching enough. According to the affected workers, the amounts now being paid out in compensation are each half or less of the amounts they paid. “I was surprised. I never thought I’d get my money back, but I don’t understand why I’m not being fully compensated,” said one of the affected Vietnamese workers in an interview with the SWR.

“On the one hand it is to be welcomed that those affected were compensated, on the other hand it is unacceptable that this was not done in full”, says Anton Pieper from the organization WEED eV (World Economy, Ecology and Development) on request. For him, both are related to the LkSG: “Because the law triggered a paradigm shift, which means that German companies are finally beginning to face up to their responsibilities.”

There are still gaps in the law

At the same time, the law has blatant loopholes, for example because it does not provide for civil liability, does not prescribe effective remedial measures and those affected cannot sue for their rights, according to Pieper. “In business practice, this weak point means that compensation is only partially paid, if at all.” Like Burckhardt, he is now relying on more binding rules in the European supply chain law, which is currently being negotiated.