Broken: Labor Contracting in the Food System

COSATU, South Africa’s main union federation, has called them worse than apartheid or slavery. Namibia tried to ban them altogether (until the Supreme Court stated that a total ban was not allowed). NGOs have linked them to labor trafficking and forced labor.

Labor contractors – also known as labor brokers, gangmasters, and thekedaars – are essentially middlemen linking workers with employers, generally through a triangular employment relationship that relieves employers of some level of responsibility. Their relationship to workers and employers can be varied, ranging from simply recruiting workers for employers to supplying, paying, and supervising workers. Labor contractors work in a number of sectors. They are prominent throughout global food supply chains, supplying workers to employers in both fields and factories.

Critics argue that labor contractors generate massive exploitation and must be prohibited. In South Africa, for example, COSATU continues to call for a complete ban, despite the ANC government’s decision that labor brokers should instead be better regulated. This debate is not new. When I was in South Africa in 2010, I spoke with someone researching labor issues there. He told me that he had attended a conference full of union leaders, all decrying the practice of labor contracting. One man stood up, a representative of unemployed workers. He said something in favor of labor contracting. He was nearly booed out of the room.

But what does international law say about labor contracting? And would banning labor contracting even help?

International Law
The International Covenant on Economic, Social and Cultural Rights (ICESCR) does not specifically address labor contracting. Article 7 of the ICESCR does note, however, “the right of everyone to the enjoyment of just and favourable conditions of work.” Such conditions comprise a number of factors, including fair wages, a decent living, safe and healthy working conditions, and reasonable limits to working hours and remuneration for some holidays.  It also includes the “equal opportunity for everyone to be promoted in his employment to an appropriate higher level,” an opportunity that is difficulty to fulfill when a workforce is composed of both regularly employed workers, who tend to have greater job stability and benefits, and contractor-recruited workers, who are generally employed tenuously and casually.

ILO Convention 181, the Private Employment Agencies Convention, explicitly addresses labor contracting. The Convention is meant “to allow the operation of private employment agencies as well as the protection of the workers using their services, within the framework of its provisions.” Though the Convention is only binding on ILO members that have ratified it – a meager 23 to date – it still provides guidelines for how labor laws should regulate contracting. The ILO urges greater ratification of the Convention, arguing that it could “help to promote and implement the Decent Work Agenda by ensuring protection of the rights and working conditions of agency workers.”

In short, the Convention does not call for a total ban on labor contracting. It does, however, allow the prohibition of labor contracting “under specific circumstances … in respect of certain categories of workers or branches of economic activity.” When members that have ratified the Convention do this, however, they must report the prohibition “and give the reasons therefor.” (The Convention also allows members that have ratified the Convention to exclude certain workers from parts of the Convention, so long as adequate protection of workers is assured.)

When labor contracting is not banned in specific sectors, which is the default circumstance, governments are required to take measures to protect the rights of workers recruited by private employment agencies, i.e., labor contractors. Among other things, governments must ensure the right to freedom of association and the right to bargain collectively, as well as protection from discriminatory treatment. They must prevent labor contractors from using child labor. Governments must prohibit labor contractors from charging directly or indirectly “any fees or costs to workers” (with very specific exceptions allowed). Governments should adopt laws or regulations that protect migrant workers recruited or placed in their territories. In addition, governments must “take the necessary measures to ensure adequate protection for the workers employed by private employment agencies” regarding a host of issues, from freedom of association to maternity/parental benefits.

The Convention also provides guidelines for how government can implement these obligations. This includes applying the provisions through “laws or regulations,” as well as ensuring that procedures “exist for the investigation of complaints, alleged abuses and fraudulent practices concerning the activities of private employment agencies.”

Banning versus Regulating
While a range of horrific conditions can occur under labor contracting arrangements, they are not inherent – or exclusive – to labor contracting itself. Rather, the main problem with labor contracting is that, depending on national laws, the arrangement allows employers to shift their responsibilities onto others. In many cases, under a labor contracting arrangement, a company that would have been an “employer” instead becomes a “client” or “user,” and the labor contractor becomes the employer under national law. This, in and of itself, is not hugely problematic, if the new employer (i.e., the labor contractor) follows all labor laws. However, when labor contractors do not comply with labor legislation – and many do not – this can lead to high level of exploitation. Exploitation is more likely when there are many layers of contractors and outsourcing. As researcher Stephanie Ware Barrientos has noted, “[w]orkers recruited through a ‘cascade’ system, or network of labour intermediaries, are often most hidden, and exposed to abuse, including new forms of ‘global slavery’.”

A second problem with the increased use of labor contractors is that they lead to more precarious work. Companies using labor contractors benefit from an extremely “flexible” workforce, taking workers only when they need them, often to the detriment of underemployed workers with insecure jobs. This is a dangerous trend. As the National Employment Law Project noted in releasing a recent report on Walmart warehouse contractors, “creating more steady, decent-paying jobs in warehouses is a priority.” This holds true for workers throughout the food system.

Of course, creating more secure jobs is easier in some sectors than others. Workers in warehouses or factories can be employed throughout the year. Yet agriculture is inherently seasonal. It is extremely difficult for farm owners to fully employ workers throughout the year, unless the farm is sufficiently diversified – an increasingly rare situation. In California last year, one socially responsible farm told me that they now offer year-round work to their workers. However, they don’t have enough work to go around to all workers in certain seasons, so the workers who choose to stay on throughout the year are underemployed at various times. It’s an improvement over many other farms, but its still an imperfect situation.

Banning labor contractors is not a panacea. If labor contractors did not exist, exploitation of workers still would. So would underemployment. Prohibiting labor contractors would make it slightly harder for employers to shift responsibility onto others, but a complete ban is not the only way to do this. Very strict regulation of labor contractors, combined with proper enforcement, should do just as much towards improving conditions of workers hired by labor contractors.

The most important way to regulate the use of labor contractors is to prohibit companies from shifting their “employer” status – and thus their liability – to a labor contractor. Namibia, for example, has new legislation stating that workers (excepting independent contractors) who are placed with a “user” company by a labor contractor become the employee of the user company (and, conversely, the user company is the employer of that employee). The employers’ federation there has complained that this law effectively bans labor contracting.

Alternatively, governments can make user companies and labor contractors jointly and severally liable for the treatment of workers recruited through labor contractors. This would mean that both a “user” company and a labor contractor are fully responsible for labor compliance towards workers. If a labor contractor violates labor laws, including minimum wage laws, both the user company and the labor contractor would be equally liable for the violation. Joint and several liability creates a disincentive to use labor contractors who do not comply with the law. (How big of a disincentive depends on how well the law is implemented and enforced.) In South Africa, employers using labor contractors to recruit farmworkers are actually jointly and severally liable for compliance with labor laws, though the labor contractors are deemed the employer. This status is rarely acknowledged, however, and seems to have had little impact, hardly surprising given the government’s inability to enforce its labor laws effectively.

Whether banning labor contracting would stem the rampant casualization of the workforce requires a different calculus, one that I’m not equipped to make. This does not appear to be an open-and-shut case, however, and I’d query any claims that labor contracting is the sole cause of labor exploitation and casualization of the workforce. Yet there are steps that could be taken, outside of banning labor contractors, that could help improve conditions. For governments, strictly regulating labor contractors and enforcing all labor laws is key. As I pointed out in Ripe with Abuse, legislation or regulation without enforcement doesn’t mean much. For unions, supporting union formation among seasonal and casual workers is also important. It’s a model that’s rarely used in agricultural labor, but one that is crucially important for raising the labor conditions of all workers within the food system.

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