corporations – Working Paper Series

Sierra Leone’s Experience with In-Country Outsourcing

by Francis Kaifala

23 DEC 2017

In 2007, I was in my first year as a lawyer working for a firm in Freetown, Sierra Leone. The managing partner of the firm forwarded an email from some foreign clients and instructed me to provide a well-researched, comprehensive response to the clients’ inquiries. The questions on “doing business in Sierra Leone” were fairly routine, as I had already responded to similar ones before. However, one question left me a bit confused – it asked what local legal and regulatory regime existed with respect to “outsourcing practices” in Sierra Leone. Until then, I had never heard the term “outsourcing” and had no idea what the clients were asking.

My research led me to one conclusion: there was nothing in our laws specifically regulating either cross-border or in-country outsourcing practices. Sierra Leone’s labor laws are primarily concerned with traditional employee-employer relationships.[1] Other practices such as consultancies are governed almost entirely by contract law. Our laws had paid little attention to outsourcing and there were scarcely any regulatory references to the practice. I came to learn that outsourcing—reflecting neoliberal motivations—aims to cut costs and reduce other liabilities associated with standard employee-employer relationships. This is achieved by creating an outside company that hires workers and then outsources them to other institutions to provide services.

I reported my findings about outsourcing to my Head of Chambers. After listening to me, he calmly said, “that which is not prohibited, is lawful.” My understanding of his statement was that because our laws did not explicitly prohibit outsourcing, it was an acceptable practice. We later explained to the clients that Sierra Leone’s labor laws protect workers but allow outsourcing based on a business’s right to contract freely.

As years went by, we provided similar opinions to additional clients, particularly in the US, UK, Nigeria, and Senegal. By 2010, Nigerian banks and service providers, many of which had benefited from our advice, started businesses in Sierra Leone. While cross-border outsourcing did not take really take root in Sierra Leone as in other countries like South Africa and Nigeria, in-country outsourcing – the phenomenon whereby workers are hired by an outsourcer and then sent to provide services to another company on a contractual basis – has become more prevalent.

Before the influx of foreign companies, most local banks and other financial sector businesses directly hired their employees (from janitors to managing directors) who typically enjoyed full rights and relatively good conditions of service. Employees worked within the normal structure of the company and were paid reasonable salaries, ensuring that they and their families lived at least middle-class lifestyles. Apart from normal sub-contracting, outsourcing of work was not known.

With the introduction of the Sierra Investment Promotion Act of 2007,[2] which opened the market and guaranteed incentives for foreign investments, more and more Nigerian companies started establishing branches and subsidiaries in Sierra Leone. These included banks, insurance companies, mining companies, oil companies, technology companies, general supplies companies, and general services providers.

With the advent of outsourcing, newly launched financial institutions, insurance companies, and mining companies capitalized on this trend: staff members were laid off then heavily recruited and hired by outsourcers. Companies could then hire (or rehire) workers directly from outsourcers, sidestepping the standard worker protections required in employee/employer relationships. Payments were made directly to the outsourcer who then paid the worker a lesser amount. Other Nigerians established their own outsourcing companies to create a ready pool of local workers with a range of skills, providing a market for companies that needed them. They took advantage of the fact that in Sierra Leone, one could hire workers on “contract” for specific periods.[3]

Because contract workers are not categorized as employees, they cannot benefit from collective bargaining agreements or union rules. Thus, workers lacked formal employment relationships with both the outsourcer and with the company where they might be stationed. In some cases, contractual workers found themselves placed at the very same institutions that had fired them in order to make way for outsourced hires. Those affected mostly included custodial staff, security personnel, cashiers, and tellers. They were no longer part of the staff structure of the businesses and were not classified as employees. As contractors, they lost employment benefits like employee loans, car loans, leave allowances, sick day allowances, paid holidays, and medical insurance.

Today, businesses that once offered competitive wages and good benefits to employees have outsourced jobs to institutions that do not prioritize workers’ well-being. This has left workers with lower wages, disadvantageous terms and conditions of service, and many unregulated harmful labor practices. With outsourcing practices growing,[4] the livelihoods of workers affected in Sierra Leone are declining, leaving them worse off than workers from previous decades.

Without some protective intervention from the government this pattern will continue. Workers ought to be treated fairly, not exploited. A company’s environment and conditions must include respect for workers and protect their human rights. Therefore, domestic standards need to be developed to create a level playing field. Such standards should prescribe a minimum set of worker rights and conditions in labor and employment agreements. This action would balance the benefits that businesses accrue from outsourcing with their obligation to safeguard the vulnerable workers’ rights.

Work Cited

[1] “Traditional” here refers to direct employment relationship between and employee and employer whereby all responsibility and work is for the employer.

[2] After the end of the civil war, this Act was introduced to encourage and attract foreign investment in the country.

[3] With proper framing, these contracts would not be employment contracts to attract the application of Collective Agreements to them.

[4] In 2014, it was estimated to be growing at 12% to 26% according to the International Organization for Standardization (ISO).

Francis Kaifala was a Fall 2017 Human Rights Scholar at the Rapoport Center for Human Rights and Justice. He is also a Fulbright Scholarship recipient and a native of Sierra Leone.

Shining Light on Bad Practices: Re-assessing Tools for Corporate Accountability in Burma

by Kate Taylor

30 NOV 2017

Over the last twenty years, transparency has become a watchword within international policy-making institutions. Specifically, enhanced transparency has emerged as a critical component in the pursuit of corporate accountability for human rights abuses. Transparency-enhancing initiatives related to corporate accountability have proliferated enormously over this period, and their various forms have diversified substantially — from voluntary codes of conduct to mandatory reporting requirements. Despite this breadth, nearly all transparency-enhancing initiatives, whether legally mandated by the state or voluntary private initiatives, push corporations to make periodic public disclosures of financial and non-financial matters (primarily regarding human rights, labor, environmental and anti-corruption).

For human rights advocates embracing transparency as an accountability tool in the business and human rights arena, the broadly stated theory of change is that shining light on bad corporate practices can lead to remedy and reform. Of course, human rights advocates who promote such transparency do not accept corporate disclosures at face value — and many are willing to scrutinize their veracity and completeness. Yet, in assessing advocacy and accountability tools in the business and human rights arena, it seems necessary to examine the opportunity cost of this focus on transparency, querying what it both overlooks and obscures.

Recent reforms to Burma’s investment law illustrates the risks of over-emphasizing transparency as an accountability tool. Throughout 2016-17, the newly-sworn-in National League for Democracy (NLD) Burmese government rewrote its investment law, as well as its subordinate rules and regulations. The reform process was undertaken by Burma’s Directorate of Investment and Company Administration (DICA) with technical assistance from the International Finance Corporation (IFC).

Human rights NGOs provided feedback with the aim of embedding respect for human rights and the environment within Burma’s new investment law regime. Ensuring that the Law and Rules incorporated rigorous transparency provisions was of fundamental importance to human rights advocates — bearing in mind the country’s egregious legacy of business-related human rights abuses and the opacity which has long-characterized Burma’s particular brand of crony capitalism.

Civil society feedback submissions covered a number of human rights issues and included transparency as a key concern. Notable among these suggestions was that the new government impose a set of “Responsible Investment Reporting Requirements,” which would require businesses investing over a certain monetary threshold to publicly disclose an annual report addressing a wide range of issues, including human rights, environmental matters, labor rights, anti-corruption measures, property acquisition and military communications.

Ultimately, civil society submissions regarding transparency were among the few suggestions taken up by DICA and the IFC in the re-writing of the new Investment Law and Rules. The final iteration of the Rules requires basic project information to be publicly disclosed before the government makes large-scale investment decisions. Additionally, it requires investors to submit annual reports on certain financial and non-financial matters to the Myanmar Investment Commission (which the Commission may decide to make public), including details of the investments’ impact on the environment and local community — but the disclosure requirements are bare-boned and are not accompanied by serious institutional buy-in on the part of the Myanmar Investment Commission. Ultimately, the drafters were hostile to rigorous human-rights based reporting requirements, which would have required due diligence on the part of companies, despite the urging of human rights NGOs. It seemed that the government, together with the IFC, was willing to incorporate only the smallest measure of transparency into the legal regime.

Without much more, embedding strong transparency requirements into Burma’s new investment law regime would do little to rectify the serious pathologies which characterize its business and human rights landscape. Enhanced transparency in Myanmar’s investment climate may begin to foster responsible business practices and encourage due diligence, but it does not promise to address broader structural issues that directly cause or exacerbate business-related human rights abuses extant in Burma, such as reckless investments in conflict-affected areas, systemic corporate tax avoidance, mammoth land grabs and displacement, and chronically weak labor-rights institutions.

Indeed, allowing irresponsible businesses to proceed as long as their disclosure requirements are met annually may actually legitimate a range of harmful business practices and obscure others that are undisclosed. Frequently, corporate disclosure efforts (especially in weak institutional contexts, where the prospects for audit and scrutiny are scarce) are little more than public relations exercises, with scant connection to the businesses’ real impacts on the ground. By emphasizing transparency as a global governance tool, we risk allowing corporations to give the allure of being a ‘rights-respecting’ or ‘socially responsible’ entities, with no substantive responsibilities being met to those most affected by their operations.

The focus on enhancing transparency also fails to support local communities affected by large-scale investments that frequently face intimidation and repression for speaking out against projects. Merely having information does little to open up spaces for contestation and access to justice. In addition, without linkages to domestic or transnational advocacy networks, ‘access to information’ means little for impacted communities. In the case of highly technical corporate disclosures, such reports can easily become sites of exclusion. The disclosure of a company’s Environmental Impact Assessment (EIA) is a salient example. EIAs are largely unintelligible for those untrained in environmental management (and in Burma, are frequently disclosed in languages and terms not understood by impacted communities). Yet, in producing and disclosing an EIAs, companies often claim to have met their obligations toward community consultation.

As a governance tool, information disclosure and transparency fit well within the prevailing neoliberal logic and its preference for due process rights over substantive equalities. Human rights advocates would be remiss in their work to solely focus on such tools. Transparency is a laudable beginning for investments in Burma, but it is the start, and not nearly the end of the broader accountability project. The risk that mere transparency is conflated with accountability and justice should not be overlooked.

Kate Taylor is a human rights lawyer and Postgraduate Fellow at the Rapoport Center for Human Rights and Justice, and is a member of the 2017-2018 Working Paper Series Editorial Committee. Her impressions in this post are drawn from her experience working in Burma on human rights reforms to the country’s investment law regime.

New Research on the Relationships between Businesses and Military Regimes under Latin America’s Cold War

by Eyal Weinberg

13 FEB 2017

State terror and human rights violations during Latin America’s authoritarian phase have been amply studied in the past two decades. Scholarship has revealed how Cold War military dictatorships and juntas-headed national security states detained, tortured, and disappeared hundreds of thousands of civilians— from indigenous groups in Central America to political activists in the Southern Cone. Studies have also illuminated how the relations of military regimes with various international and domestic forces—among them U.S. policymakers, Church representatives, technocratic experts, and industrialists—enabled and facilitated that repression. Yet many facets of the repressive apparatus remain under-examined.

Recently, scholars are returning to scrutinize the interplay between business corporations and Latin American regimes. Early literature has already unraveled the close ties between business elites and authoritarian rules, from the state’s reliance on industrialists in developing a pro-market, open economy, to industrialists’ consent and sometimes-active support of coups d’état and ensuing state-led repression. Today, newly available archives and updated approaches to the study of Latin America’s Cold War allow researchers to revisit some of these issues, as well as other questions that explore the entanglements between corporations and regimes.

Studies exemplifying this new wave of research were presented last September in a special workshop at the University of Göttingen in Germany. Presentations shed light on the changing nature of relationships between businesses and dictatorships across states and over time, analyzing the transitions from collaborations to conflicts and even opposition. They also examined the direct and indirect roles companies played in state-sponsored repression. And they explicated how the regimes’ policy planning met business interests to introduce new domestic industries—healthcare, energy, and pharmaceutical markets, to name a few. The histories of multinational corporations under the military rules received a particular focus. Moving beyond the traditional interpretation of the authoritarian state as a guarantor of international companies, papers focused on how subsidiaries dealt with both state apparatuses and parent corporations, typically located in Europe or North America.

In Argentina, for example, German companies Deutz, Siemens, and Daimler-Benz held subsidiaries operating during the Dirty War. Case studies examined how these businesses reacted to workers’ protests and union demands, as well as how they handled reports of disappeared people in their correspondence with the distant board of directors. In 2015, for example, a team of Argentinian researchers supported by Argentina’s Ministry of Justice published a detailed report that investigates the responsibility of domestic and multinational companies in regard to human rights violations carried out on the premises of their factories. The workshop’s papers also payed considerable attention to the relationship of Volkswagen do Brasil (a subsidiary of the German car manufacturer) with the Brazilian regime and its counterinsurgency agencies. The Brazilian National Truth Commission (2012-2014) concluded that over 70 corporations, among them Volkswagen, provided security agencies with blacklists of unionizing and “problematic” workers, some of whom were later detained or fired. The workshop’s presentations illustrated the controversy over the extent of VW’s collaboration with state repression, a result of inaccessible or missing archival material. For now, appeals are still in review at the office of the Attorney General.

As the last example demonstrates, there is much to reveal about the intricate relationships between corporations and authoritarian regimes in Latin America, and particularly about their relation to human rights violations. Further archival research, as well as intellectual exchanges focused on that theme, will expand current knowledge and scholarship.

Eyal Weinberg is a PhD candidate in the Department of History at The University of Texas at Austin and member of the 2016-2017 Working Paper Series Editorial Committee.