A few shareholders at Gap’s annual meeting this week questioned the company’s refusal to sign on to a plan that commits retailers to help finance safety upgrades in Bangladesh, where 1,127 workers died when the Rana Plaza factory building collapsed on April 24.
“In the United States, there’s maybe a bigger legal risk than there is in Europe,” Gap’s chief executive, Glenn Murphy, responded. “If we were to sign onto something that had unlimited legal liability and risk, I think our shareholders should care about that.”
Whether the new accord would subject retailers to substantial legal risks has been debated since nearly three dozen European retailers embraced the plan last week while almost all major American companies shunned it. The plan, called the Accord on Factory and Building Safety in Bangladesh, was forged by retailers, union leaders and government officials overseas.
Labor advocacy groups and other supporters of the plan pilloried the responses by Gap, Wal-Mart and other American retailers that have decided to rely on their own inspection systems rather than join the plan.
Johan Lubbe, a legal adviser to the National Retail Federation, asserts that the Americans’ worries about litigation are legitimate. “The liability issue is of great concern, at least on this side of the Atlantic,” Mr. Lubbe said. “For U.S. corporations, there is a fear that someone will try to impose liability and responsibility if something goes awry in the global supply chain.”
For example, if a Bangladesh factory burns and workers die, the victims’ families, represented by zealous American lawyers, might seize on the legal commitments in the accord to file lawsuits in the United States against retailers that bought apparel from the factory.
John C. Coffee Jr., a professor of corporate law at Columbia University, said American companies generally faced a higher risk of litigation than overseas competitors, largely because the court systems differ significantly. Unlike the system in the United States, courts in Europe generally prohibit class-action lawsuits, do not allow contingency fees for lawyers who win cases and require losing parties to pay legal fees for both sides. Those policies often discourage lawyers and plaintiffs from filing lawsuits.
But Professor Coffee also cited a Supreme Court decision last month that could greatly reduce the ability of overseas factory workers and their families to file lawsuits in United States courts.
“It may be that those retailers who worry about legal liability are pointing to an outdated sense of what liability is for actions taken abroad,” Professor Coffee said. He added that if an accident occurred abroad — for instance, at a factory in Bangladesh — “there is an increasing doubt that the American retailer could be sued in the United States,” because the Supreme Court ruling, Kiobel v. Royal Dutch Petroleum, went far to curb such lawsuits under the Alien Tort Claims Act.
Long before the Bangladesh safety plan was developed, overseas workers had sued American retailers over illegally low wages, 12-hour shifts and the use of guard dogs and barbed wire fences, said Scott Nova, executive director of the Worker Rights Consortium, a university-backed factory monitoring group. In 2003, Gap, Nordstrom, Target, Wal-Mart and 20 other retailers settled a lawsuit for $20 million on behalf of 30,000 garment workers on the Pacific island of Saipan who alleged those abuses.
Mr. Lubbe cited a more recent lawsuit as evidence that American retailers still faced risks. Last year, the University of Wisconsin sued Adidas, demanding that it pay $1.8 million in severance benefits to former workers at an Indonesian factory it used. The factory’s owner had failed to comply with an order to pay those benefits to 2,800 workers who lost their jobs.
Mr. Nova said the University of Wisconsin lawsuit was based on a licensing agreement with more specific obligations than the Bangladesh accord. Adidas had pledged to comply with a labor code of conduct that said it must “ensure that all manufacturers comply” with the code and “provide legally mandated benefits,” such as severance benefits.
Liz Alderman contributed reporting.
This article has been revised to reflect the following correction:
Correction: May 22, 2013
An earlier version of this article misstated the position that Philip J. Jennings holds at Uni Global Union. He is the general secretary, not the executive director.
Article source: http://www.nytimes.com/2013/05/23/business/legal-experts-debate-us-retailers-risks-of-signing-bangladesh-accord.html?partner=rss&emc=rss
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