Decision

Final statement: IUF and FLOC complaint to UK NCP about BAT

Updated 6 May 2022

This statement was published on 2 December 2019 by UK National Contact Point (UK NCP) for the OECD Guidelines for Multinational Enterprises.

Summary

Findings and recommendations

The UK National Contact Point (UK NCP) examined the allegations put forward by the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF) and the Farm Labor Organizing Committee (FLOC) that British American Tobacco (BAT) is linked to alleged breaches of the OECD Guidelines for Multinational Enterprises under chapter II, paragraph 10 and 12 and chapter IV, paragraphs 1, 3 and 5.

The UK NCP finds that BAT did meet the obligations set out under chapter II, paragraph 10 and 12 and chapter IV, paragraphs 1, 3 and 5 of the OECD Guidelines.

The UK NCP also recognises that while BAT has met the obligations which were the basis of IUF and FLOC’s complaint, there are still issues which need to be addressed by the company to ensure that these are acted on appropriately. The UK NCP would therefore like to make the following recommendations:

• In the course of its engagement with the UK NCP, BAT provided 2 reports relating working and living conditions for tobacco workers. One was produced in 2015 under its own Social Responsibility in Tobacco Production (SRTP) programme. The other was a report prepared for R.J. Reynolds Tobacco in 2016 under the U.S. Tobacco GAP Assessments programme, which is industry maintained. Both reports commented on the quality of living and working standards for workers in the tobacco industry. The UK NCP recommends that if BAT has not done so already, it should address the issues identified in these reports by establishing objective standards of living and working conditions for migrant workers.

• Following the acquisition of RAI by BAT in 2017 it is a wholly owned subsidiary of BAT. The UK NCP therefore recommends that BAT ensure RAI processes for managing the well-being of agricultural workers employed in its supply chain are fit for purpose. If it has not already done so, the UK NCP recommends that BAT use the OECD Due Diligence Guidance for Responsible Business Conduct for this purpose.

The UK NCP will issue a follow-up report to this final statement in April 2020.

UK NCP procedure

The OECD Guidelines are voluntary principles for responsible business conduct in areas including employment, human rights and the environment. Each country adhering to the Guidelines is required to maintain a National Contact Point (NCP) to consider complaints under the Guidelines. The UK government maintains the UK NCP to meet this requirement. The NCP is not part of the OECD and has no wider responsibilities for OECD functions.

The UK NCP is based in the Department for International Trade (DIT) and funded by DIT and the Department for International Development (DfID). A Steering Board including members from business, trade unions, civil society, an unaffiliated member and key government departments has general oversight of the UK NCP.

Full details of the UK NCP’s process and statements can be found on gov.uk.

The complaints process is divided into the following stages:

a) Initial Assessment: desk-based analysis of the complaint and the company’s response to decide whether issues raised merit further examination.

b) Mediation or examination: If the UK NCP accepts that issues merit further examination, it offers mediation to parties to help them resolve the issues. If conciliation/mediation is declined or fails to achieve a resolution, the UK NCP examines the complaint further and reaches findings on whether the company’s actions are consistent with the Guidelines.

c) Final statement: the UK NCP issues a final statement recording the agreement reached by the parties or, alternatively, its findings on the company’s actions. If appropriate, the final statement includes recommendations to help the company make its conduct consistent with the Guidelines.

d) Follow up – where a final statement includes recommendations, or where an agreement between parties provides for it, the UK NCP publishes a further statement based on reports from the parties at a specified interval (usually a year) after the final statement.

An initial assessment of this complaint was published in August 2016.

Detailed analysis

Details of the parties involved

The complainants

1. The lead complainant is the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF).

2. The co-complainant is the Farm Labor Organizing Committee of the United States (FLOC).

The company

3. The company is British American Tobacco (BAT). The complaint also refers to a second company, Reynolds American Inc (RAI). At the time the complaint was made in 2016, RAI was part owned by BAT. In 2017, BAT went on to acquire the remaining shares in RAI.

Initial Assessment of the complaint by the UK NCP

4. The complaint alleged that BAT was linked to breaches of the OECD Guidelines through its business relationship with RAI in the US.

5. The UK NCP’s initial assessment of the complaint can be found on gov.uk.

The UK NCP accepted the complaint in relation to the following parts of the OECD Guidelines:

Chapter II General Policies

Enterprises should take fully into account established policies in the countries in which they operate, and consider the views of other stakeholders. In this regard:

A. Enterprises should:

10, Carry out risk-based due diligence, for example by incorporating it into their enterprise risk management systems, to identify, prevent and mitigate actual and potential adverse impacts as described in paragraphs 11 and 12, and account for how these impacts are addressed. The nature and extent of due diligence depend on the circumstances of a particular situation.

12, Seek to prevent or mitigate an adverse impact where they have not contributed to that impact, when the impact is nevertheless directly linked to their operations, products or services by a business relationship. This is not intended to shift responsibility from the entity causing an adverse impact to the enterprise with which it has a business relationship.

Chapter IV Human Rights

States have the duty to protect human rights. Enterprises should, within the framework of internationally recognised human rights, the international human rights obligations of the countries in which they operate as well as relevant domestic laws and regulations:

1, Respect human rights which means they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved.

3, Seeks ways to prevent or mitigate adverse human rights impacts that are directly linked to their business operations, products or services by a business relationship, even if they do not contribute to those impacts.

5, Carry out human rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse human rights impacts.

6. The initial complaint as drafted had also suggested that BAT was directly involved as a participant in a multi-stakeholder process set up to tackle alleged labour abuses in farm work. This was disputed by BAT on the basis that they had never participated in such a process. The IUF confirmed that this part of the complaint had been made in error. The UK NCP agreed it would not pursue further examination of this part of the complaint (relating to chapter II, paragraph 11 and chapter IV, paragraph 6).

7. The UK NCP applied the updated 2011 Guidelines to the actions of companies from 1st September 2011 and to outstanding impacts known to the company at that date.

8. The complaint also refers to the International Labour Organization (ILO) Freedom of Association and Protection of the Right to Organize Convention No. 87 which relates to the right of workers to establish and join an organisation of their own choosing and, the Right to Organize and Collective Bargaining Convention No. 98 which relates to the protection of workers against dismissal or other prejudice because of union membership or activity.

UK NCP process

Initial Assessment

9. The OECD procedural guidance to NCPs is that complaints are dealt with by the NCP of the country in which the issues have arisen. In this instance the issues arose in the US. As a member of the OECD, the US also adheres to the Guidelines. BAT is headquartered in the UK. After a discussion between the 2 NCPs, and in line with the guidance set out under the Commentary on the Implementation Procedures of the OECD Guidelines for Multinational Enterprises, it was agreed that the complaint would be examined by the UK NCP.

10. In the original complaint submitted to the UK NCP, the IUF and FLOC set out a number of demands. These were: the creation of a commission consisting of members from both RAI and workers to address the differences between FLOC, RAI and participating tobacco growers; a Memorandum of Understanding to be entered into by FLOC and RAI to act as a starting point for discussions between the 2 parties and, that BAT should use its leverage to persuade RAI to participate in actions which would lead to good faith discussions on guaranteeing freedom of association and worker representation for migrant workers on farms providing tobacco to RAI.

11. In its Initial Assessment the UK NCP concluded that it would not further the effectiveness of the Guidelines to duplicate or usurp work appropriate to another process, namely the multi-stakeholder process already established in the US. For this reason, the UK NCP decided that any process undertaken by it would be limited to determining the actions appropriate to BAT’s role.

12. The UK NCP received the complaint in April 2016 and published its finalised Initial Assessment accepting the issues for further examination in 10 August 2016.

Mediation and use of the UK NCP’s good offices

13. The UK NCP offer of mediation was made to all the parties involved. BAT declined to participate.

Further examination

14. The UK NCP subsequently informed the parties that it would be proceeding to the final statement stage of the complaints process.

Note on the timeframe

15. The UK NCP recognises that there has been a long delay in the handling of this complaint, primarily due to staff changes in the UK NCP team. It has apologised to both parties for this.

16. Due to the delay in the process, the UK NCP also attempted to facilitate a teleconference between the parties. The proposal was made to the parties in June 2018 by the UK NCP. The objective of the meeting was to discuss the current state of the complaint and to discuss moving the process forward. Terms of Reference were drafted by the UK NCP and submitted to the parties for approval. The UK NCP then worked with the parties to develop Terms of Reference which were acceptable to both parties. Despite contributing several changes and suggestions to the proposed Terms of Reference over a period of several months, BAT decided to withdraw their participation in March 2019.

17. Since the submission of the original complaint in April 2016 the UK NCP also understands that the BAT has now become the full owner of RAI. This development is further discussed under paragraphs 27 – 30.

UK NCP analysis

Information reviewed in further examination

Complainants

18. In addition to the information provided in the complaint, the UK NCP also held discussions with the complainants in December 2016 and January 2017. Based upon these exchanges, the understanding was that the complainants intended to provide additional and relevant information to the UK NCP. However, this did not prove to be the case.

Company

19. As well as its response to the complaint, the company also provided an additional letter of correspondence to the UK NCP on the 30 August 2016. This set out their reasons for declining the process of mediation.

Other sources

20. The UK NCP approached Foreign & Commonwealth Office (FCO) colleagues based in the United States for information relating to agricultural workers’ domestic rights as well as labour legislation in North Carolina.

21. The UK NCP also conducted its own on-line research into the legislation relating to US state and federal employment standards in North Carolina.

Information sharing

22. All the information provided to the UK NCP by the parties has been shared as part of the complaint process. Information is shared on the understanding that while the complaint is under consideration it should not be shared further or made public. After the process is complete, parties are free to discuss it but should not share information provided by another party without its permission.

Limitations of information review

23. The UK NCP operates within boundaries set by the OECD Guidelines, including the voluntary nature of the Guidelines and the requirement on NCPs to operate transparently.

24. The UK NCP has no powers to require any party to provide information to it, nor any special status permitting it to obtain confidential information that other government officials are under statutory obligation to protect. The UK NCP expects, in any case, to share information it obtains with the parties.

25. The UK NCP bases its conclusions on the evidence that it is presented with.

UK NCP findings

BAT’s alleged breach of the OECD Guidelines

26. In the complaint made by the IUF and FLOC, the allegations are that migrant workers involved in the harvesting of tobacco crops in North Carolina cannot join unions or enter into the collective bargaining process without fear of retaliation or intimidation. Without any form of redress, the allegation is that workers experience conditions which constitute a breach of human rights.

27. The complainants state that BAT and RAI, a tobacco company in the United States, are aware of these issues but have not acted upon them to bring about any positive outcomes for migrant workers. Because of this, the IUF and FLOC allege that BAT, as a party with shareholder interest in RAI, is in breach of the OECD Guidelines.

28. At the time of the complaint, BAT owned 42% of RAI, and members of BAT staff also sat on RAI’s management board as directors. BAT has since gone on to acquire full ownership of RAI. ^{[footnote 1]}

29. The complainants’ proposal is that BAT should use its interest in RAI, to influence and address this situation. The complainants propose the creation of a commission the purpose of which would be to address the differences between the parties and to make recommendations for their resolution. The commission would also provide mediation and arbitration where necessary and make recommendations for future collective action to be conducted by the parties.

30. BAT’s response is that an alternative forum already exists to address the concerns of migrant workers who are not represented through membership of existing unions or who cannot bargain collectively on rates of pay. This is the Farm Labor Practices Group (FLPG).

BAT’s ability to influence RAI in issues relating to alleged abuse of migrant farmworkers in the United States

31. In their complaint to the UK NCP, IUF and FLOC alleged that BAT was linked to the abuse of migrant workers, specifically those involved with the harvesting of tobacco in North Carolina, through its 42% shareholding in RAI. BAT has since acquired full ownership of the RAI, in 2017.

32. In their response to the UK NCP, BAT stated that at the time (that is, prior to it acquiring full ownership of the RAI), the rules of governance under which it retained its business interest in RAI, prevented it from actively influencing the decisions of the management board. As a result of this, BAT stated that it could not use its interest in RAI to influence any decisions made by the company. BAT also stated that while members of its staff sat on RAI’s management board, the board as a whole always had the duty to act in the best interests of RAI’s shareholders and, that any decisions arrived at were done so independently and without any direction from BAT. The UK NCP has addressed this issue under the section Recommendations to the company and follow-up.

The establishment of the Farm Labor Practices Group (FLPG) and its role in addressing the needs of migrant farmworkers

33. BAT state that an existing organisation, the Farm Labor Practices Group (FLPG), already exists to address the issues identified by IUF and FLOC. Membership of the FLPG is comprised of several tobacco companies, growers, NGOs and US and North Carolina Labor Department officials. In BAT’s view, the FLPG is an effective forum through which issues raised by US based stakeholders can be dealt with. BAT state that meetings are also held in the presence of a lawyer to ensure that there are no violations of North Carolina’s anti–trust laws.

34. Both the lead and co-complainant acknowledge the existence of the FLPG. However, they also state that as at time of writing, co-operation with the FLPG has failed to yield any effective outcomes. This includes establishing any processes that may allow agricultural workers to access their full range of rights. The complainants state that the issues faced by migrant tobacco workers are not being addressed properly because of this.

Relevant legislation

35. Within the US, workers’ rights are protected under Federal laws, specifically the National Labor Relations Act and the Fair Labor Standards Act. The former establishes the basic rights of employees to form trade unions, enter into collective bargaining and, participate in collective action. The latter sets out fair labour standards for workers, including the right to a minimum wage and standards for overtime payment. The UK NCP understands that for agricultural workers, including those who work in the tobacco industry, there is a reliance on state legislature to set out the conditions of employment for agricultural workers. This covers the migrant workers referred to in the original complaint.

36. Workers under North Carolina law cannot be compelled to join a union by employers as a condition of employment. At the beginning of 2017, the North Carolina Assembly also passed the state’s farm bill, SB 6152. This effectively makes it illegal for agricultural workers, who have signed and entered into union agreements, to have their union fees automatically deducted from their pay by agricultural producers. SB 615 ^{[footnote 2]} also means that agricultural workers are prevented from asking farmers or growers to sign an agreement with unions as part of a wage settlement or dispute resolution mechanism. Collectively these are referred to as Right to Work conditions. It does not mean however, that agricultural workers cannot form their own unions.

Conclusions

Obligations relating to due diligence processes (chapter II, section A paragraphs 10 and 12)

37. The obligation under paragraph 10 is to ‘carry out risk-based due diligence, for example by incorporating it into their enterprise risk management systems, to identify, prevent and mitigate actual and potential adverse impacts as described in paragraph 12 … and account for how these impacts are addressed. The nature and extent of due diligence depend on the circumstances of a particular situation’.

38. The obligation under paragraph 12 is to ‘prevent or mitigate an adverse impact where they have not contributed to that impact, when the impact is nevertheless directly linked to their operations, products or services by a business relationship’.

39. In their response to the UK NCP, BAT provided a report based on a series of interviews that had been conducted with agricultural workers in the tobacco industry in 2015, under the Social Responsibility in Tobacco Production (SRTP) programme. The research conducted by the SRTP is funded by a number of tobacco companies including BAT. The interviews were conducted by a third party. The UK NCP understands that at the time of the complaint, this report was produced every 4 years with the intention to reduce this to a 3-year cycle going forward.

40. BAT also provided the summary findings of a 2015 U.S. Tobacco GAP Assessments program that had been prepared for R.J. Reynolds Tobacco, a subsidiary of RAI, by a third party. This provided data on how agricultural, labour and environmental practices were being employed by tobacco growers in the U.S.

41. On the basis of the information it has seen, the UK NCP accepts that due diligence processes do exist to identify, prevent and mitigate actual and potential adverse impacts. However, UK NCP is also mindful that the complaint made by IUF and FLOC in 2016 was submitted before the introduction of the OECD Due Diligence Guidance for Responsible Business Conduct in 2018.

Obligations relating to Human Rights (chapter IV, paragraphs 1, 3 and 5)

42. The obligation under paragraph 1 is to ‘respect human rights which means they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved’.

43. The obligation under paragraph 3 is to ‘seek[s] ways to prevent or mitigate adverse human rights impacts that are directly linked to their business operations, products or services by a business relationship, even if they do not contribute to those impacts’.

44. The obligation under paragraph 5 is to ‘carry out human rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse human rights impacts’.

45. To assist with the interpretation of these paragraphs, guidance is provided under sections 36 to 46 of chapter II of the Guidelines.

46. Section 37 states that ‘…respect for human rights is the global standard of expected conduct for enterprises independently of [a] States’ abilities and/or willingness to fulfil their human rights obligations, and does not diminish those obligations.’^{[footnote 3]}

47. Section 38 goes on to state that where a State’s domestic laws may be contrary to specific human rights obligations, they do not ‘…diminish the expectation that enterprises respect human rights.’^{[footnote 4]}

48. Section 39 also states that ‘…In all cases and irrespective of the country or specific context of enterprises’ operations, reference should be made at a minimum to the internationally recognised human rights expressed in the International Bill of Human Rights, consisting of the Universal Declaration of Human Rights and the main instruments through which it has been codified: the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, and to the principles concerning fundamental rights set out in the 1998 International Labour Organisation Declaration on Fundamental Principles and Rights at Work.’^{[footnote 5]}

49. Article 22 of the International Covenant on Civil and Political Rights states that ‘…everyone shall have the right to freedom of association with others, including the right to form and join trade unions for the protection of his interests.’^{[footnote 6]}

50. The Article goes on to state that ‘…no restrictions may be placed on the exercise of this right other than those which are prescribed by law and which are necessary in a democratic society in the interests of national security or public safety, public order (ordre public), the protection of public health or morals or the protection of the rights and freedoms of others.’^{[footnote 7]}

51. Under the International Labour Organization (ILO) Freedom of Association and Protection of the Right to Organize Convention No. 87, the right of workers to establish and join an organisation of their own choosing is stated. Under the Right to Organize and Collective Bargaining Convention No. 98, workers are protected against dismissal or other prejudice because of union membership or activity.

52. IUF and FLOC’s complaint states that in failing to provide access to adequate processes of redress, BAT fails to respect the human and employment rights of migrant workers in the tobacco industry who are part of the supply chain for their final products.

53. In their response to the complaint, BAT acknowledge that workers who wish to join a union have the right to legally do so. However, BAT also state that tobacco growers cannot participate in a process that effectively causes the mandatory unionisation of the workforce in a supply chain as this would be contrary to existing legislation.

54. In its response to the UK NCP, BAT state that North Carolina, which is the relevant geographic area relating to the complaint, have enacted Right to Work laws which guarantee that no person can be compelled, as a condition of employment, to join or not to join a union, or to pay dues to a labour union. BAT further state that this is a legal prohibition against the compulsion of an employee by an employer to join a union or pay dues is a point of U.S. law and not something over which they have any control.

55. BAT has provided evidence that an alternative forum currently exists where the issues faced by migrant workers in the agricultural industry who are not members of unions or cannot enter into collective bargaining can be voiced. This organisation is the Farm Labor Practices Group (FLPG).

56. The OECD Guidelines state how issues should be handled in instances where there appears to be a conflict between the conditions it outlines and the laws of the domestic market. Chapter I, paragraph 2 of the Guidelines state that, ‘…obeying domestic laws is the first obligation of enterprises. The Guidelines are not a substitute for nor should they be considered to override domestic law and regulation. While the Guidelines extend beyond the law in many cases, they should not and are not intended to place an enterprise in situations where it faces conflicting requirements. However, in countries where domestic laws and regulations conflict with the principles and standards of the Guidelines, enterprises should seek ways to honour such principles and standards to the fullest extent which does not place them in violation of domestic law.’

57. Based on these points, the UK NCP accepts that BAT’s actions are appropriate in relation to the parts of the complaint brought under chapter IV of the OECD Guidelines.

Recommendations to the company and follow-up

58. Based upon the information it has been provided, the UK NCP concludes that BAT has not breached the sections of the OECD Guidelines set out in the complaint.

However, the UK NCP accepts that there are areas where BAT could contribute more to help promote a better working environment for migrant workers. The UK NCP would like to make the following recommendations to BAT.

BAT to review how it acts on the findings of the research conducted with migrant workers under the Social Responsibility in Tobacco Production (SRTP) programme.

59. Within the definition of the OECD Guidelines, BAT have participated in processes intended to establish and record the working and living conditions of migrant workers. However, it is not always clear how the information gathered under the SRTP programme BAT contributed financially and in which it participated, is used effectively to improve working and living standards for migrant workers.

60. For any information gathering and research process of this type to be useful, it must also result in a commensurate response to ensure that standards are met. If it has not done so already, the UK NCP recommends that BAT participate in procedures to address the issues identified in the interviews with workers. These procedures should be time bound and subject to quality inspections by an independent third party to ensure that they are fit for purpose.

61. BAT should also affirm its commitment to the monitoring process by examining the findings of the research and publishing a schedule of activity to correct the identified issues.

BAT to reassess its relationship with Reynolds American Incorporated (RAI) following its acquisition of the company

62. As part of the original complaint, the IUF and FLOC asserted that BAT was linked to alleged breaches under the OECD Guidelines through its 42% shareholding of RAI. The complainants also stated that through this interest in RAI, BAT could influence the decisions of its management board, with the suggestion that it could work with FLOC to form an employment commission for the benefit of migrant workers.

63. In their response to the UK NCP, BAT stated that this was not possible due to the nature of its governance arrangement with RAI which ensured that it always maintained a minority position on the management board. It also pointed to the obligation of company directors to act independently in a way that benefitted company shareholders.

64. BAT’s response included a statement that its minority position on the management board could only change if BAT acquired 100% of RAI. The UK NCP notes that in July 2017, BAT did proceed to acquire the remaining 58% of RAI to assume total control of the company.^{[footnote 8]}

65. Following the acquisition of RAI by BAT in 2017, it became a wholly owned subsidiary of BAT. The UK NCP therefore recommends that BAT ensure that RAI’s processes for managing the well-being of agricultural workers employed in its supply chain are fit for purpose. If it has not already done so, the UK NCP recommends that BAT use the OECD Due Diligence Guidance for Responsible Business Conduct for this purpose.

BAT to work with stakeholders to ensure the Charter and Operating Protocols of the FLPG are more clearly defined and that the findings established at FLPG meetings are dealt with in a timely manner so that positive outcomes are achieved for ununionized workers

66. The UK NCP acknowledges that it has seen evidence of an alternative process that allows the views of ununionized workers to be heard. This is the FLPG process that was established in 2012.

67. However, the UK NCP notes that the Charter and Operating Protocols for the FLPG it has seen, and which are dated 2015, indicate that many of the processes are still at a preliminary stage and are not clearly defined.

68. While the UK NCP agrees that the FLPG can act as a vehicle for dialogue with migrant workers and therefore lead to an improvement of working and living standards for them, the UK NCP considers that it can only do so if the FLPG conducts itself in a proactive and transparent way. This includes establishing a clear process to address the issues identified during the meetings on a timely basis, if it has not already done so.

69. The UK NCP will request an update from both parties in a year’s time.

April 2019

UK National Contact Point for the OECD Guidelines for Multinational Enterprises

1. BAT Completes Acquisition of Reynolds ↩

2. General Assembly of North Carolina, Session 2017, Session Law 2017-108, Senate Bill 615 ↩

3. OECD Guidelines for Multinational Enterprises, 2011 edition, p.32. ↩

4. OECD Guidelines for Multinational Enterprises, 2011 edition, p.32. ↩

5. OECD Guidelines for Multinational Enterprises, 2011 edition, p.32. ↩

6. International Covenant on Civil and Political Rights, 1976, article 22, paragraph 1. ↩

7. International Covenant on Civil and Political Rights, 1976, article 22, paragraph 2. ↩

8. BAT Completes Acquisition of Reynolds. ↩