California Adopts New Corporate Slavery Disclosure Law

On September 30, California Governor Gavin Newsom signed Assembly Bill 2599. This new law – the first of its kind in the United States – requires large companies doing business in California to conduct a records search for specified slavery-related conduct and submit to California an affidavit of their findings, which will be made public. We discuss AB 2599 in more detail in this post.

As many readers of our posts know, California has required modern slavery disclosure by retailers and manufacturers for more than a decade. The California Transparency in Supply Chains Act was the first corporate modern slavery transparency law. It has since been followed by broadly similar requirements, in chronological order, in the United Kingdom, Australia and Canada, with New Zealand likely to soon be part of the club.

AB 2599 is different. It is not focused on modern slavery. Instead, it is focused on pre-Thirteenth Amendment slavery.

The Legislature’s findings in AB 2599 note that businesses from that period in the following industries, among others, profited from slavery: insurance, banking, tobacco, cotton, sugar, railroads and shipping. However, AB 2599 is not industry-specific.

Covered Entities

Entities are subject to AB 2599 if they (1) do business in California, (2) were in existence on or before December 31, 1964 (or had a predecessor in existence then) and (3) have annual worldwide gross receipts of more than $100 million. 

Doing business in California has the meaning in Section 23101 of the California Revenue and Taxation Code. 

Records Search

AB 2599 requires each covered entity to search through the records in its and its related entities’ possession, control and knowledge for records that the covered entity or its related entities:

• Bought or sold persons subjected to slavery;
• Used persons subjected to slavery as collateral;
• Provided loans to purchase persons subjected to slavery;
• Insured such transactions or the persons subjected to slavery; or
• Provided related or other services to aid or otherwise facilitate those transactions.

AB 2599 does not prescribe a particular search methodology. However, the California Civil Rights Department has the authority to adopt, promulgate and amend regulations implementing and interpreting this and other aspects of the law. 

“Related entity” is a defined term in AB 2599. It includes the covered entity’s parent entities or subsidiaries that do business in California, as well as any predecessor in interest, regardless of whether that predecessor did business in California.

Affidavit Requirement

Following its records search, the covered entity must complete an affidavit and submit it to the California Civil Rights Department. 

The affidavit must include the following information: 

• A statement from the covered entity verifying that it has exercised due diligence to search through any and all records in its and its related entities’ possession.
• The names of each slave and slaveholder described in the records.
• Evidence of transactions that benefited or otherwise profited from slavery in the United States financially or through the exchange of goods or services.
• To the extent applicable, records from 1849 forward indicating the following:
  • Insurance policies related to slaveholding;
  • Evidence of the purchase, sale or lease of enslaved persons;
  • The use of enslaved persons as collateral for insurance policies, loans or other transactions;
  • Evidence of the provision or receipt of loans to purchase enslaved persons;
  • Insuring transactions for enslaved persons; and 
  • Any other company or contractor records evidencing participation in slaveholding or participation in the slave trade.
• An index summarizing and describing the records provided, including the years referenced in the records, the industry and names of the companies referenced (if the predecessor or subsidiary company had a different name) and the types of documentation or records submitted.

There is a partial accommodation for insurance companies: an insurance company that submitted documentation to the California Department of Insurance pursuant to Chapter 5 of Division 3 of the Insurance Code (enacted by SB 2199) may include that documentation as part of the affidavit. SB 2199, which was adopted in 2000, required California insurers to provide information regarding records of slaveholder insurance policies. 

Affidavit Due Date; Public Availability of Data

There is a decent amount of runway before affidavits are due (although for some companies AB 2599 will be a big lift). 

Affidavits and related records ultimately will be included on a public digital platform. The timing of that platform will dictate when affidavits and supporting documentation are first due. After AB 2599 has been funded by the California Legislature, the Civil Rights Department has one year to create the platform. By its terms, the requirements of AB 2599 become operative upon appropriation by the California Legislature. 

At the earliest, affidavits will be due by January 15, 2029, for covered entities doing business in California as of January 1, 2028. However, if the digital platform is delayed, the deadline will be pushed back to the next applicable January 15 following the development of the platform. 

For covered entities that commence business in California after January 1, 2028, the affidavit is due by January 15 of the second year following the establishment of the business or one year after the Legislature’s implementing appropriation, whichever is later. 

Affidavits and records received by January 15 of the first reporting year are required to be made available on the platform within one year. Affidavits and records received thereafter are required to be made available within six months of receipt.

The platform is required to disaggregate data by, among other things, (1) company industry or focus, (2) multi-year review of data, (3) the estimated value and profit to the company for each year information has been submitted and (4) the estimated value or revenue gained in the time period of the slavery-related transaction or business.

All affidavits, reports, information and data are required to remain indefinitely on the digital platform.

The records search and affidavit submission generally are a one-time undertaking. However, a covered entity must submit an updated affidavit to the Civil Rights Department upon the discovery of new reportable information. 

Government Contractor Certification

Companies subject to AB 2599 submitting a bid or proposal, or otherwise proposing to enter into or renew a contract, with a California state agency for at least $100,000 will be required to certify that they have submitted an affidavit in compliance with AB 2599.  

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