AB 381 makes compliance with anti‑trafficking and anti‑forced‑labor rules a precondition for state contracts for apparel, garments, accessories, equipment, materials, and supplies (excluding public works). Contractors and subcontractors must certify that goods were not produced with forced labor or severe trafficking, implement a written compliance plan, require the same of subcontractors, and notify the state of credible allegations.
The bill adds concrete monitoring and reporting duties (including cooperation with audits and investigations), mandates posting minimum compliance requirements and hotline access for workers, and creates a range of sanctions—voiding contracts, monetary penalties, removal from bidders’ lists, suspension/debarment, and other remedies. It also directs the Department of Industrial Relations to implement a Sweatfree Code of Conduct with phased rollouts; most new rules apply to contracts entered or renewed on or after January 1, 2026.
At a Glance
What It Does
AB 381 requires contractors to certify that covered goods were not produced using sweatshop labor, forced labor, convict or indentured labor, abusive child labor, or trafficking, and to implement compliance plans that prevent, detect, and remediate such practices. It compels subcontractor certification, mandates specific prohibitions (e.g., confiscating IDs, charging recruitment fees), prescribes worker protections (posting, hotline), and creates remedial penalties and administrative hearings.
Who It Affects
Vendors and subcontractors supplying apparel, uniforms, and non‑public‑works equipment or supplies to California state agencies, procurement officers who evaluate bids, and the Department of Industrial Relations charged with implementing the Sweatfree Code of Conduct. It also reaches foreign manufacturers and recruiters via contract terms and subcontractor obligations.
Why It Matters
The bill uses state procurement as leverage to drive upstream supply‑chain compliance, creating direct contractual obligations and penalties that shift verification risk to bidders. For compliance officers and procurement teams, it raises new due‑diligence, documentation, and audit responsibilities that will change bid preparation, subcontracting, and supplier selection.
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What This Bill Actually Does
AB 381 makes anti‑trafficking assurances a gating item for many state purchases. Before award, a proposed contractor must certify it has a compliance plan and that, to the best of its knowledge, neither it nor its agents or proposed subcontractors have engaged in prohibited activities, or that any known abuses have been appropriately remediated.
Subcontractors must give the same certification before they are awarded work. That creates a cascading contractual duty: prime contractors must vet and require written commitments from every tier of subcontracting that could touch covered goods.
The statute itemizes prohibited conduct—severe trafficking, forced labor, confiscating identity documents, charging recruitment fees, deceptive recruitment, unsafe housing, and the failure to provide employment documents in a language the worker understands. Compliance plans must be proportional to contract size and risk and must include an employee awareness program, a non‑retaliation reporting channel (including the Global Human Trafficking Hotline), recruitment and wage plans that ban recruitment fees, housing standards if housing is provided, and procedures to terminate or remediate subcontractors that violate the rules.Enforcement is contractual and administrative rather than solely criminal.
The state can void contracts, assess penalties (the greater of $1,000 or 20 percent of the value of noncompliant goods), suspend payments, remove contractors from bidders’ lists up to 360 days, and seek suspension or debarment. Contractors must disclose violations, cooperate with audits and investigators (while retaining attorney‑client and Fifth Amendment protections), and protect suspected trafficking victims.
The bill requires public posting of compliance plan minimums at workplaces or online and requires the contractor to submit the full compliance plan to the contracting officer within 60 days of receiving a contract.To operationalize the program, AB 381 revives and updates the Sweatfree Code of Conduct framework and directs the Department of Industrial Relations to establish a contractor responsibility program, use phased implementation (up to one year for apparel categories and up to three years for other targeted categories), and consider third‑party nonprofit monitoring mechanisms. The statute excludes small routine credit‑card purchases (individual purchases under $2,500, and a per‑company annual cap of $7,500) and clarifies that the new rules apply to contracts entered into or renewed on or after January 1, 2026.
The Five Things You Need to Know
Before award a proposed contractor must certify it has a compliance plan and either has no knowledge of prohibited activities or has taken remedial actions if abuses were known.
Contractors must obtain written certifications from all subcontractors before subcontract award and must include a duty to monitor and terminate noncompliant subcontractors at any tier.
Monetary sanctions for noncompliance are the greater of $1,000 or 20% of the value of the noncompliant goods supplied to the state; collected monies go to the General Fund.
The Department of Industrial Relations must publish and phase in a Sweatfree Code of Conduct, allowing up to one year for apparel categories and up to three years for other targeted procurement categories.
Contractors must post minimum compliance requirements at worksites or online and provide employees access to the Global Human Trafficking Hotline; the full compliance plan must be delivered to the contracting officer within 60 days of award.
Section-by-Section Breakdown
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Mandatory certification and enumerated prohibitions
This provision makes a contractor’s certification that covered goods were not produced with forced labor, sweatshop practices, abusive child labor, or trafficking a contractual requirement. It sets out an explicit list of prohibited behaviors—confiscating identity documents, deceptive recruitment, recruiter noncompliance with laws, charging recruitment fees, unsafe employer‑provided housing, and failure to furnish work documents in a language the worker understands—turning those prohibitions into enforceable contract terms.
Notification, subcontractor flow‑down, and pre‑award certifications
Contractors must notify employees of prohibited activities and the consequences of violations, and primes must require certifications from subcontractors. Before award, contractors must certify that they have implemented a compliance plan and conducted due diligence; subcontractors must provide parallel certifications before being engaged. This creates front‑loaded documentary obligations for bidders and forces primes to certify knowledge or remediation of any known abuses.
Compliance plan content and cooperation obligations
The compliance plan must be scaled to contract size and risk and include at minimum an awareness program, a secure reporting mechanism with access to the Global Human Trafficking Hotline, recruitment and wage plans banning recruitment fees, housing plans when applicable, and procedures to prevent and terminate noncompliant agents or subcontractors. Contractors must disclose violations, provide documents to auditors, and allow reasonable access to facilities for compliance checks; the statute explicitly preserves privilege rights while demanding cooperation.
Sanctions, remedies, and protective steps
If the state finds a contractor knew or should have known goods were produced in violation of the statute, it may void the contract, assess a penalty (the greater of $1,000 or 20% of the noncompliant goods’ value), suspend payments, remove the contractor from bidders’ lists for up to 360 days, require employee or subcontractor removal, and seek suspension or debarment. The section also requires contractors to take remedial personnel actions and protect victims and witnesses from retaliation.
Administrative hearing process and factors
Contractors get a 15‑day notice and may request a hearing before an Office of Administrative Hearings administrative law judge. The ALJ considers mitigating factors (existing compliance plan, good‑faith remediation, reparations to victims) and aggravating factors (failure to abate or enforce plans) and may reduce or waive sanctions. The statute assigns hearing costs depending on outcome and preserves contractor procedural rights.
Investigation, referral, and reporting duties
On credible information of violations, contracting officers must notify oversight entities, the debarring official, and appropriate law enforcement and may direct abatement steps. Agencies may limit investigations to evaluating the credible information submitted and must refer matters to agency heads and, where appropriate, to the Director of Industrial Relations or the Department of Justice for further action.
Key definitions that broaden reach
The bill provides wide definitions—‘recruitment fees’ covers a long list of costs from visa fees to transportation; ‘forced labor,’ ‘severe forms of trafficking,’ ‘sweatshop labor,’ and ‘abusive forms of child labor’ are broadly defined—extending contractual exposure to practices across international supply chains. It also excepts certain inmate work that is permissible under state law from the forced labor definition.
Sweatfree Code of Conduct and contractor standards
DIR must establish a contractor‑responsibility program and a Sweatfree Code of Conduct available publicly for review. Agencies shall use phased, targeted implementation—up to one year for apparel and up to three years for other targeted categories—may use competent nonprofit monitors, and must solicit public input. The section also lists substantive contractor obligations (wages, overtime, minimum age, nondiscrimination, safe housing, listing subcontractors and facilities) that agencies must enforce.
Credit‑card purchase exemption and effective date
The certification requirements don’t apply to individual credit‑card purchases of $2,500 or less, with a per‑company annual cap of $7,500 that agencies must track. Finally, the amendments apply only to contracts entered into or renewed on or after January 1, 2026, giving agencies and bidders a transition period to adapt systems and supply‑chain practices.
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Explore Government in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Workers potentially subjected to trafficking or forced labor — the statute creates contractual mechanisms for disclosure, victim protection (including return transportation in many cases), and a route for remediation and referral, improving prospects for identification and assistance.
- Labor advocates and NGOs — the bill mandates public posting, a public Sweatfree Code of Conduct, and channels for submitting allegations, giving advocates formalized access to procurement review and a clearer basis for reporting violations.
- State procurement and compliance teams — the statute provides explicit contractual levers (certifications, audit access, remedies) and a statutory framework for suspensions/debarments that procurement officers can use to enforce labor standards.
Who Bears the Cost
- Prime contractors and suppliers — they must implement and document compliance plans, run expanded due diligence on multi‑tier supply chains, secure written certifications from subcontractors, and potentially replace noncompliant suppliers, all of which increase compliance, legal, and operational costs.
- Small foreign manufacturers and recruiters — the flow‑down requirements and bans on recruitment fees may force small suppliers to absorb costs or change recruiting models; some may be excluded from state contracts if they cannot meet documentation or housing standards.
- State agencies and DIR — agencies will need to absorb administrative burdens to review certifications, process reports, conduct or oversee investigations, publish code of conduct materials, and possibly engage with third‑party monitors without a dedicated funding stream.
Key Issues
The Core Tension
The central dilemma is using procurement power to stop forced labor versus the practical limits of verifying sprawling global supply chains: stricter contract terms and penalties reduce tolerance for abuse but amplify compliance costs, risk excluding marginal suppliers (which can hurt workers), and demand resources and legal clarity the state and bidders may lack.
AB 381 relies on contractual warranties and audits to police complex, multi‑tier international supply chains. That approach gives the state practical leverage but places heavy tracing and monitoring responsibilities on contractors, who must certify lack of knowledge or remediation when abuses are known.
The statute’s broad definitions (e.g., recruitment fees, sweatshop labor) increase capture but also introduce ambiguity: compliance officers will need detailed guidance to apply those definitions consistently across jurisdictions with divergent labor laws.
Enforcement raises several trade‑offs. Strong penalties and debarment power incentivize supplier cleaning or exit, but they also risk unintended consequences (supplier delisting, supply disruptions, or the transfer of work to informal channels that evade oversight).
The bill requires cooperation with audits while preserving privilege and Fifth Amendment protections; balancing timely document access with legal protections will require careful protocols and may slow investigations. Finally, the credit‑card purchase exemption (individual purchases under $2,500; $7,500 annual cap per company) creates a potential circumvention path that procurement teams will have to monitor closely to avoid fragmentation of the statute’s impact.
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