Contractors' workers: how far does the developer's responsibility extend

A developer who contracts out does not contract out its social responsibility. IFC PS2 explicitly covers workers employed by third parties and, further still, certain workers in the supply chain. But this responsibility is not unlimited: it is measured by reasonable effort and the level of actual control of the client. This article specifies who is covered, how far the developer's obligation extends, what to audit at a contractor, what clauses to include in the contract and which non-compliances most frequently arise in due diligence.

Who is covered: three circles of workers

PS2 distinguishes three categories of workers, and the obligations regime changes at each circle.

The first circle brings together direct workers, employed by the client itself. The foundation of working conditions applies to them in full. These requirements are detailed in our article on working conditions on DFI projects.

The second circle is that of contracted workers. These are persons engaged by a third party to perform work related to the core business processes of the project, for a substantial duration. The worker of a civil engineering firm on the construction site is part of it. The occasional service provider who delivers an order is not part of it. The notion of duration and link to the core business draws the boundary.

The third circle concerns the supply chain. PS2 here targets primary suppliers, defined as those who, on an ongoing basis, provide goods or materials essential to the core business processes of the project. A regular supplier of aggregates or prefabricated elements falls within this category. The field of obligation is narrower there, as will be seen.

How far does responsibility extend: reasonable effort

For contracted workers, PS2 does not require the client to directly manage the contractor's personnel. It requires the client to ensure that this contractor is serious and that it operates in a compliant manner.

The standard speaks of "commercially reasonable efforts to ascertain that these third parties who engage such workers are reputable and legitimate enterprises" with an appropriate management system (IFC PS2, paragraph 24). The important word is "reasonable". The impossible is not expected of the client. Proportionate, documented and verifiable diligence is expected.

Concretely, this obligation breaks down into three components. The client verifies the solidity of the third party before contracting. It puts in place procedures to monitor the social performance of the contractor during execution. It includes these requirements in the contract.

For the supply chain, the cursor is different. PS2 recognises that the client does not control the employment relationship at a distant supplier. It states that "the client's ability to fully address these risks will depend on the client's level of control or influence over its primary suppliers" (IFC PS2, paragraph 29). Responsibility is therefore graduated. It increases with the real power to act.

AfDB Operational Safeguard 5, dedicated to working conditions, health and safety, follows the same logic. It extends protections to contractors' workers and requires the sponsor to cascade these requirements downstream. For a co-financed project, both frameworks must be read together and the most demanding provision retained.

Auditing a contractor: what to verify

Reasonable effort is demonstrated by actions. The first is an assessment of the contractor before award, then periodic monitoring.

Before contracting, the audit focuses on the company's capacity to comply with PS2. One looks at whether it has a human resources policy, a personnel register, a grievance mechanism and a health and safety organisation. One verifies the absence of a history of child labour or forced labour. One examines cascading sub-contracting, because a second-tier contractor often escapes the radar.

During execution, monitoring is documentary and physical. Documentary control covers employment contracts, pay slips, hours registers, proof of payment of contributions, declared ages. Physical control is carried out on site: accommodation conditions, protective equipment, cleanliness of facilities, confidential interviews with workers.

The points to examine as a priority at a contractor are as follows.

• The existence of written and comprehensible employment contracts for each worker.
• The reality and regularity of wage payment, without abusive deduction.
• Control of hours and overtime, with a reliable register.
• Age verification, with identification of any person under eighteen.
• The absence of indicators of forced labour: retention of documents, imposed debts, restriction of movement.
• Effective access to a grievance mechanism.

This last point deserves particular attention. PS2 specifies that "where the third party is unable to provide a grievance mechanism for such workers, the client will extend its own grievance mechanism to allow the third party's workers to raise workplace concerns" (IFC PS2, paragraph 26). In other words, the developer cannot hide behind the absence of a mechanism at its contractor. The principle aligns with the logic of a credible grievance mechanism.

The clauses to include in the contract

Audit is not sufficient if it is not supported by any contractual lever. PS2 requires its requirements to be incorporated into agreements entered into with third-party employers. The sub-contract becomes a tool of social compliance.

A few clauses recur in well-managed arrangements. A clause obliging compliance with PS2 and national labour law. A transparency clause giving the developer a right to audit and access to personnel registers. A clause prohibiting child labour and forced labour, at the contractor and at its own sub-contractors.

Other clauses close the blind spots. A clause governing cascading sub-contracting, subject to authorisation and reporting of the same obligations. A clause requiring adherence to the project's code of conduct, particularly on violence and harassment, a subject addressed in our article on SEA/SH arrangements on construction sites. Finally, a graduated sanction clause: formal notice, corrective action plan, penalty, then termination in case of serious uncorrected breach.

These clauses are only useful if they are verified. An exemplary contract never monitored protects no one. It is the articulation between the written clause and the audit carried out that creates compliance.

The labour supply chain

The third circle is the most poorly understood. Many developers think that PS2 stops at the gates of the construction site. This is not the case.

For primary suppliers, the standard targets two specific risks. First, child labour and forced labour: where the risk is elevated in the primary supply chain, the client must identify it, remedy confirmed cases and monitor the chain on an ongoing basis. Second, situations endangering workers' lives: the client must then ensure that the supplier takes measures to prevent or correct these hazards.

The obligation remains proportionate to the power of influence. But it is not zero. Where remediation is impossible, PS2 expects the client to progressively reorient its chain towards suppliers capable of demonstrating their compliance. It is an obligation of trajectory, not merely of observation.

For an infrastructure project, the typical vigilance points are quarries and aggregate suppliers, brick or prefabricated element production, and certain material supply chains with high intensity of informal labour. Mapping these primary suppliers from the appraisal stage avoids discovering the risk during the construction phase.

Recurring non-compliances

Social due diligence missions almost always find the same gaps. Knowing them makes it possible to prevent them.

The most frequent is the absence of traceability. The developer asserts that its contractors are compliant, but produces neither audit, nor register, nor proof of monitoring. Assertion without proof does not constitute compliance. Next comes the grievance mechanism inaccessible to contracted workers: it exists for direct personnel, but the contractor's workers are unaware of its existence. Undeclared cascading sub-contracting constitutes the third blind spot, with second- or third-tier workers beyond any control.

Gaps in conditions are also found: degraded accommodation, uncompensated overtime, unjustified wage deductions at the contractor, whilst direct personnel are correctly treated. Finally, the supply chain is almost always the poor relation of the system, without any mapping of primary suppliers.

Key points

The developer's responsibility for contractors' workers is neither total nor zero. It is proportionate and demonstrable. Three reflexes secure it.

Map all circles of workers, down to cascading sub-contracting and primary suppliers, before the start of works. Translate reasonable effort into verifiable actions: prior assessment, contractual clauses, periodic audits, extended grievance mechanism. Treat the supply chain as a real perimeter, prioritising child labour and forced labour.

A social system that stops at the developer's gates does not pass due diligence. A system that follows the work to the last worker on the project passes through it without remediation.