1. Introduction

With the continuous development of economic globalization, the global flow of capital has a profound impact on labor relations and production organization. More and more multinational companies have begun to set up operations worldwide to reduce production costs, the division of labor in the upstream and downstream industrial chain has been formed on a global scale. In other words, multinational enterprises in order to reduce costs and other needs, such as the raw material collection, raw material rough processing, assembly, sales and other production links in different countries, thus forming a transnational industrial chain system. However, the development of legal globalization is asymmetrical with the development of the processes of economic, which further enables transnational corporations to operate through supply chains to minimize their legal liability for the consequences of their economic activities in certain jurisdictions [1]. For example, in the clothing industry, the Rana Plaza incident in Bangladesh had disclosed the weak domestic labor laws and fierce low-price competition contributed to extremely poor working conditions, low wages, and inadequate labor protection for workers.

The protection of workers' rights and interests has become a more and more important part in today's world. International organizations such as ILO, WTO and OECD have regarded it as a very important part of organizational work, and have also issued some declarations and conventions to regulate the global labor market by "soft law". In the domestic laws of various countries, the protection of labor rights and interests has become a very important departmental law as an important embodiment of the protection of human rights and corporate social responsibility. Furthermore, the response to such labor legal questions has involved multiple stakeholders, including the International Labor Organization, multinational companies, international NGOs, and local NGOs, alongside the host and home state government.

This paper will focus on the current situation of labor law regulation and the labor legal risks that multinational enterprises may encounter when establishing and utilizing the global industrial chain, and plan to analyze from the perspective of multiple labor law governance subjects, and put forward some feasible suggestions.

2. Literature Review

The current research on the legal liability of labor in the supply chain of transnational corporations encompasses content that spans multiple subjects and aspects.

George and Nikita focused on the regulation of international organizations. George noted that as the influence of transnational corporate activities on trade, technology, and employment deepened, nearly all major international organizations began to focus on regulating these corporations and issued codes of conduct [2]. Meanwhile, Nikita explored the challenges brought by globalization and the rise of transnational corporations to global labor law. She highlighted the potential incorporation of "social clauses" into international trade agreements and suggested that the International Labor Organization (ILO) could serve as an independent intermediary institution for resolving cross-border labor conflicts. Additionally, she emphasized the need to avoid a "race-to-the-bottom competition" among developing countries in lowering labor rights standards [3].

The author also has found two articles exploring the labor legal liability of multinational enterprises in the global supply chain from the perspective of cases. Genevieve, Remi, Tom, Charline and Penelope explore the effectiveness of corporate social responsibility (CSR) commitments, Focus on commitments related to the living wage. They conducted a survey of 20 leading apparel companies and analyzed publicly available information on apparel companies and related multi-stakeholder initiatives (MSIs) and concluded that companies contribute to the ineffectiveness of the CSR Living wage through various means [4]. Rutvica and Tonia examined the extent of regulatory inadequacy in exploitative labor conditions within the global supply chain of the Slovakian electronics industry, with a specific focus on Serbian temporary migrant workers engaged through temporary work agencies in globalized production activities, leading to heightened instances of exploitation and constrained labor relationships. The paper argues that the current legal and corporate governance framework promotes market competition through violations of basic labor standards, normalizing exploitation and unfree labor relationships in the supply chain. It suggests that prioritizing the protection of temporary migrant workers is key to addressing these issues in global supply chains and achieving a more just and humane mode of production [5].

James J. Brudney focuses on the promotion and protection of labor conditions in global supply chains [6]. James has delineated the factors contributing to the historical inadequacy of public law and private law paradigms in addressing this challenge, highlighting deficiencies in legal frameworks within developing nations, limitations of corporate social responsibility (CSR), and constraints inherent in recent legislation enacted by developed countries targeting multinational enterprises operating at the apex of global supply chains. He suggested that the ILO should play a leading role in seeking broader participation from the worker and employer communities to enrich discussions aimed at promoting enhancements in labor conditions. Additionally, he recommended establishing a cross-border dispute resolution mechanism, including arbitration, to address potential issues related to jurisdiction, enforcement, and remedy. Despite the complex nature of labor issues within global supply chains, achieving more fair and sustainable labor standards through international collaboration and innovative legal frameworks is feasible. This not only presents a challenge to existing laws and practices but also represents a significant test for global governance structures.

Genevieve Lebaron examines the role of supply chains in forced labor, highlighting their impact on labor standards, working conditions, and business models [7]. She argues that supply chains significantly shape employment conditions and management practices that influence labor exploitation dynamics. LeBaron identifies three key points: patterns in the causes of forced labor within supply chains, the interconnectedness of forced labor with broader employment dynamics, and the disparity between corporate social responsibility standards and actual business practices. The article also underscores that contemporary forms of slavery involve non-economic relational dynamics and personalized coercion, preventing victims from escaping forced labor.

Rob van Tulder, Jeroen van Wijk, and Ans Kolk examined the implementation of occupational safety and health (OSH) guidelines in global supply chains by multinational corporations, focusing on the development and execution of corporate social responsibility (CSR) strategies [8]. The study compared OSH guidelines from 30 companies participating in the International Framework Agreement (IFA) with those from 38 leading multinational enterprises (MNEs), analyzing how stakeholder involvement in code of conduct development influences guideline implementation likelihood."

In conclusion, the examination of labor law obligations within the global supply chains of multinational corporations encompasses human rights, social security, and other related domains. The stakeholders involved in governance encompass the corporations themselves, domestic governments, and international organizations. Furthermore, there exists a substantial disparity in labor protection systems between developing and developed nations, rendering this issue exceedingly intricate.

3. The Source of Labor Law Liability for Multinational Corporations in Supply Chain

3.1. Overview of Domestic Law Sources

Most countries have domestic laws to regulate corporate behavior and protect workers' rights and interests. In the application of legal principles, enterprises are required to adhere to local regulations when conducting business in specific geographical areas, in order to ensure compliance with the principle of national sovereignty. Take Law of the People's Republic of China on the Application of Law on Foreign-Related Civil Relations as an example, which stipulates that all labor dispute cases within the territory of the People's Republic of China shall unconditionally apply Chinese law to protect the rights and interests of workers.

From the standpoint of substantive law, most countries regulate labor relations by considering two aspects: the formal recognition of substantive rights and employment relationships. The majority of nations have specific regulations pertaining to minimum working hours, minimum wage standards, rest periods, working conditions, and termination criteria for employees, such as China's Labor Law, the United States' Fair Labor Standards Act (FLSA) and Occupational Safety and Health Act (OSHA), Germany's Working Hours Act, France's Labor Law, Japan's Labor Standards Law and Labor Safety and Health Law. In addition, the Federal Collective wage Contract Law in Germany and the Social Dialogue Law in France are also crucial to protect workers' rights to collective bargaining, information access, and participation.

In conclusion, the legislation in major countries regulates workers' rights, providing a domestic legal framework for protection. However, incidents like the Rana Plaza event in Bangladesh highlight ongoing gaps in enforcing legal protections for workers' rights in different nations.

3.2. The Provisions of International Standards

The legal obligations of enterprises in labor law are clearly defined and demonstrated through various means in international law and conventions. The International Labor Charter of 1919 established fundamental principles of international labor law. As international labor law has evolved, the soft law, the standards for corporate social responsibility in various international conventions, and the UN Global Compact have collectively constructed a framework of labor-related legal obligations that enterprises are expected to adhere to. Subsequently, this paper will primarily concentrate on the three prominent international organizations and conventions: the International Labor Organization (ILO), the World Trade Organization (WTO), and the United Nations Guiding Principles on Business and Human Rights (UNGP).

3.2.1. ILO Regulations

The ILO has made significant efforts in establishing and enforcing minimum labor standards, prohibiting child labor, eliminating forced labor, and safeguarding workers' rights to collective bargaining. It has issued numerous conventions and declarations on these matters: The Declaration on Fundamental Principles and Rights at Work (1998), Prohibition of Child Labor (Convention No. 138), Elimination of Forced Labor (Convention Nos. 29 and 105) (Acceptance of wages does not negate the presence of forced labor), Right to Collective Bargaining (Convention Nos. 87 and 98) and Elimination of Discrimination in Employment and Occupation (Convention No. 111).

Meanwhile, the ILO has also established a supervisory mechanism for labor organizations, with regular reviews and complaint procedures to monitor compliance with these standards. Member states are required to submit implementation reports on ratified conventions, reviewed by independent experts and the Tripartite Committee on the Application of Standards. However, the effectiveness of these mechanisms is limited by the voluntary nature of ILO conventions and varying capacities of member countries to implement and enforce these standards. The ILO lacks enforcement powers to compel member states to comply with international labor standards and impose sanctions, often leading to prolonged investigations without corrective action.

3.2.2. WTO Regulations

The WTO primarily focuses on trade but indirectly influences labor standards through its agreements and dispute resolution processes. Specific provisions in the agreements and conventions of the WTO organization may establish a legal basis for the labor obligations of multinational corporations:

Firstly, under the General Agreement on Tariffs and Trade (GATT), Article 20(a) allows for measures necessary to uphold public morality; Article 20(b) allows for measures protecting human, animal, or plant life or health, while Article 20(e) relates to measures related to products of prison labor. These provisions can be interpreted as supporting the protection of labor rights such as prohibiting forced labor and enhancing the working environment, albeit with limited impact. Secondly, General Agreement on Trade in Services (GATS) also includes provisions that can impact labor practices.

In conclusion, the primary mandate of WTO is to facilitate free trade and it does not directly regulate labor [9]. Instead, it indirectly influences labor standards by promoting fair trade practices. This incentivizes countries to enhance their labor standards in order to maintain competitiveness in the global market. Nevertheless, ongoing debates within The WTO regarding the extent to which labor standards should be integrated into trade agreements highlight the contentious intersection of trade and labor rights [10].

3.2.3. UNGP Regulations

Following their unanimous endorsement by the UN Human Rights Council in 2011, the UN Guiding Principles on Business and Human Rights (UNGP) have established comprehensive international standards for corporate conduct concerning human rights. The UNGP framework encompasses governmental duties to safeguard individuals against corporate-related human rights violations; corporate obligations to uphold human rights; as well as requirements for governments and corporations alike to ensure accessible redress mechanisms for victims of such violations. It is imperative that these principles are applied without discrimination, with specific consideration given to vulnerable or marginalized groups as well as gender-specific vulnerabilities. For example, Principle 3(b) guarantees that legal frameworks governing corporate operations foster respect for human rights, whereas Principle 18 obliges corporations to identify and evaluate potential impacts on human rights arising from their operations and relationships through engagement with relevant stakeholders possessing expertise in this field.

Following the formal adoption of the UNGP, the UN has undertaken efforts to advance its global implementation--spearheaded by an inter-regional expert working group charged with promoting, disseminating, and operationalizing it, particularly in jurisdictions and industries where multinational corporations and other business enterprises face systemic risks of human rights abuses.

3.3. Corporate Social Responsibility (CSR) Requirements

Unlike the hard legal framework of domestic laws and the soft legal framework of international treaties, corporate social responsibility resembles more closely a moral code and a set of conduct guidelines established or proclaimed by enterprises to enhance their societal standing. CSR practices emerged in the 1980s as a response to perceived deficiencies in traditional labor laws and limitations within international labor law. This gradual development aimed to rectify these shortcomings through an evolving system of corporate social responsibility [1].

Corporate social responsibility heavily relies on the commitment of individual businesses and functions as a form of private regulation over corporate conduct. Important normative documents on Corporate Social Responsibility (CSR)typically encompasses commitments to labor and human rights, ensuring workplace safety and health, respecting fundamental employee rights such as opposing forced labor, child labor, and discrimination, as well as providing equitable wages and favorable working conditions. The following are some international normative documents with important reference value for the development of corporate social responsibility standards: ISO 26000 "Guidance on Social Responsibility", The United Nations Global Compact, The Global Reporting Initiative (GRI) standards, The OECD Guidelines for Multinational Enterprises, SA8000 (published by Social Accountability International), The International Labor Organization (ILO) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy.

Nevertheless, it is crucial to acknowledge that CSR practices are often perceived as soft guidelines. Although companies may outwardly commit to certain obligations, they often fail to rigorously adhere to them, resulting in a mere formal compliance with labor law requirements. Such phenomenon will lead these companies to prioritize their own economic interests over the rights of workers and bypass legal obligations. As a result, this phenomenon implies that CSR practices are more likely to confer legitimacy upon "sustainable capitalism" rather than genuinely promoting sustainable social development in the world's poorest and most vulnerable countries [1].

4. Current Situation of Supply Chain Labor Compliance in Multinational Corporations

The author contends that labor compliance in multinational enterprises is closely intertwined with human rights compliance, particularly in safeguarding minimum wage standards, regulating maximum working hours, prohibiting forced labor, and preventing child labor. Therefore, this paper will also address certain aspects of human rights compliance when discussing labor practices in multinational enterprises. In the context of economic globalization, various MNEs actively expand their outsourcing operations to developing countries in pursuit of lower labor costs. This strategy contributes to the establishment of MNE’s global supply chain system. However, this economic model also presents the risk of suppliers exploiting the absence of local legal oversight to engage in a race to the bottom, potentially leading to decreased labor costs and inadequate enforcement of labor regulations. (both the domestic law in some host countries and the international law) [11].

4.1. Assessment of Labor Law Compliance in Nike's Supply Chain

Nike, Inc. was widely criticized for engaging in unethical labor practices at its overseas manufacturing factories from the 1970s to the early 2000s [12]. Under such circumstances, Nike has implemented measures and practices which aim to effectively address the legal risks closely associated with human rights and labor.

Nike explicitly commits to upholding fundamental principles and workers' rights outlined in the International Labor Organization (ILO) conventions within its human rights policy. This includes ensuring a safe and healthy work environment and eliminating discrimination. Additionally, Nike fulfills its human rights obligations by adhering to significant international law documents such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines. Specific commitments encompass a dedication to combating all forms of discrimination and advancing gender equality, ensuring equitable remuneration for supply chain workers, and upholding the principle of safeguarding vulnerable groups.

In addition to making commitments, Nike has also implemented measures to enhance its labor compliance, such as conducting human rights due diligence and publishing self-assessment reports. Nike has proactively implemented measures for conducting comprehensive assessments regarding potential impacts on human rights arising from its business operations while developing effective mitigation strategies accordingly. The company engages in rigorous due diligence processes aimed at identifying significant risks related to human rights within its operational scope and formulates corresponding management approaches aligned with international standards. Moreover, Nike transparently publishes self-assessment reports demonstrating both progress made and challenges encountered in meeting its obligations towards safeguarding human rights. Nevertheless, deficiencies exist in executing due diligence procedures as it falls short of fully honoring commitments toward safeguarding labor rights for employees.

Notably evident is a gender-based wage disparity where male employees earn an average annual salary $11k higher than their female counterparts; alongside allegations concerning workplace intimidation resulting in employee apprehension. Reports have surfaced indicating substandard working conditions along with inadequate social security provisions coupled with instances of gender bias prevalent throughout their supply chain network. Criticism directed at Nike includes failure to adhere strictly by OECD guidelines especially pertaining non-involvement or consultation with trade unions prior implementing changes impacting supply chain workforce dynamics. Furthermore, Nike's abrupt cancellation of numerous orders during the COVID-19 pandemic led to loss in earnings for workers lasting up to three months, further compounding adverse effects upon worker's rights.

4.2. Labor Law Compliance in IKEA’s Supply Chain

The labor compliance construction implemented by IKEA in its global supply chain management is highly valuable for reference. In response to public concerns regarding working conditions at its suppliers, IKEA initiated a systematic approach to managing social responsibility within its supply chain as early as the 1990s. The supply chain labor compliance management measures implemented by IKEA have reached a relatively advanced and systematic level.

The IKEA Way on Purchasing Home Furnishing Products (IWAY) is a comprehensive code of conduct for suppliers, covering social, labor, and environmental issues. Its primary objective is to ensure that suppliers comply with minimum environmental, social, and labor standards throughout the manufacturing process. The IWAY is based on the fundamental labor rights enshrined in the 1998 Tripartite Declaration of the International Labor Organization (ILO), further reinforced by the International Framework Agreement (IFA) signed with the Building Woodworkers' International Union (BWI). This agreement serves as a guarantee for effective implementation of global labor standards. In order to ensure the effective implementation of IWAY, IKEA's supply companies must adhere to the code and undergo regular audits, which serve as a means for IKEA to monitor supplier compliance with IWAY requirements in practice. Furthermore, IKEA has established a worker suggestion box that enables employees to express their satisfaction or grievances regarding IWAY implementation independently from formal union channels. This feedback mechanism not only facilitates timely understanding of workers' needs and challenges by IKEA but also provides a platform for active worker participation and feedback, thereby showing respect of their right of engagement. IKEA also offers training and support to enhance workers' comprehension and adherence to IWAY requirements. These trainings equip employees with knowledge on proper safety equipment usage, workplace cleanliness maintenance, as well as their rights and benefits. Such measures attest to the efficacy of IWAY's labor law compliance efforts in improving working conditions and fostering work skills.

Despite the IWAY Code of Conduct providing a framework for labor compliance, IKEA's global supply chain management still faces numerous challenges in implementation. Firstly, there is a significant conflict between workers’ actual working hours and legal working hours as protecting worker’s working time rights clashes with meeting the market’s needs, even though IKEA allows up to two hours of overtime per day. Secondly, managing multiple subcontractors proves difficult due to the lack of formal agreements, which complicates audits; while IKEA regularly visits subcontractor factories, ensuring compliance remains challenging especially when requirements are inconsistent in different countries. Thirdly, during busy seasons it becomes hard to ensure worker training adequately covers and complies with IWAY requirements leading to difficulties in compliance; such difficulty will also lead workers’ lack of awareness regarding safety equipment resulting in safety risks at work. Lastly, implementing IWAY puts financial and managerial pressure on suppliers who must bear costs associated with improving working environments and purchasing equipment themselves.

In general, studies have shown that the implementation of IKEA's IWAY Code of Conduct has significantly enhanced the overall working conditions of local supply companies in Vietnam, thereby making a positive impact. Local employees express their satisfaction with the improved working conditions and perceive this standard as safeguarding human rights while also providing opportunities for increased productivity and access to international markets [13].

5. Methods for Public Subjects and MNEs to Optimize the Status of Labor Law Liability of Multinational Enterprises

5.1. Public Subjects

The activities of multinational enterprises across multiple countries necessitate the involvement of various governance subjects in the legal regulation of labor issues. Both international organizations and domestic legislatures play complementary roles by regulating through soft law and hard law respectively.

Firstly, international organizations (such as ILO, WTO, etc.) should play a leading role in formulating global core labor standards, which should aim to specifically regulating the procedural and substantive obligations that multinational enterprises must adhere to in global labor governance. From a procedural standpoint, international organizations should actively collaborate with governments to establish institutions like international labor tribunals and promote the establishment of tripartite negotiation mechanisms involving governments, multinational enterprises, and workers' organizations. Countries can promote the construction of a class action system, such as allowing international labor rights organizations and workers' organizations to become the main body of litigation. This could help international organizations and workers themselves can carry out more effective supervision over the production activities of multinational companies in the global supply chain, forcing multinationals and enterprises to strengthen their own compliance construction.

In summary, public actors have the ability to establish procedural and substantive mechanisms for fostering social dialogue, facilitating mediation processes, incorporating commercial contractual provisions, and enforcing due diligence obligations of multinational corporations. These measures aim to clarify their legal responsibilities in relation to labor laws within global supply chains and consequently enhance compliance with labor standards.

5.2. MNEs

The activities of MNEs are subject to restrictions from both international and domestic law; however, due to the inconsistency in national standards and enforcement powers, these enterprises still possess a certain level of "autonomy". However, as a significant private subject in the realm of international labor governance, multinational enterprises also engage in self-regulation through corporate social responsibility (CSR) and their own code of conduct (CoC), driven by considerations of societal moral obligations and preservation of social standing.

In the process of conducting cross-border practical activities, its labor compliance practices primarily encompass establishing minimum labor standards, performing supplier due diligence for labor compliance, implementing internal transparency requirements, and providing skills and legal training to employees. However,the top-down approach to private regulation, exemplified by initiatives like CoC, still faces shortcomings including the absence of legal enforceability, imbalanced power dynamics, limited transparency, and inadequate accountability mechanisms [1].

In light of the aforementioned issues, the author posits that enhancing the corporate power structure, the construction of substantive transparency within multinational enterprises and reinforcing the mandatory meaning of CoC could serve as effective means to enhance self-regulation in labor law within multinational enterprises.

First, multinational enterprises can set up joint workers' organizations and increase workers' participation in supplier due diligence and corporate self-compliance review reports, and cooperate with international organizations such as the International Labor Organization and local governments to give workers, governments, and international organizations greater participation in labor law compliance. Secondly, labor compliance departments of multinational enterprises can establish confidential and independent information feedback channels that are directly connected with grassroots employees. For example, C&A Company has established a confidential reporting system called "Fairness Channel" for reporting labor law violations. Finally, the promotion of unified labor standards implementation among enterprises can effectively mitigate instances of labor infringement in transnational corporations. The establishment of industry-specific or cross-industry alliances might enhance mutual supervision between companies, effectively curbing cutthroat competition and carry out efficient intra-industry sanctions. This will strengthen the coercive power of industry Codes of Conduct (CoC) and reducing the benefits of multinational enterprises violating labor laws. The above two approaches will enhance multinational enterprises' compliance with labor regulations from both positive and negative perspectives. The establishment of cross-industry or industry enterprise alliances has been witnessed currently, such as Responsible Business Alliance (RBA), Ethical Trading Initiative (ETI) and Fair Wear Foundation (FWF).

6. Conclusion

In conclusion, the current governance of labor laws in multinational enterprises within the global supply chain involves the participation of multiple stakeholders. This includes domestic laws, as well as international labor regulations issued by various organizations such as the ILO, which have established a regulatory framework for the labor law responsibilities of multinational enterprises. However, due to constraints imposed by national sovereignty principles, the globalization process of labor laws still lags behind that of industrial chains. Bridging this gap necessitates multinational enterprises to establish their own corporate codes of conduct based on corporate social responsibility standards in order to ensure compliance with labor laws. While some multinational enterprises have made significant strides in this regard, there still exist inherent risks associated with non-compliance and labor rights violations. This implies the necessity for legislative, judicial, and corporate regulatory efforts to enhance the involvement of workers themselves and international organizations. This will serve to clarify the labor law obligations of transnational corporations in global supply chains and bolster their effectiveness in safeguarding the rights of workers within the global industrial chain.