What Defense Contractors Owe Employees Serving in Danger Zones

Photo: Defense Dept.

On Nov. 12, 2016, a man associated with the Taliban detonated a suicide vest inside Bagram Air Base — the largest and most protected NATO military base in Afghanistan. He killed two U.S. soldiers and two American defense contractors.

The incident showed that security measures and defenses against terrorism in regions of conflict are not a guarantee for safety.

The post-9/11 escalations in both terrorism as a growing phenomenon and the U.S. presence in regions fraught with political violence merits a closer look into the legal, financial and ethical vulnerabilities of military defense firms and their employees. There needs to be a broad overview and analysis of the threat of terrorism to defense contractors and their overseas employees including the knowns and unknowns of risks, an evaluation of the financial impact, and a critical assessment of the importance of counterterrorism measures to defense contractors.

Defense corporations are in a unique quandary today. Their employees go virtually everywhere U.S. soldiers work abroad. However, defense companies cannot subject their employees to the same risks as soldiers — these employees took no oath to serve or sacrifice, and have no obligation to risk their life for protection of their country.

From the employer’s perspective, the danger is therefore distinct. Their employees must travel to some of the most terrorism-plagued parts of the world, but remain protected under “duty of care” guidelines that any other corporation must follow with regard to their setting. Duty of care is the scope of obligations from an employer to protect employees. Whereas these guidelines at a construction firm might require the employer to protect employees against falls or hazards for example, duty-of-care guidelines for defense corporations with employees abroad must address the risk of terrorism and other violent phenomena.

Contractor employees work at virtually every U.S. or NATO military outpost worldwide. Hundreds of these jobs are in high-risk areas such as Afghanistan, Egypt, Iraq, and the Philippines, each of which are in the top 25 most terrorism-prone countries in the world.

Of the top five defense companies, four of them included both Iraq and Afghanistan in their recent job postings. Some industries such as tourism have vulnerabilities to the terrorism threat because of loss of business due to perception and fear. Defense companies are prone to terrorism in their own right for different reasons: primarily because of the reality of working in conflict regions and having associations with the military.

Tangible and intangible costs comprise the total financial impact of terrorism to a business unit. Tangible costs are those that are quantifiable, regardless of whether the value of the costs themselves are determined before or after a potential terrorist attack occurs. Intangible costs cannot be quantified in a predictive or typical sense.

One easily made error when sending employees abroad is maintaining the assumption that the business owes the same duty of care to a traveling employee upon arrival to their workplace abroad as the duty of care owed to locals working at the same facility. In other words, if a contractor sends an American employee from Washington, D.C., to a facility in Kabul, they might assume that the duties of care they owe to the locals working at the facility or permanently relocated employees who live in Kabul are the same obligations as to the American employee.

But these employees have separate work hours. As noted in a legal brief by the law firm of White & Case LLP, local employees are owed a duty of care at work which might include physical security, badging and guards. Meanwhile, traveling or expat employees are deemed “working” 24 hours a day, seven days a week. Therefore, the care obligation for locals is one component of that owed to expats and business travelers, but the obligations to the latter must be more encompassing. Traveling employees might be at a greater risk of terrorism at their hotel or a restaurant than at a military base or facility where they get work done.

The constant “working” nature of employees abroad also increases the company’s exposure to liability if a company did not uphold the appropriate duty of care or engaged in negligence. In a brief prepared in response to injured corporate employees after the Arab Spring of 2011, White & Case warns employers that “after an injury happens, an allegation that security was too lax can look compelling. To make the case, the victim just points to the injury itself. If the employer provided a bodyguard and a bullet-proof vest, the employee victim says the crisis demanded two bodyguards and an armored car.”

A manifestation of this risk appeared in 2013, when a BP plant in Amenas, Algeria, was attacked and 40 people were killed — some expats and some locals. Two years later, the legal counsel for one of the expatriate survivors brought a $100 million suit against BP, claiming the company did not exhibit proper duty of care for their employees by failing to take necessary steps to protect them.

In 2016, victims’ families filed two more cases against BP in U.K. courts claiming similar transgressions, and the company says it faces several additional lawsuits in the United States over the same attack. These specific cases will likely reach undisclosed conclusions, but the risk of exposure to at least partial liability in a terrorist incident — even though incidents themselves are extremely rare — raises legitimate concerns in the industry.

Typically, when a business assesses risk in the context of injury or fatality, they tend to frame their threat using the occupational health and safety obligations that comprise the majority of obligations and duties of care to employees. However, in factors uncontrollable to the business like terrorism or violence, health and safety regulations are of less significance while the door opens for personal injury litigation — often separate from workers’ compensation claims that would otherwise be covered by an insurer.

This is an important distinction, since the risk from an employer’s perspective could deceptively seem mitigated if health and safety laws at a facility are adequately addressed. Instead, when considering external threats such as war, terrorism or epidemic, the exposure to personal litigation is a greater risk than that from failing to satisfy OSHA or related codes.

Intangible costs to a defense contractor are largely perception-fueled by both stakeholders and customers. With regard to employees, the result of terrorism incidences causes organizational problems. Terrorism and the inevitable public relations fallout could drive employees to consider their circumstance inherently dangerous.

Perhaps more threatening, the same drivers could cause a negative perception of a contractor as a future employer and prevent would-be employees from ever working there. The potential lack of future skilled employees is impossible to quantify and employer perception is difficult to study, but the organizational-psychological threat to the business in the aftermath of terrorism deserves its own attention.

The other perception that a contractor must manage is that of corporate stakeholders. For the publicly traded major defense firms, these are both current and potential investors. For smaller firms, the threat is more severe since the loss of a partner or proprietor could be drastic.

Finally, the most potent intangible cost to defense contractors is the risk of losing their greatest component: the contracts themselves. The process of bidding on and later winning contracts is extremely oriented toward a culture of trust between the customer and a contractor. Though reputation in the contract bidding process typically refers to past performance, the impact of terrorism on a business and its continuity is relevant grounds to judge a company’s fitness to carry out a contract from the Defense Department’s perspective.

Furthermore, the Federal Acquisition Regulation, the document that provides a code of ethics and governs the acquisition process, mandates companies to participate in anti-terrorism practices and to uphold duty-of-care standards for employees. Failure to uphold these standards, even in the case of liability found after a terrorist incident as discussed earlier, can damage the reputation of a contractor and their stake in future contracts as a result.

Three threat areas warrant further analysis to address research gaps. First, there should be a critical assessment of how U.S. military and contractor anti-terrorism policies are keeping up with the changing trends of terrorism.

Next, what is the measure of liability that a defense company holds after a terrorism fatality? Finally, there needs to be a further look into the intangibles of terrorism as an enduring phenomenon: for example, how much potential labor, investment or business that a particular company may lose due to terrorism on any company in the industry.

In a sense, a closer examination into these areas is a noble one. After all, while defense companies provide tools for warfighters to carry out their mission in protecting the country against terrorism, decision-makers for those companies should do everything they can in the mission of preventing the economic peril that terrorists have fervently sought through the vehicle of violence.

This is an adaptation of a longer study by James Gulliksen, a graduate of Embry-Riddle Aeronautical University and a law school student at Georgetown University. He is currently an aerospace security intern at Raytheon Missile Systems. The full study can be found at: bit.ly/2tKfICr.

Topics: Contracting, Defense Contracting, Viewpoint