Penal labor was very common in the 1860s. The UK, and its colonies, didn't ban penal labor until about 1950s. France didn't ban it until 1987. The statement was added to the Northwest Ordinance and the 13th Amendment, not as a sop to the Southerners to reintroduce slavery by backdoor means, but to ensure that someone couldn't look at the text and decide that the customary practice of penal labor would be considered outlawed.