In brief 6 min read
As the Federal Modern Slavery Bill has passed Parliament, Australian entities (or entities carrying on a business in Australia) with at least $100 million global consolidated revenue will be required to submit an annual modern slavery statement on the risks of modern slavery in their operations and supply chains. While the first statement will not be due until 2020, you should take steps now to ensure that, when the time comes, your business can meet the reporting obligations. Partner Paul Nicols, Senior Associate Dora Banyasz, Senior Associate Clare Bradin and Associate Holly Woodcroft report.
The Modern Slavery Bill (Cth) (the Federal Bill) has passed Parliament, and this follows the passage in June 2018 of the NSW Modern Slavery Act (the NSW Act), which will affect companies with at least one employee in NSW, and a turnover of at least $50 million. While neither regime is likely to require Modern Slavery Statements until 2020, steps need to be taken now to make sure the reporting obligations can be met.
- Is your business an Australian entity, or an entity carrying on a business in Australia?
Under the Federal Bill, if your business (including all controlled entities, eg subsidiaries) has a total revenue of at least $100 million, it will be required to submit an annual Modern Slavery Statement.
- Is your business an entity with employees in NSW?
Under the NSW Act, if your business:
- has at least one employee in NSW;
- supplies goods and services for profit or gain; and
- has an annual turnover of not less than $50 million,
it must submit an annual Modern Slavery Statement.
- Does your entity meet both the Federal Bill and NSW Act criteria?
The NSW Act is expected to come into force at the same time as the Federal Bill. To date, the NSW Act has not been officially proclaimed and the regulations, which will specify the contents of the Modern Slavery Statement and whether entities reporting under the Federal Bill (ie those with an total annual turnover of more than $100 million) will also be required to report under the NSW Act, have not been released. We anticipate that they will not be.
- The first statement under the Federal Bill must be submitted by 30 June 20201 (for calendar-year-reporting entities) or 31 December 20202 (for financial-year-reporting entities). The NSW Act regulations, once released, will give a date for the first report. We anticipate that the timing will align with the Federal Bill.
- Given that Modern Slavery Statements will require reporting entities to report on steps that they have taken, it is important to start laying the groundwork well in advance.
Mandatory reporting criteria
The structure, operations and supply chain of the entity
The risks of modern slavery practices in the operations and supply chains of the entity, and any entities it owns or controls
The actions taken by the entity, and any entity it owns or controls, to assess and address those risks, including due diligence and remediation processes
How the entity assesses the effectiveness of such actions
The process of consultation with any entities that the entity owns or controls
The Federal Bill provides for joint statements by a reporting entity on behalf of the reporting entities that it owns or controls. The only requirement on the parent entity is that it consults with the boards of the relevant subsidiaries when preparing the statement on their behalf.
The Modern Slavery Statement must be approved by the board and signed by a director. This sets a 'tone from the top' that there should be zero tolerance for modern slavery in supply chains.
The criteria for the NSW Act will be contained in yet-to-be released regulations; however, they are likely to be similar to the federal requirements.
Under the Federal Bill, Modern Slavery Statements will need to be submitted to the Minister, who will be required to maintain a register of Modern Slavery Statements that is accessible to the public online. Under the NSW Act, reporting entities are required to make their Modern Slavery Statements public in accordance with the regulations, and a publicly available register will be maintained that identifies entities that have disclosed in a Modern Slavery Statement that their goods and services are, or may be, a product of supply chains in which modern slavery may be taking place.
'Modern slavery' under the Federal Bill is defined to include certain offences under the Criminal Code, such as slavery, servitude, forced labour, trafficking in persons, forced marriage, child trafficking, debt bondage and other slavery-like practices, and certain forms of child labour. The NSW Act has a slightly broader definition, as it includes offences relating to child abuse material.
'Supply chain' is not defined in either the Federal Bill or the NSW Act. The Explanatory Memorandum to the Federal Bill states that the term is 'intended to refer to the products and services that contribute to the entities' own products and services and is not restricted to "tier one" or direct suppliers'. It also states that the Government will release guidance on the definition of 'modern slavery', including case studies, and clarify the terms 'risks', 'operations' and 'supply chains'.
While there are no financial penalties for non-compliance under the Federal Bill (compared with penalties of up to $1.1 million under the NSW Act), the Minister does have the power to:
- request an entity to explain a failure to comply;
- request remedial action be taken in relation to compliance with the reporting requirement; and
- publish information about the entity's failure to comply with the request.
If this occurs, or civil society benchmarking or other reporting reveals non-compliance, public criticism and shareholder activism in response to non-compliance may, in practice, be just as costly as any financial penalties.
Under the Federal Bill, the Minister will produce annual reports, which will include an overview of compliance by entities and identification of best practice reporting.
We can assist you to determine whether you (or any of your controlled entities) need to comply, and then:
- undertake a risk assessment and mapping exercise to trace which parts of your business and supply chain are susceptible to modern slavery;
- establish controls to mitigate modern slavery risks;
- prepare human rights and anti-modern slavery-related policies, including ethical sourcing policies;
- conduct due diligence on suppliers and other relevant third parties;
- prepare contractual controls for supplier contracts;
- prepare and conduct anti-modern slavery training for relevant employees;
- assess the effectiveness of the actions you take to assess and address modern slavery risks; and
- prepare your Modern Slavery Statements.
The prescribed reporting areas under the Federal Bill are broader than those set out in the UK Modern Slavery Act (which only has optional criteria). This means that if your business is already reporting under the UK Modern Slavery Act, the contents of the statement will need to be reviewed for compliance with the Federal Bill.
- Assuming the Federal Bill comes into effect before 1 January 2019. If it comes into effect during the 2019 calendar year, the first statement will be due by 30 June 2021.
- Assuming the Federal Bill comes into effect before 1 July 2019. If it comes into effect during the following financial year, the first statement will be by 31 December 2021.