By: Courtney Burton
The deadline for reporting under the new Modern Slavery Act is fast approaching. Businesses that fall within the scope of this legislation must submit their reports and fulfill other requirements by May 31, 2024. Here’s what you need to know to determine if your business is affected.
Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff, commonly referred to as the Modern Slavery Act, came into effect on January 1, 2024. This Act mandates that certain organizations report to the government and publicly disclose their internal processes aimed at reducing the risk of forced or child labour within their operations and supply chains.
Who is a reporting entity?
The new rules impose annual reporting obligations on specific entities, including corporations, partnerships, trusts, and unincorporated organizations. Entities are required to report if they meet a two-part test: (i) connection to Canada/Financial thresholds; and (ii) producing, selling, distributing, or importing.
Connection to Canada/Financial Thresholds
Entities required to report must have a place of business in Canada, assets in Canada, or conduct business in Canada. The entities must also meet at least two of the following criteria within one of the past two fiscal years:
$20 million or more in assets;
$40 million or more in revenue;
250 or more employees (on average); or
be listed on a Canadian stock exchange.
Producing, Selling, Distributing or Importing
Entities have reporting requirements under the Act if they produce, sell, or distribute goods (in Canada or elsewhere), import goods into Canada, or control (directly or indirectly) another entity involved in any of these activities.
Penalties for Non-Compliance
The penalties for non-compliance with the Modern Slavery Act can vary depending on the specific circumstances and the severity of the violation. However, here are some general points to consider:
Civil Penalties: Organizations that fail to comply with reporting requirements may face civil penalties. These penalties can include fines or other financial consequences. The exact amount of the penalty would depend on factors such as the size of the organization and the nature of the violation.
Legal Consequences: In addition to civil penalties, there could be legal consequences if an organization is found to have knowingly imported goods produced using forced labour or child labour. Legal actions could include lawsuits, injunctions, or other legal remedies.
Supply Chain Impact: Non-compliance can disrupt supply chains. Organizations that fail to address risks related to forced labour or child labour may face challenges in sourcing goods and maintaining business relationships.
Where to Report/What to do
Modern Slavery Act entities are required to report on measures taken to prevent and reduce the risk of forced labor and child labor in their supply chains:
Questionnaire: In addition to the preparation of the annual report, entities must complete an online questionnaire when submitting the report to the government. It is recommended that the questionnaire can be used as guidance to structure the report. (Government of Canada - Supply Chains Act questionnaire (qualtrics.com))
Annual Reporting: Companies must submit an annual report detailing the measures they have taken to prevent and mitigate forced and child labor in their operations and supply chains. (Submit a report (publicsafety.gc.ca))
Designated Authority: These reports must be submitted to the Minister of Public Safety and Emergency Preparedness via the Public Safety Canada Website. (Forced Labour in Canadian Supply Chains (publicsafety.gc.ca))
Public Disclosure: In addition to completing the questionnaire and submitting the annual report, entities must also make these reports publicly available. This is usually done by posting the report on the entities’ website, ensuring transparency and accessibility to the public. Depending on an entities governing corporate legislation (e,g. Canada Business Corporations Act), the entity may also be required to submit the report to each shareholder, along with its annual financial statements.
Content of the Report: The report should include information on the company's policies, due diligence processes, risk assessments, measures taken to address identified risks, and the effectiveness of these measures. It is recommended the report not exceed ten pages.
Ensuring Compliance
Ensuring compliance with the Modern Slavery Act requires proactive measures. Here are some steps entities can take:
Risk Assessment: Conduct a thorough risk assessment of your supply chain. Identify areas where forced labour or child labour risks may exist. Consider factors such as geographic locations, industries, and suppliers.
Due Diligence: Implement due diligence processes to assess suppliers and subcontractors. Verify their compliance with labour laws and ethical standards. Regularly review and update this information.
Supplier Engagement: Engage with suppliers to promote awareness of the Modern Slavery Act. Encourage them to adopt responsible practices.
Contract Provisions
Incorporating contractual provisions to ensure compliance with the Modern Slavery Act and similar legislation is becoming increasingly common. Here are some boilerplate clauses that parties might use in their contracts to demonstrate compliance:
Compliance with Laws: The Supplier warrants and represents that it shall comply with all applicable laws, statutes, regulations, and codes relating to anti-slavery and human trafficking, including but not limited to the Fighting Against Forced Labour and Child Labour in Supply Chains Act (Canada).
Anti-Slavery and Human Trafficking Policy: The Supplier agrees to adopt and maintain a policy that prohibits the use of forced labor and human trafficking in its operations and supply chain. The Supplier shall provide a copy of such policy to the Buyer upon request.
Due Diligence: The Supplier shall implement due diligence procedures for its own suppliers, subcontractors, and other participants in its supply chain to ensure that there is no use of forced labor, human trafficking, or child labor. The Supplier shall provide the Buyer with evidence of such due diligence upon request.
Audit: The Buyer reserves the right to audit the Supplier’s compliance with this clause at any time upon reasonable notice. The Supplier agrees to provide the Buyer with all information reasonably requested to demonstrate compliance and shall allow the Buyer or its designated auditor to inspect its premises, books, and records as necessary.
Reporting: The Supplier shall promptly notify the Buyer in writing if it becomes aware of any breach or potential breach of this clause and shall cooperate with the Buyer in addressing and remediating the issue.
For further insight on these issues, please contact us at Blue Rock Law LLP.
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