Introduction of Modern Slavery Legislation

15 Feb 2019

Introduction

Legislation has now been introduced requiring large Australian entities (including companies, partnerships, trusts, universities and charities), those entities carrying on business in Australia (irrespective of where they are incorporated), and Commonwealth corporations and companies, with annual consolidated revenue exceeding $100 million to disclose how their operations and supply chain may contribute to modern slavery and explain what they are doing to address those risks.

There are 2 sets of legislation which have been introduced, the first being the Modern Slavery Act 2018 (No. 153. 2018) (the Commonwealth Act), and the second being the Modern Slavery Act 2018, No. 30), (the NSW Act). The legislation does not apply to all Companies, for example entities must have an annual consolidated revenue of over $100 million to fall under the Commonwealth Act and a total annual turnover of $50 million to fall under the NSW Act. However, this does mean that companies with employees in NSW and revenue of over $100 million may fall under both sets of legislation.

What is Modern Slavery?

Modern slavery refers to any situations of exploitation where a person cannot refuse or leave work because of threats, violence, coercion, abuse of power or deception. The Australian regime defines modern slavery to incorporate conduct that would constitute an offence under existing human trafficking, slavery and slavery-like offence provisions set out in Divisions 270 and 271 of the Commonwealth Criminal Code. This will mean that modern slavery will encompass slavery, servitude, the worst forms of child labour, forced labour, human trafficking, debt bondage, slavery like practices, forced marriage and deceptive recruiting for labour or services.¹

The 2018 Global Slavery Index estimated that there are over 40 million victims of Modern Slavery practices worldwide today. It is believed that there are around 15,000 living in conditions of Modern Slavery in Australia with many Australian supply chains leading directly to the Asia Pacific region where there are estimated to be over 30 million people in situations including human trafficking, forced labour and debt bondage, as well as other breaches of an individual’s basic human rights.²

Commonwealth Act

Modern Slavery Act 2018, No. 153, 2018

The Commonwealth Act which introduces mandatory reporting requirements for “Reporting Entities” was passed on 10 December 2018.

Definition of Reporting Entity

The Act defines a “reporting entity” as:

an Australian entity (including Australian companies, trusts and partnerships), carrying on business in Australia and which has a consolidated revenue of at least $100 million each financial year; or
the Commonwealth Government; or
a corporate Commonwealth entity, or a Commonwealth company with a consolidated revenue of at least $100 million each financial year.

Additionally, the Act allows entities to “volunteer” to comply with the reporting requirements by giving written notice to the Minister that a statement will be provided.

Key Obligations

Modern Slavery Statement: Reporting Entities will need to prepare an annual Modern Slavery Statement addressing mandatory criteria, including:
- Senior management accountability: The Commonwealth Act makes senior management accountable for the organisation’s modern slavery risks by requiring Modern Slavery Statements to be approved at Board level (or equivalent) and signed by a director of the entity (or equivalent).
- Failure to comply: Organisations that fail to take action will be penalised by the market and consumers and stand to severely damage their reputations. In addition, if the Minister is reasonably satisfied that an entity has failed to comply with the requirement to provide a Modern Slavery Statement, the Minister may give a written request to the organisation to provide an explanation for its failure to comply (within 28 days) and/ or undertake action to remedy it. If the organisation fails to comply with the request, then the Minister may publish information about the failure to comply on the register or elsewhere, including the identity of the organisation.

When is the first Statement due?

The effective date is 1 January 2019; this means that the reporting period of an entity is a financial year, or another annual accounting period applicable to the entity, which starts after the commencement of the Act.³
For most Australian entities the first Reporting Period will be from 1 July 2019 to 30 June 2020, to be given to the Minister within 6 months after the end of the reporting period for the entity, in a manner approved by the Minister.⁴ As such for entities on an Australian financial year the first Annual Report is due by 31 December 2020. However, for entities which have an international reporting period the reporting periods may differ.

What will need to be included in the Statement?

A Modern Slavery Statement must, in relation to each reporting entity covered by the statement:

identify the Reporting Entity; and
describe the structure, operations and supply chains of the reporting entity; and
describe the risks of modern slavery practices in the operations and supply chains of the Reporting Entity, and any entities that the Reporting Entity owns or controls; and
describe the actions taken by the Reporting Entity and any entity that the Reporting Entity owns or controls, to assess and address those risks, including due diligence and remediation processes; and
describe how the Reporting Entity assesses the effectiveness of such actions; and
describe the process of consultation with:
1. any entities that the Reporting Entity owns or controls; and
2. In the case of a Reporting Entity covered by a statement under Section 14 – the entity giving the statement; and
include any information that the Reporting Entity, or the entity giving the statement, considers relevant.⁵

NSW Act

Modern Slavery Act 2018, No. 30

The NSW Act was passed on 21 June 2018, however the commencement of the act is to be “on a day or days to be appointed by proclamation” as such the timetable and reporting periods have not yet been confirmed.

Who is affected?

The NSW Act applies to “Commercial Organisations” that:

have employees in NSW; and
supply goods and services for profit or gain; and
a total annual turnover in a financial year of not less than $50 million (or such other amount as may be prescribed by the regulations); and
are not a NSW government agency.⁶

However, the NSW government have indicated that small businesses with less than 20 employees will be exempt from the reporting requirement for 18 months following commencement.⁷

Penalties and Modern Slavery Risk Orders

Under the NSW Act, a maximum penalty of 10,000 penalty units can be imposed for the following offences:

Failing to prepare a modern slavery statement;⁸
Failing to publish the modern slavery statement in accordance with the regulations;⁹ and
Providing information that a person knows, or ought to reasonably know if false or misleading (this offence is also subject to maximum 2 years imprisonment, $22,000 or both under the Crimes Act 1900).¹⁰

In addition, a court that convicts a person of an offence listed in Schedule 2 may make an order prohibiting the person from engage in conduct described in the order (a modern slavery risk order).¹¹ A breach of the risk order would be subject to a maximum penalty of 500 penalty units, and/or 2 years imprisonment.¹²

Summary

Although the NSW Act does not have a confirmed timetable and the first reports for the Commonwealth Act are not due until 2020, companies should start preparing for this legislation and align the Companies policies and procedures with the legislation.

Even if Companies do not fall into the criteria under the legislation, best practice would indicate that policies and procedures should be updated and added to risk matrices if not already done.

What steps can we take to prepare for the reporting process?

Law firm, Gadens, has suggested entities should consider the below steps in order to prepare for the commencement of the Legislation and the Reporting Process:

Allocate resources and set up an internal multi-disciplinary team to consider these issues – this may include employees from operations, procurement and/or human resources;
Map and assess their existing (and any upcoming) supply chains;
Undertake a risk management approach to initially assess where modern slavery risk may arise in those supply chains;
Take action to minimise or completely remove those risks;
Revise current supplier terms and policies to cover these new obligations;
Revise current employee codes of conduct and policies to address modern slavery issues and provide training to employees on modern slavery risks;
Create a due diligence framework to continually monitor risk both internally and within those supply chains, and to look for markers of potential modern slavery – those markers may range from the unlawful withholding of wages and identity/travel documents through to excessive work hours and restrictions on individual movement; and
Make sure supply chain participants are aware of these obligations.