International Business Obligations – Modern Slavery Bill

Who should read this

• Senior management and corporate officers

Things you need to know

• Federal legislation is being passed which will require some entities to report on modern slavery risks in their supply chain.

What you need to do

• Review your existing compliance procedures and contractual arrangements and update them to address these new requirements.
• The Commonwealth Government has introduced a Bill strengthening Australia’s ability to combat modern slavery. The Bill establishes a transparent reporting framework for businesses to identify how their operations and supply chains may contribute to modern slavery and how they are addressing these risks. It is prudent to be aware of the reporting requirements that the legislation will, if passed, impose in order to avoid severe penalties and reputational damage.

Modern Slavery Bill 2018 (Cth)

On 28 June 2018, the Modern Slavery Bill 2018 (Cth) was introduced into Federal Parliament. The Bill will apply to Australian entities with annual turnover of $100M or more and will require these entities to prepare a ‘Modern Slavery Statement’ each financial year describing the risks of modern slavery in their supply chains and in entities they control or own.[1] Modern Slavery Statements must also outline the actions entities take to address those risks[2] and be submitted to the Minister for Home Affairs, within six months after the end of each financial year,[3] who will maintain an online public register.[4]

The Bill makes senior management accountable for the entity’s modern slavery risks by requiring details of approval to be given by the principal governing body of the entity.[5] Notably, it presently does not, contain any penalties for failing to prepare a Modern Slavery Statement.The Bill also states that the Regulations may not prescribe any offence or civil penalty.[6]

Modern Slavery Act 2018 (NSW)

The Modern Slavery Bill 2018 (Cth) was introduced following NSW Parliament passing the Modern Slavery Act 2018 (NSW) on 21 June 2018. NSW is the first Australian state to adopt global supply chain reporting practice, already seen in the United Kingdom, France and the United States. The NSW regime requires entities, with employees in NSW and annual turnover of $50M or more, to produce a Modern Slavery Statement.[7]

Comparatively, the NSW Act imposes significant financial penalties, of up to $1.1M, for failing to prepare or publish a Modern Slavery Statement or providing false or misleading information in connection with a Modern Slavery Statement.[8]

Inconsistency between the State and Federal positions

The key difference between the NSW Act and the drafting of the Commonwealth Bill is that only the NSW Act imposes penalties for non-compliance with the reporting requirements. Additionally, the NSW Act establishes an Anti-slavery Commissioner, responsible for promoting actions to combat modern slavery and monitoring the effectiveness and prevention of modern slavery.[9]

Further, inconsistency arises where entities, covered by the NSW Act, may be subject to penalties for non-compliance with the mandatory reporting requirements while other entities with annual turnover exceeding $100M covered by the Commonwealth framework, are not.

Federal Parliament resumes today where it is expected the Bill will continue to be debated. It is likely that once the Bill is refined, incorporating amendments suggested by the Federal opposition, specifically including for penalties for non-compliance with the mandatory reporting requirements, it will be passed before the end of the year.

Implications

Although the Commonwealth Bill has not yet come into force, you should begin to review your existing compliance procedures to keep ahead of the law. Importantly, you should:

• notify supply chain members of your reporting requirements,
• incorporate into contracts, with supply chain members, clauses that permit you to audit supply chain members and require them to provide information and other assistance you need to comply with reporting obligations.  It will also be worthwhile considering obligations on key suppliers to ensure there are systems in place to address modern slavery risks,
• ensure you review and amend compliance procedures and policies to reflect updated reporting requirements; and,
• develop a framework to address how supply chain members, engaging in modern slavery, will be managed and prepare a crisis response plan if this situation arises.

We will continue to monitor the progression of the Modern Slavery Bill (Cth).

McCullough Robertson can help you develop and implement appropriate compliance procedures and frameworks so you are well positioned to meet the reporting requirements, once finalised.  Our approach is practical and commercial and tailored to your business.

If you would like to know more about compliance procedures, and their importance, please contact our leading International Business Obligations practitioners below:

[1] Modern Slavery Bill 2018 (Cth) cl 12.
[2] Modern Slavery Bill 2018 (Cth) cl 16(1).
[3] Modern Slavery Bill 2018 (Cth) cl 13(2)(e).
[4] Modern Slavery Bill 2018 (Cth) cl 18.
[5] Modern Slavery Bill 2018 (Cth) cl 16(2)(a), (b)(i).
[6] Modern Slavery Bill 2018 (Cth) cl 25(2)(a).
[7] Modern Slavery Act 2018 (NSW) s 24(1).
[8] Modern Slavery Act 2018 (NSW) s 24(2), (3), (7).
[9] Modern Slavery Act 2018 (NSW) s 9.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.