An estimated 46 million people worldwide are victims of slavery with 4,300 of these workers believed to be residing in Australia.1 Minority groups in particular, such as migrants, are at greater risk of exploitation.2 So, how will New South Wales' Modern Slavery Act and the Commonwealth Slavery Bill seek to address these issues and what will this require of organisations?
In response to this critical situation, the Modern Slavery Act 2018 (NSW Act) was passed through NSW Parliament on 21 June 2018. The NSW Act defines 'modern slavery' as committing, attempting to commit or inciting a range of offences in the Crimes Act 1900 (Cth), Human Tissue Act 1983 (NSW) and Criminal Code Act 1995 (Cth), including slavery, servitude, forced labour, human trafficking, debt bondage and sexual servitude. Shortly after, on 28 June 2018, the Commonwealth Government introduced a bill to be applied at a national level.
The intention of both regimes is to ensure companies have a publicly-available modern slavery statement that customers and the public can scrutinise. Neither regime requires any direct action on modern slavery, other than the creation and publication of such a statement, but plainly the intention is to ensure there is accurate information in the market, to enable consumers and contractual counter-parties to assess, make decisions and participate in a debate about ethical supply chains.
NSW MODERN SLAVERY ACT
The NSW Act requires commercial organisations with an annual turnover of $50 million or more to produce a Modern Slavery Statement on the incidence of modern slavery in their supply chains.
Reporting requirements under the NSW Act will apply to 'commercial organisations' (companies, partnerships and associations) that:
- have employees in NSW;
- supply goods and services for profit or gain;
- have a total turnover in a financial year of not less than $50 million; and
- are not a NSW government agency.
Each financial year, commercial organisations will need to prepare and publish a modern slavery statement containing the steps taken to ensure that their goods and services are not a product of supply chains in which modern slavery is taking place.
Regulations will prescribe the content to be included in modern slavery statements, and the method of publication. Organisations should be prepared to include information on the following:
- structure, business and supply chains;
- due diligence processes in relation to modern slavery in the organisation's business and its supply chains;
- the parts of the organisation's business and supply chains where there is a risk of modern slavery taking place, and the steps taken to assess and manage that risk; and
- training available to employees regarding modern slavery.
A penalty of up to $1.1 million applies for:
- failing to prepare a modern slavery statement;
- failing to publish a modern slavery statement; or
- providing false or misleading information in connection with a modern slavery statement.
Any disclosure concerning the incidence, or possible incidence, of modern slavery in a commercial organisation's supply chains will be recorded in a public register maintained by the Anti-slavery Commissioner. The register will also record whether the organisation has taken steps to address those modern slavery concerns. The NSW Act mandates that government agencies must take reasonable steps to ensure that goods and services procured by and for the agency are not the product of modern slavery. Meeting this obligation would likely require government agencies to review modern slavery disclosures of potential suppliers on the public register.
The NSW Act states that the reporting provisions do not apply if another regime is in place.
COMMONWEALTH MODERN SLAVERY BILL
The Commonwealth Modern Slavery Bill 2018 (Commonwealth Bill) was introduced and read a first time in the House of Representatives on 28 June 2018.
The Commonwealth Bill will apply to organisations with revenue over $100 million per financial year (compared with $50 million for the NSW Act).
Under the Bill, certain entities must prepare a 'modern slavery statement' each financial year. Entities required to comply are:
- Companies that are Australian residents;
- trusts, where the trust entity is a resident trust estate;
- corporate limited partnerships that are Australian residents; and
- other partnerships or entities that are either:
- formed or incorporated within Australia; or
- the central management or control of the entity is in Australia.
with a total revenue of more than $100 million per financial year. Entities that are not listed above may volunteer to comply with the reporting requirements.
The Minister for Home Affairs (Minister) will maintain an online, public register of these statements. Modern slavery statements must be provided to the Minister within six months after the end of each financial year. The statement must be approved by the principal governing body of the entity (i.e. a company's board of directors) and signed by a responsible member of the entity.
There are further requirements prescribed by the Commonwealth Bill, including that the modern slavery statement must identify the reporting entity and describe:
- its structure, operations and supply chains;
- the risks of modern slavery practices in its operations and supply chains, and those of any entities that the reporting entity owns or controls;
- 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. This may include may include the development of policies and processes to address modern slavery risks, and providing training for staff about modern slavery; and
- the effectiveness of those actions taken.
The modern slavery statement must additionally describe the consultation process with other entities that the reporting entity owns or controls and include any other relevant information.
A 'joint modern slavery statement' may be prepared that reports on a number of entities. Approval for the joint modern slavery statement must be given by the principal governing body of either:
- each reporting entity covered by the statement;
- an entity (higher entity) which is in a position to influence or control each reporting entity covered by the statement, whether or not the higher entity is itself covered by the statement; or
- if it is not practicable to comply with (a) or (b), at least one reporting entity covered by the statement.
ANOMALIES BETWEEN NSW ACT AND COMMONWEALTH BILL
The Commonwealth Bill creates some significant anomalies, as currently drafted and we expect these will be corrected by Parliament. The most striking is that, unlike the NSW Act, the Commonwealth Bill does not presently contain any penalties for failing to prepare or publish a modern slavery statement or for providing false and misleading information. The Commonwealth Bill additionally provides that the regulations must not enforce any offence or civil penalty.
This creates the situation where entities covered by the NSW Act, but not the Commonwealth Bill (i.e. those with a NSW Presence and a turnover between $50m and $100m) are subject to penalties, but entities with a turnover of $100m or more, are not. The opposition has flagged amendments and our expectation is that the final Commonwealth position will at least meet the standard set by the NSW Act.
IMPACT ON PROCUREMENT AND REPORTING OF GOVERNMENT AGENCIES
Government agencies are exempt from the NSW reporting requirements. However, the Act has a number of provisions directed to the incidence of modern slavery in the procurement of goods and services by NSW government agencies.
A "Government agency" is:
- a government sector agency (as defined in the Government Sector Employment Act 2013);
- a NSW Government agency;
- a State owned corporation;
- a company incorporated under the Corporations Act 2001 of which one or more shareholders are a Minister of the Crown;
- councils, under the Local Government Act 1993;
- any other public or local authority constituted by or under an Act or that exercises public functions; and
- any public or local authority constituted by an Act of another jurisdiction that exercises public functions.3
The NSW Act inserts a new provision into the Public Works and Procurement Act 1912, which mandates that government agencies must take reasonable steps to ensure that the goods and services they procure are not the product of modern slavery. 4 Any government agency that fails to comply with the NSW Procurement Board's directions concerning the procurement of goods and services that are the product of modern slavery will be identified in the Anti-slavery Commissioner's public register. The Act also inserts a new provision into the Public Finance and Audit Act 1983, enabling the Auditor-General to conduct an audit of a government agency to assess whether an agency is ensuring that the goods and services it procures are not a product of modern slavery.5
The Act amends the Annual Reports (Departments) Regulation 2015 and the Annual Reports (Statutory Bodies) Regulation 2015 to require government departments and statuary bodies to include in their annual reports:
- a statement of the action taken in relation to any significant issue raised by the Commissioner during the financial year concerning the operations of the agency; and
- a statement on the action taken to ensure goods procured were not the product of modern slavery.6
The role of the NSW Anti-slavery Commissioner in relation to government agencies'
Government agencies must work in co-operation with the Commissioner in the exercise of their respective functions.7
The Commissioner must regularly consult with the Auditor-General and the Board to monitor the effectiveness of due diligence procedures in place to ensure that goods and services procured by government agencies are not the product of modern slavery.8
Finally, the Commissioner may develop publically available codes of practice that guide government agencies in identifying, monitoring and remediating modern slavery in their supply chain.9
The Commonwealth Bill mandates for the Minister to prepare a modern slavery statement that complies with the Bill's reporting requirements referred to above, for all non-corporate Commonwealth entities. The modern slavery statements will need to be approved by each entity's principal governing body.
IMPLICATIONS FOR COMMERCIAL ORGANISATIONS
Although the date for the commencement of the Act has not been set, commercial organisations should start preparing now to ensure they comply with the new requirements. The following steps should be considered:
- mapping supply chains;
- allocating reporting responsibilities to relevant departments or people. This may include the corporate social responsibility, operations management, procurement/supply chain management or human resources teams;
- notifying supply chain members of the reporting requirements;
- updating employee and supplier policies and codes of conduct to address modern slavery;
- creating a remediation framework to address how suppliers perpetrating, or at high risk of perpetrating, modern slavery will be managed. Consequences may include the non-renewal of contracts;
- implementing a due diligence process that investigates and monitors modern slavery within the organisation and its supply chains;
- training employees and members of supply chains on modern slavery;
- considering whether to use internal or external human rights experts to advise on, conduct or evaluate the reporting process;
- addressing modern slavery obligations in supplier contracts; and
- allocating resources to fund the above steps.
The due diligence process requires audits of suppliers to evaluate their compliance with modern slavery legislation. The audits should incorporate various indicators of each of the forms of modern slavery. For example, common indicators of forced labour are:
- withholding of wages, identity or travel documents;
- debt bondage;
- excessive working hours beyond those prescribed by national law or collective agreements;
- denial of breaks or days off;
- employees living at the workplace or another condition controlled or owned by the employer;
- restrictions on freedom to move or leave the workplace;
- violence in the workplace;
- hazardous workplaces without adequate protective gear.10
Forced labour is considered to be the most likely form of modern slavery to arise in the supply chains of NSW commercial organisations.
Both the NSW Act and Commonwealth Bill operate on the basis that businesses should publicise the incidence of modern slavery in their supply chains to enable the market to make more informed decisions when purchasing goods and services. The Commonwealth Bill will continue to be debated once Federal Parliament resumes sitting on 13 August 2018. The NSW Modern Slavery Act will bring most large NSW (and indeed Australian) businesses into line with global practice in supply chain reporting. The approach taken is one of requiring companies to examine and report on their affairs. The publication of this information is likely to lead to market based competition for organisations to improve their supply chains.
It seems likely that in NSW, modern slavery statements will be carefully scrutinised in government procurement, as agencies seek to meet the internal standards governments have set. Similarly, commercial procurement arrangements will now include ethical supply as one of the key elements for assessment.
More broadly, there will be a greater level of public awareness around this issue and companies' responses to it. Businesses can expect to see league tables comparing their response to their competitors, and activists using this information to challenge commercial organisations to ensure they are not part of the global modern slavery problem.
1 2016 Global Slavery Index, pp 4 and 29, accessed at https://www.globalslaveryindex.org/download/ .
2 Ibid, 54.
3 Modern Slavery Act 2018 (NSW) s 5(1) (definition of 'government agency').
4 Modern Slavery Act 2018 (NSW) sch 5 cl 5.6.
5 Modern Slavery Act 2018 (NSW) sch 5 cl 5.5.
6 Modern Slavery Act 2018 (NSW) sch 5 cll 5.1–5.2.
7 Modern Slavery Act 2018 (NSW) s 14.
8 Modern Slavery Act 2018 (NSW) s 25.
9 Modern Slavery Act 2018 (NSW) s 27.
10 International Labour Organisation, ILO Indicators of Forced Labour, 2013, accessed at http://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---ilo-yangon/documents/publication/wcms_227848.pdf .
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
|Chambers Asia Pacific Awards 2016 Winner
Client Service Award
|Employer of Choice for Gender Equality