New South Wales is the first jurisdiction to enact modern slavery legislation in Australia, with the Modern Slavery Act 2018 (NSW) (NSW Act) passing through Parliament on 21 June 2018. The NSW Act contains some key differences to the proposed Commonwealth Modern Slavery Bill 2018 (Cth) (Commonwealth Bill) which was introduced into Federal Parliament on 28 June 2018 and is expected to pass Parliament later this year.
Both the NSW Act and the Commonwealth Bill introduce reporting requirements for certain commercial entities that are aimed at increasing transparency in commercial supply chains to combat modern slavery 1.
However, the NSW Act and the Commonwealth Bill differ in their approach to government entities.
This article will look at the direct impacts of the NSW Act on NSW government procuring agencies which, for the purposes of the NSW Act include:
- a NSW Government agency
- a State owned corporation
- a Corporations Act 2001 (Cth) company under which one or more shareholders are a minister of the Crown
- a council, county council or joint organisation within the meaning of the Local Government Act 1993 (NSW) 2.
Overview of the NSW Act and the Commonwealth Bill
Under the NSW Act, a "commercial organisation" with an annual turnover of $50 million or more must prepare a modern slavery statement (Statement) each financial year 3.
The Statement must contain such information as required by the Regulations and be published publicly within the time frame stipulated by the Regulations (likely to be within five months of the end of the financial year). The Regulations have not yet been enacted, however will likely require an organisation to include the following information in its Statement:
- the organisation's structure, its business and its supply chains
- due diligence processes in relation to modern slavery in its business and supply chains
- the parts of its business and supply chains where there is a risk of modern slavery taking place, and the steps it has taken to assess and manage that risk
- the training about modern slavery available to its employees.
Large penalties of up to $1.1 million apply for failing to prepare or publish a Statement, or for providing false or misleading information in connection with a Statement. Statements will be published on a public register which will be kept by the Anti-slavery Commissioner (Commissioner).
For the purposes of the NSW Act, a NSW government agency is not a commercial organisation and is therefore not required to prepare a Statement. However, as set out below, the obligations on NSW government agencies, while different, end up having a very similar effect to commercial organisations.
In comparison, the Commonwealth Bill applies to Australian organisations with a revenue over $100 million per financial year which includes the Commonwealth and Commonwealth entities or companies 4. Similar to the NSW Act, those qualifying organisations must prepare a modern slavery statement (within six months of the end of the financial year) which is to be maintained on an online public register by the Minister of Home Affairs. The Commonwealth Bill contains some additional requirements regarding the content of the modern slavery statements, including the effectiveness of actions taken by the reporting entity, and the consultation process with other entities the reporting entity owns or controls.
Both the NSW Act and Commonwealth Bill contain "opt in" provisions allowing organisations who do not meet the thresholds to voluntarily submit modern slavery statements.
A key difference between the two regimes is the penalties for non-compliance, with the Commonwealth Bill currently not prescribing any penalties for non-compliance, compared with the potential $1.1million fine for non-compliance under the NSW Act.
The NSW Act and government procuring agencies
As noted above, NSW government agencies are exempt from preparing Statements under the NSW Act, as compared to the Commonwealth and Commonwealth entities under the Commonwealth Bill.
Instead, the NSW Act applies separately to government agencies5 and creates separate mechanisms to ensure the procurement of goods and services by the NSW Government are not the product of modern slavery. To this end, the NSW Act requires the Commissioner to regularly consult with the Auditor-General and the NSW Procurement Board to monitor the effectiveness of due diligence procedures to ensure goods and services are not the product of modern slavery. There is little guidance in the NSW Act regarding what regular consultation may entail or how the effectiveness of due diligence procedures may be monitored or measured.
The NSW Act also amends a number of other NSW Acts and Regulations to ensure goods and services procured by and for government agencies are not the product of modern slavery, including:
- new provisions under the Public Works and Procurement Act 1912 (NSW) which allow the Auditor-General to conduct a modern slavery audit of a government agency to determine if reasonable steps have been taken by the agency to ensure goods and services are not the product of modern slavery
- new provisions under the Public Finance and Audit Act 1983 (NSW) which allow the Auditor-General to conduct a risk-based audit to assess whether goods and services procured by government agencies are the product of modern slavery
- new provisions under the Annual Reports (Departments) Regulation 2015 and Annual Reports (Statutory Bodies) Regulation 2015, requiring the annual report of a NSW Government Department or Statutory Body to include:
- a statement of action taken in relation to any issue raised by the Commissioner in the previous year
- a statement of steps taken to ensure the goods and services procured were not the product of modern slavery.
The Commissioner must also publish on the public register any government agency failing to comply with directions of the NSW Procurement Board concerning procurement of goods and services that are the product of modern slavery and whether the government agency has taken steps to ensure compliance in the future.
Further, the Commissioner may also develop publicly available codes of practice that promote public awareness and assist government agencies to identify, monitor and remediate modern slavery in their supply chains.
Conclusion and next steps
Both the NSW Act and Commonwealth Bill impose reporting requirements on commercial entities aimed at exposing the prevalence of modern slavery in supply chains and allow the Australian business community to take proactive and effective actions to address modern slavery.
While there are many similarities between the two legislative regimes, the different approach to government entities is a key point of difference and NSW government agencies need to be aware of their obligations in this regard.
What NSW government agencies should begin turning their mind to now is:
- what sectors are they involved in and buy from
- which of those sectors are high risk in relation to modern slavery 6
- which entities that they do business with are above or below $50 million and, where they are less than $50 million, whether any are opting in to the legislation
- changes to the procurement documentation, in particular Tender Returnable Schedules in relation to Supply Chains, Modern Slavery Statement, modern slavery compliance, modern slavery policies and training
- changes to commercial and construction contracts regarding modern slavery compliance, assistance with audits, proactive disclosure of identified issues or fines, and specific indemnities regarding loss or damages arising from breaches, including loss of reputation (normally excluded as consequential loss).
1 Modern slavery is defined in the NSW Act as committing, attempting to commit or inciting a range of offences in the Crimes Act 1900, the Human Tissue Act 1983 and the Commonwealth Criminal Code. The offences include slavery, servitude, forced labour, human trafficking, debt bondage and offences relating to child abuse. Modern slavery extends to any conduct involving any form of slavery, servitude or faced labour to exploit children or other persons taking place in the supply chains of government agencies or non-government agencies.
2 Government agency defined in section 5 of the NSW Act.
3 A commercial organisation means an organisation which has employees in NSW, supplies goods and services for profit or gain, has a total turnover in a financial year of the organisation of more than $50 million and is not a government agency (section 24(1) of the NSW Act).
4A reporting entity is defined under section 5 of the Bill as (a) an entity which has a consolidated revenue of at least $100 million for the reporting period, if the entity is an Australian entity at any time in that reporting period or carries on business in Australia at any time in that reporting period; (b) the Commonwealth; (c) a corporate Commonwealth entity, or a Commonwealth company, within the meaning of the Public Governance, Performance and Accountability Act 2013, which has a consolidated revenue of at least $100 million for the reporting period; and (d) an entity which has volunteered to comply with the requirements of this Act under section 6 for that period.
5 A government agency means any of the following: a government sector agency (within the meaning of the Government Sector Employment Act 2013), a NSW Government agency, a State owned corporation, a company incorporated under the Corporations Act 2001 of the Commonwealth of which one or more shareholders are a minister of the Crown, a council, county council or joint organisation within the meaning of the Local Government Act 1993, any other public or local authority that is constituted by or under an Act or that exercises public functions and any public or local authority that is constituted by an Act of another jurisdiction that exercises public functions.
6 According to the International Labour Office statistics (Global Estimates of Modern Slavery 2017) the highest risk sectors are domestic work 24 per cent, construction 18 per cent, manufacturing 15 per cent, agriculture, forestries and fishing 11 per cent, accommodation and food service 10 per cent, wholesale and trade nine per cent, mining and quarrying seven per cent.
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