Canadian Modern Slavery Bill Would Cast A Wide Net On Supply Chain Transparency Practices

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On March 31, 2021, Bill S-216, An Act to enact the Modern Slavery Act and amend the Customs Tariff (the "Bill"), passed its Second Reading in the Senate and was referred to the ...
Canada Government, Public Sector
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On March 31, 2021, Bill S-216, An Act to enact the Modern Slavery Act and amend the Customs Tariff (the "Bill"), passed its Second Reading in the Senate and was referred to the Standing Senate Committee on Banking, Trade and Commerce for further study. Originally introduced in the Senate on October 29, 2020, the Bill is an update of two prior modern slavery bills that were never enacted: Bill S-211, introduced in the Senate in 2020 and Bill C-423, introduced in the House of Commons in 2018.

The Bill has been described as "supply chain transparency legislation", drafted as a tool to both combat modern slavery in the supply chains of Canadian businesses, manifested through forced labour and child labour, as well as support Canada's commitments under the international labour conventions it has ratified. In meeting these goals, the Bill provides two broad objectives:

  • to prohibit the importation of goods manufactured or produced, in whole or in part, by forced labour or child labour; and
  • to impose mandatory continuous reporting obligations on certain businesses with respect to measures taken to prevent and/or reduce the risk that forced labour or child labour is used at any step in the business's production of goods in Canada or elsewhere, or in the production of goods the business imports into Canada.

The increased focus on human rights violations within supply chains has been gaining steam on the global stage, with the United Kingdom, Australia, France and the Netherlands recently passing similar laws. As such, it is important to take a close look at the stated objectives of the Bill to determine what its potential enactment might mean for Canadian businesses and to identify which businesses should be paying particularly close attention as the Bill proceeds through Parliament.

Customs Tariff Amendments under the Bill

The Customs Tariff has already been recently amended to prohibit the importation of goods "mined, manufactured or produced wholly or in part by forced labour". This amendment was realized through the implementation of the Canada-United States-Mexico Agreement, which came into force on July 1, 2020. The Bill will build on the Customs Tariff's prohibition of imported goods produced through forced labour by adding child labour to the prohibition, together with the Bill's definitions of those terms.

The Bill defines "forced labour" as labour or service provided or offered to be provided by a person under circumstances that:

  • could reasonably be expected to cause the person to believe their safety or the safety of a person known to them would be threatened if they failed to provide or offer to provide labour or service; or
  • constitute forced or compulsory labour as defined in article 2 of the Forced Labour Convention, 1930.

"Child labour" is defined as labour or service provided or offered to be provided, in Canada, by persons under the age of 18 years under circumstances that:

  • are contrary to laws applicable in Canada, or, if provided or offered to be provided outside Canada, under circumstances that, if provided or offered to be provided in Canada, would be contrary to the laws applicable in Canada; or
  • constitute the worst forms of child labour as defined in Article 3 of the Worst Forms of Child Labour Convention, 1999.

New Supply Chain Reporting Requirements

As referenced above, the Bill places mandatory continuous reporting obligations on certain businesses. The reporting is meant to ensure supply chain transparency and eradicate modern slavery practices in the production of goods made or imported into Canada.

Definition of "entity"

The Bill's reporting regime defines an "entity" as a corporation, trust, partnership or other unincorporated organization that:

  • is listed on a stock exchange; or
  • has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets two of the three following conditions in one of its two most recent financial years:
  • (i) at least $20 million in assets;
  • (ii) at least $40 million in revenue;
  • (iii) at least 250 employees (average); or
  • is prescribed by regulations.

Entities to which the reporting requirements apply

Of these entities, the Bill will impose reporting requirements only on those that: produce or sell goods in Canada or elsewhere; import goods produced outside Canada into Canada; or control an entity engaged in the same activities (a "Covered Entity" or "Covered Entities").

Nature of the reporting requirements

Covered Entities must file an annual report with the Minister of Public Safety and Emergency Preparedness (the "Minister"), setting out steps taken during the year to prevent and reduce the risk that forced labour or child labour is used at any step of the entity's own production of goods in Canada or elsewhere, or of goods the entity imported into Canada. The annual report must also include information regarding the:

  • structure of the entity and the goods it produces in Canada or elsewhere or that it imports into Canada;
  • internal policies relating to forced labour and child labour;
  • activities that carry a risk of forced labour and child labour being used and steps the entity has taken to assess and manage that risk;
  • measures taken to remediate forced labour and child labour; and
  • training provided to employees on forced labour and child labour.

The Bill defines "production of goods" as including the manufacturing, growing, extraction and processing of goods.

Liabilities and Enforcement

The Bill in its current form does not oblige Covered Entities to reduce or diminish the use of forced labour or child labour. Nevertheless, the failure to satisfy the reporting requirements could lead such an entity to be found guilty of an offence punishable on summary conviction with a fine of up to $250,000.

Director and officer liabilities

The Bill additionally requires a director or officer of a Covered Entity to provide an attestation that the information in the report is true, accurate and complete. This opens the door for the prospect of personal liability for the attesting individual. The Bill also expressly confers liability on directors and officers who directed, authorized, assented to, acquiesced or participated in the commission of an offence under the Bill.

Warrantless searches of places of business

Further, the Bill would allow the Minister's designate to enter a Covered Entity's place of business, without a warrant, and access records and information systems, for the purpose of verifying compliance with the Bill, where they have reasonable grounds to believe there is anything to which the Bill applies or any document relating to the administration of the Bill. Any entry into a dwelling-house would require consent or a warrant.

Registry requirement

The Bill also requires the Minister to create and maintain a publicly accessible electronic registry system of the reports. Further, a Covered Entity must make the report available to the public by publishing it in a prominent place on its own website.

Concluding Thoughts: Casting a Wide Net on Canadian Businesses

As noted above, if the Bill becomes law in its present form, any Covered Entity will be obligated to submit annual reports or risk a significant penalty.

Due to its broad language, a wide range of businesses are likely to be captured by the Bill, across numerous industries. Key decision makers at larger corporations should inform themselves about the extent to which their business' supply chain pose a risk that goods may have been produced through forced labour or child labour, as defined in the Bill. Additionally, decision-makers should identify any subsidiary or affiliated corporations their business controls (or is deemed to control pursuant to the Bill), directly or indirectly, that may also be captured by the Bill.

The scope of the Bill's application cannot be ignored, as its purpose reaches further than just those businesses specifically engaged in producing goods. Rather, it casts a broad net by establishing reporting obligations on entities that import goods into Canada or which undertake activities that carry a risk of forced labour or child labour being used in such activities. This widely-cast net is an attempt to target larger businesses with resources to comply with the reporting requirements.

The Bill represents a firm assertion of Canada's stance on the eradication of human rights violations in its supply chains. The 2018 Global Slavery Index estimates that, in 2016, upwards of 17,000 people lived in conditions of modern slavery in Canada, identifying migrant workers and individuals trafficked for the purposes of sexual exploitation. Further, the 2018 Global Slavery Index estimates that billions of dollars' worth of products imported into Canada could potentially have had modern slavery in their supply chains, including laptops, computers, mobile phones, apparel and clothing accessories, extracted minerals such as gold, fishery-derived products and sugarcane.

If the Bill passes, proactive steps should be taken, and legal counsel should be consulted to ensure that the Bill's requirements are met. Moreover, the Bill's public disclosure obligations may generate a powerful reputational impetus for businesses to proactively assess their supply chains for modern slavery issues.

Next Steps in the Legislative Process

The Bill is currently in the Senate, where it was introduced. To become law, it would need to be passed by both the Senate and the House of Commons. The Bill provides that it comes into force on January 1 of the year following the year in which Royal Assent is received. At the time of writing, it was uncertain whether the Bill will be able to get through the legislative process before Parliament is dissolved for elections that may occur later in 2021. We will keep readers apprised of further developments.

The authors would like to acknowledge the support and assistance of Alec Pollock, articling student-at-law.

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.

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