This article was written by Monique Carroll, Jane Menzies and Georgie Bills.
The Modern Slavery Bill 2018 (Cth) was introduced to the House of Representatives in Federal Parliament last Thursday. This comes shortly after New South Wales passed its own modern slavery legislation that we reported on earlier last week – the Modern Slavery Act 2018 (NSW). This move also follows the UK’s introduction of modern slavery legislation, which came into force in 2016. The Bill, if passed, will introduce a modern slavery reporting requirement designed to strengthen Australian’s response to modern slavery. We anticipate that companies will first be required to publish modern slavery statements by the end of 2019.
- Reporting entities will need to publish a modern slavery statement annually describing the risks of modern slavery practices in the operations and supply chains of the business and the measures taken to address those risks, including consultation with any entities the reporting entity owns or controls. The Bill provides a mandatory set of criteria for reporting, unlike the equivalent laws in the UK where reporting criteria are non-mandatory.
- Statements must be approved by the reporting entity’s Board or principal governance body and will be published by the Federal Government on an online register. This is also different to the UK approach where statements are not centrally published by government but required to be published on a company’s website or provided on request.
- The modern slavery practices that must be reported on are criminalised under Commonwealth law and include slavery, servitude, conducting a business or providing finance to a business involving slavery, servitude or forced labour, trafficking in persons, forced marriage and forced labour. Entities will also be required to report on the most serious forms of child labour, including the sale and trafficking of children, recruitment of children for use in armed conflict, child prostitution and child pornography.
- Statements are to be submitted no later than six months after the relevant reporting period. Given the government’s stated commitment to enact the Bill by year’s end, we anticipate that the first reporting period would expire at the end of the 2019 financial year. Companies would be required to publish statements by the end of 2019.
- To assist with compliance, the Federal Government will release a reporting guideline before the requirements come into force. A dedicated Modern Slavery Business Engagement Unit, established within the Department of Home Affairs, will also provide advice and support for reporting entities.
- ‘Supply chain’ is not defined so the ordinary meaning of these words in the context of the reporting entity will apply.
- Unlike the newly passed NSW law, penalties are not prescribed for non-compliance. The real penalty is likely to be reputational, and the potential for offences and liability under the Criminal Code.
Who will be affected?
- Companies based, or operating, in Australia which have an annual consolidated revenue of at least $100 million. This is anticipated to cover approximately 3,000 entities.
- Commonwealth corporations and companies that meet the revenue threshold.
- Directors of reporting entities required to approve modern slavery statements. Whilst this proposed legislation does not prescribe penalties for non-compliance, the publication of an inadequate modern slavery statement or modern slavery statement which indicates inadequate preventative due diligence, can give rise to corporate and director liability in the following respects:
- the existence of modern slavery in a supply chain can have serious implications for business continuity from a supply perspective but also from a demand perspective due to reputational damage. This can in turn impact a company’s share price giving rise to investor class actions or claims for loss and breach of directors’ duties;
- modern slavery statements may be used in regulatory investigations or prosecutions in respect of offences under the Criminal Code Act.
What do you need to do?
Companies operating in Australia with expected revenue of at least $100 million should commence a review of their business operations and supply chains to assess risks of modern slavery. That assessment should inform decisions about what actions the company will implement to prevent modern slavery, and the statement that will likely need to be made public by 30 December 2019.
Knowing that the assessment has the potential to be rather complicated, we’d be pleased to discuss ideas for tackling the task sensibly and efficiently.
All companies should be aware of the scope of the existing criminal offences and reporting requirements including under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). See our previous alerts on these topics here and here.
Further debate on the Bill has been adjourned until 13 August 2018. A commitment to pass the Bill by the end of 2018 was expressed yesterday by Hon Alex Hawke MP, Assistant Minister for Home Affairs.