06 December 2018

Federal Government passes Modern Slavery Act

This article was written by Monique Carroll.

Earlier this year, we reported that the Federal Government had introduced the Modern Slavery Bill 2018 (Cth) which, if passed, would introduce a modern slavery reporting requirement designed to strengthen Australia’s response to modern slavery.  The Bill has now passed, with some amendments by the Senate, which are set out below.  Although there is no commencement date yet, the Act is expected to take effect in 2019, which will mean that the first statements for many reporting entities will be due at the end of 2020.  Here’s what you need to know.

Reporting requirements

  • The Act will apply to any entities based, or operating, in Australia, which have an annual consolidated revenue of more than $100 million.  This is expected to cover approximately 3,000 entities and will include government corporations. Other entities may report voluntarily. 

  • Each year, reporting entities will need to report on the risks of modern slavery in their operations and supply chains, and actions to address those risks (including how entities assess the effectiveness of those actions).  Each statement will need to be signed by a responsible member of the entity – usually, a company director. The statements will be made available to the public on the internet.

  • A joint statement may be given on behalf of one or more reporting entities, if approved by the principal governing body of each reporting entity or an entity that owns or controls each reporting entity covered by the statement.

  • Statements will be due 6 months after the end of each reporting period, which is defined as the applicable financial year for each reporting entity.  Depending on your company’s arrangements, this will mean that the first statements will likely be due for most reporting entities at the end of 2020.

Compliance

  • Notably, the Act does not impose any penalties for failure to comply, nor does it create the role of an independent Anti-Slavery Commissioner, unlike the New South Wales legislation.

  • Every three years, a report will be prepared by the Minister of Home Affairs to review the operation of the Act and whether any amendments should be made.  Prior to the Bill’s passing, the Senate introduced an additional requirement that the report specifically consider whether any additional measures to improve compliance with the Act are necessary or desirable, such as civil penalties. 

Wider implications

  • As we previously reported, the real penalties under the Federal Act are likely to be reputational.  Prior to the Bill’s passing, the Senate incorporated an amendment that enables the Minister of Home Affairs to request that any entities that fail to comply with the reporting obligations provide an explanation or to undertake specified remedial action.  If there is then failure to comply with those requests, details of that failure may be published on the public register.  An annual report will be released each year by the Minister to provide an overview of compliance by entities with the Act. Reporting entities should also be aware that failure to ensure the robustness of statements may attract the attention of regulators to potential breaches in respect of AML/CTF legislation and the Criminal Code.

  • There are also wider business disruption risks for non-compliance.  If it is identified (or becomes apparent) that there is modern slavery in a company’s supply chain, there are potential liability risks for directors, particularly given the requirement for the statements to be approved and signed at Board level.  The obligations under the Act will interact with existing obligations on directors.

  • The absence of civil penalties for non-compliance is a departure from the New South Wales legislation, which came into force earlier this year.  The Modern Slavery Act 2018 (NSW) contains penalties for non-compliance by a fine of up to $1.1 million.  The NSW Act applies to entities operating in New South Wales with an annual revenue of $50 million or more.

  • Relevantly, the NSW Act contains an “opt out” provision if entities are subject to a “corresponding law”.  It remains to be seen whether the Federal Act will become a corresponding law with respect to the NSW Act, given the absence of penalties under the Federal Act.  Supporting regulations for the NSW Act are to be released, which are expected to deal with this matter.  In any event, , due to the difference in revenue thresholds between the Acts, it will mean that a number of NSW entities will come within the ambit of the NSW legislation but not the Federal legislation and will be unable to opt-out

What should you do now to prepare?

You should ensure that you have a good understanding of the risks of modern slavery in your supply chain and what policies and frameworks are in place to address and monitor those risks.  As the first statements will cover the upcoming financial year, it is important to ensure that those policies are in place well in advance to guide decision making and assessment of risk from the commencement of the reporting period.

KWM would be pleased to assist you with:

  • developing internal anti-slavery policies and frameworks;

  • auditing your supply chains;

  • considering and amending your procurement agreements;

  • developing due diligence, culture and corporate governance guidelines;

  • conducting awareness seminars for boards, executives and legal teams; and

  • preparing a crisis management or response plan if modern slavery is identified in your supply chain.

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