COVID-19 | Modern slavery update

The Modern Slavery Act 2018 (Cth) came into force on 1 January 2019 and established a national modern slavery reporting requirement for large businesses and other entities in the Australian market with annual consolidated revenue of at least $100 million.

Our previous article sets out a comprehensive overview of the legislation and the steps that reporting entities should be taking to meet their obligations.  The Federal government has also published comprehensive guidance for reporting entities as to how to prepare their modern slavery statements.

Temporary extension to the reporting deadlines

Generally reporting entities must submit their modern slavery statements within six months after the end of their reporting periods and for some companies that deadline has been fast approaching.

However to support reporting entities impacted by the COVID-19 pandemic to meet their obligations, the Federal government has extended this legislated deadline by an additional three months for all entities whose reporting periods end on or before 30 June 2020.  Importantly this extension only changes the deadline for submission of statements and does not alter the actual reporting periods for entities

Those new reporting deadlines are as follows:

The effects of COVID-19 on modern slavery risks

The Federal government has also published information for reporting entities about the impacts of COVID-19, and specifically on how to reduce the risks for vulnerable workers in their operations and supply chains becoming exposed to modern slavery as a result of the COVID-19 pandemic.

There is no doubt that one of the impacts of COVID-19 has been to make the positions of many workers in global operations and supply chains more vulnerable. The closure of international borders, measures by businesses to cut costs and to meet cash flow pressures, and the virtual shutdown of international travel and in many cases trade, has brought factory shutdowns, order cancellations, workforce reductions and sudden changes to supply chain structures.  In some cases there has been a dramatic increase in the demand for goods such as personal protective equipment (PPE) and medical supplies, which has resulted in other challenges.  Each of these unexpected changes can disproportionately affect some workers and increase their exposure to modern slavery and other forms of exploitation.

At the individual level there are a variety of reasons why some workers may be more vulnerable to modern slavery as a result of COVID-19, including the loss of income or fear of loss of income, low awareness of their workplace rights, imposed requirements to work excessive overtime to cover capacity gaps or an increased demand due to supply chain shortages, or the inability to safely return to home countries.

What can reporting entities do in relation to the increased modern slavery risks?

Reporting entities are encouraged to integrate consideration of modern slavery risks into their broader response to the COVID-19 pandemic.  This could include providing information about modern slavery risks to the Board or executives as part of COVID-19 updates and using internal sustainability, human rights or modern slavery working groups to identify further opportunities for action.

There are also a number of key steps reporting entities can take to protect and support workers in their operations and supply chains – these steps include:

• maintaining supplier relationships and fostering open communication with suppliers about COVID-19 risks. This should include, where practicable, reporting entities:
  • honouring current contracts; and
  • recognising that purchasing practices such as short production windows and last-minute or short‑term orders may increase modern slavery risks;
• engaging with suppliers to consider options to more directly support vulnerable workers – these options could include:
  • paying for completed work in a timely manner and extending orders over time to help ensure ongoing cash-flow for suppliers;
  • avoiding varying contracts unreasonably or seeking discounts from suppliers;
  • asking suppliers for information on steps they have taken to protect their workers from COVID-19, such as providing workers with PPE, providing sick or carers leave or benefits, and increasing cleaning to minimise the risk of transmission;
  • asking suppliers whether there are ways they can work with the supplier to support affected workers by guaranteeing workers’ wages or leave conditions for set periods;
  • asking suppliers whether new or changed orders will require them to take on additional workers or require additional overtime from current workers; and
  • continuing existing supplier due diligence and remediation processes and adjusting these processes where necessary to ensure risks continue to be identified and addressed; and
• collaborating with suppliers, workers, business peers, investors, civil society and peak bodies to identify best-practice approaches to protect and support vulnerable workers in global operations and supply chains. This could include:
  • informing and educating workers about modern slavery risks linked to the impacts of COVID‑19;
  • redeploying workers to mitigate the impact of workforce reductions;
  • ensuring workers are protected from illness and related impacts by providing, for example, appropriate PPE, increased cleaning and sanitising of workspaces, leave and pay arrangements during periods of self-isolation and, where appropriate, safe locations to self-isolate; and
  • supporting the safe return of migrant workers to their home countries.

How should reporting entities address the impacts of COVID‑19 in modern slavery statements?

It is important that reporting entities continue to take steps to assess and address modern slavery risks during the COVID-19 pandemic and that they report on these actions through their modern slavery statements.

While entities should address all the mandatory criteria set out in the Modern Slavery Act, some entities may be unable to provide detailed responses to some criteria in their statements due to the impact of COVID‑19.  This may be because entities are unable to undertake planned activities to address modern slavery risks, have limited capacity to prepare statements (including due to staffing changes), and/or have experienced significant changes to their supply chains.  If any of these factors are present, then these factors should be referred to in the statement and an explanation given as to how they have impacted an entity’s capacity to assess and address modern slavery risks during the relevant reporting periods.

Where activities have been suspended due to COVID-19, such as face-to-face training and supplier engagement activities, but those activities have subsequently resumed, then this should also be referred to in the statement, even where this may have occurred strictly outside of the reporting period.

Gadens can assist organisations to meet these new reporting requirements, together with reviewing existing policies, supplier terms and implementing risk management / due diligence frameworks to identify and appropriately respond to modern slavery risks.

For details of all our COVID-19 tips and updates, visit the Gadens COVID-19 Hub.

Authored by:

Brett Feltham, Partner