Modern slavery and what businesses need to know

Australia is slowly moving closer to the establishment of comprehensive modern slavery legislation. At Federal level, the Modern Slavery Bill 2018 (Federal Bill) passed the lower house last month and is now being considered by the Senate, and in the last Federal budget funding was provided to establish an anti-slavery unit in the Department of Home Affairs. In New South Wales the Modern Slavery Act 2018 (NSW) is expected to become law shortly. Organisations need to prepare now in order to meet these new obligations.

What is modern slavery and how prevalent is it?

The term modern slavery describes a range of exploitative practices including slavery, servitude, forced labour, child labour, human trafficking, forced marriage and sexual servitude, bonded labour and debt bondage, and other slavery-like practices.

The United Nation’s latest estimates suggest that over 40 million people around the world, and 4,300 people in Australia, are victims of some form of modern slavery.

While many Australian organisations may see modern slavery as being far removed from their own operations, when product supply chains are taken into account modern slavery becomes a very relevant issue for the Australian business community.

“Hidden in Plain Sight”

In December 2017, a joint standing committee of Federal Parliament handed down its final report into modern slavery entitled “Hidden in Plain Sight”. In light of the United Kingdom’s Modern Slavery Act 2015, the Committee was asked to examine whether Australia should adopt a comparable Modern Slavery Act. In particular, the Committee was asked to focus on the following issues:

• the nature and extent of modern slavery both in Australia and globally;
• the prevalence of modern slavery in the domestic and global supply chains of companies, businesses and organisations operating in Australia;
• identifying international best practice employed by governments, companies, and organisations to prevent modern slavery in those supply chains, with a view to strengthening Australian legislation;
• the implications for Australia’s visa regime; and
• provisions in the United Kingdom’s legislation which have proven effective in addressing modern slavery, and whether similar or improved measures should be introduced in Australia.

The Committee made a number of strong recommendations, including to establish an Australian Modern Slavery Act, with an independent Anti-Slavery Commissioner to lead and coordinate Australia’s response to combatting modern slavery, the establishment of mandatory global supply chain reporting requirement for certain entities operating in Australia, increasing support for victims through a national compensation scheme and improving criminal justice responses.

Federal Modern Slavery Bill 2018

In response to the Committee’s recommendations, on 28 June 2018 the Federal Government introduced the Federal Bill into parliament. Despite unsuccessful moves by the Federal Opposition to introduce amendments to the Federal Bill, the opposition nonetheless passed the Federal Bill in the lower house. While the Federal Bill has yet to be passed by the Senate, its passage should be assured given the support for modern slavery reporting on both sides of politics and within the broader community.

The Federal Bill seeks to establish a modern slavery reporting requirement, with its primary objective being to support Australian businesses to take proactive and effective actions to address modern slavery and to mitigate the risk of modern slavery practices occurring in the supply chains of goods and services in the Australian market.

Key features of the Federal Bill include:

• both Australian entities and foreign entities carrying on business in Australia will be required to submit modern slavery statements for every 12 month period that they have annual consolidated revenue of at least $100 million. This threshold is expected to cover approximately 3,000 entities;
• the Federal Government will also publish an annual modern slavery statement covering its procurement;
• entities that are not strictly required to report can also voluntarily provide a statement;
• a modern slavery statement must describe:
  • the entity’s structure, operations and supply chains;
  • the potential modern slavery risks in the entity’s operations and supply chains;
  • actions the entity has taken to assess and address those risks, including due diligence and remediation processes; and
  • how the entity assesses the effectiveness of those actions;
• the statement must be signed by a responsible member for the entity, approved by the principal governing body of the entity (such as the board of directors), and be provided to the government within six months from the end of the entity’s financial year – this requirement is designed to ensure that senior management is accountable;
• the government will operate a public central repository to ensure that all statements are easily accessible to the public;
• the government will provide support and assistance through a dedicated business unit in the Department of Home Affairs and by preparing written guidance materials; and
• the government has committed to reviewing the reporting requirement and its effectiveness after three years to ensure it remains appropriate for the Australian context.

The Federal Bill does not include many of the Committee’s recommendations, including a national redress scheme for victims of modern slavery or the establishment of an independent Anti-Slavery Commissioner. Oddly the Federal Bill does not impose any penalties for an organisation failing to meet its reporting requirements.

NSW Modern Slavery Act 2018

On 21 June 2018 the New South Wales parliament passed the Modern Slavery Bill (NSW Act) and it received assent on 27 June 2018. The NSW Act is expected to become law shortly.

The NSW Act contains reporting requirements that have the potential to overlap with those under the Federal Bill. It is important that companies understand both the requirements under the NSW Act, as well as any key differences to the measures proposed by the Federal Bill.

The NSW Act applies to any commercial organisation (company, partnership or association):

• who has employees in New South Wales;
• supplies goods and services for profit and gain; and
• has a total annual turnover of at least $50 million (or such other amount as may be set by regulations).

This threshold is obviously much lower than that proposed under the Federal Bill and is in line with the Committee’s recommendations. The NSW Government has also indicated that small businesses with less than 20 employees will be exempt from any reporting requirement for 18 months following commencement.

Similar to the Federal Bill, a key requirement of the NSW Act is that commercial organisations must publish an annual modern slavery statement. The specific information which organisations will be required to report on will be detailed in regulations (which are yet to be drafted), but at a minimum the NSW Act provides that those statements should cover:

• the organisation’s structure, its business and its supply chains;
• its 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; and
• the training about modern slavery available to its employees.

These areas are broadly similar to those proposed under the Federal Bill. In line with the NSW Government’s already expressed desire to harmonise its reporting framework with any Federal reporting framework to avoid duplicating administrative burdens, the NSW Act provides that the NSW reporting requirement will not apply to commercial organisations who report under a prescribed corresponding Federal or state law.

The NSW Act contains penalties of up to $1.1 million for organisations who:

• fail to prepare a modern slavery statement;
• fail to publish that statement publicly (in accordance with the regulations to come); or
• knowingly provide false and misleading information in a statement.

Unlike the Federal Bill, the NSW Act provides for the appointment of an Anti-Slavery Commissioner. The Commissioner’s role will be focused on public awareness, advocacy and advice, but does not include investigative or complaint-handling powers in individual cases. The Commissioner will also be responsible for preparing a strategic plan to combat human trafficking and slavery-like practices in NSW, maintaining a public register identifying organisations in whose supply chains modern slavery is taking place, and establishing a hotline to provide advice to victims.

Lastly, NSW government agencies are exempt from the NSW Act, but they must take reasonable steps to ensure that the goods and services they procure are not the product of modern slavery. Practically this means it is likely that modern slavery statements will be carefully reviewed as part of government procurement processes.

What does this mean for organisations now?

While the Federal Bill has yet to be passed and we still await commencement of the NSW Act, it is clear that organisations need to start preparing now to meet their new obligations.

Organisations will need to commence taking the following steps:

• allocate resources and set up an internal multi-disciplinary team to consider these issues – this may include employees from operations, procurement and/or human resources;
• map and assess their existing (and any upcoming) supply chains;
• undertake a risk management approach to initially assess where modern slavery risks may arise in those supply chains;
• take action to take minimise or completely remove those risks;
• revise current supplier terms and policies to cover these new obligations;
• revise current employee codes of conduct and policies to address modern slavery issues and provide training to employees on modern slavery risks;
• create a due diligence framework to continually monitor risks both internally and within those supply chains, and to look for markers of potential modern slavery – those markers may range from the unlawful withholding of wages and identity/travel documents through to excessive work hours and restrictions on individual movement; and
• make sure supply chain participants are aware of these obligations.

For organisations who respond well to these obligations, there is the potential to create a point of difference in the market when compared to competitors.

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.

Authored by:
Brett Feltham, Partner