Earlier this month, the Modern Slavery Act 2018 (Cth) (the MSA) became law and will come into effect within the next 6 months.
Once in effect, the MSA will require reporting entities to prepare annual Modern Slavery Statements (Statements) detailing the steps undertaken by the entity to address modern slavery risks within its operations and supply chains. These Statements are to be lodged with the relevant Minister and will be recorded on a register and accessible publicly.
The MSA is reflective of international concerns in respect of modern slavery, and is modelled substantially on the United Kingdom’s Modern Slavery Act 2015.
The MSA will establish a reporting framework that requires businesses to identify modern slavery risks in all of their operations and supply chains, and to implement appropriate measures to ensure identified risks are lessened or remediated, as necessary. This reporting framework is aimed at promoting transparency for consumers and potential investors, placing a business’ reputation at stake if it fails to report or mitigate identified risks.
Modern Slavery Concerns for Australian Businesses
Minimising the risk of modern slavery is of particular concern to Australian businesses because these practices occur predominantly in the Asia-Pacific region, where many Australian businesses source products, raw materials or services as part of their supply chain.
Modern slavery is not defined clearly in international or domestic law. However, for the purposes of preparing a Statement in accordance with the MSA, it covers trafficking in persons, slavery and slavery-like practices and the worst forms of child labour. For example, servitude, forced labour, forced marriage, debt bondage, deceptive recruiting for labour or services, organ trafficking and using children for prostitution or dangerous work fall within its scope.
What is a Reporting Entity?
Any entity that carries on business in Australia with an annual consolidated revenue of AUD$100 million or more will have an obligation to prepare a Statement. This obligation will apply to both publicly listed and non-listed companies, trusts and partnerships, as well as foreign entities conducting business in Australia through a subsidiary.
Entities that operate in Australia, but fall outside of this parameter, may prepare voluntarily a Statement and provide it to the Minister.
Commonwealth corporate and non-corporate entities will also be subject to the reporting requirement.
What is a Modern Slavery Statement?
Each Statement must contain the following information, in respect of a reporting entity:
- its identity;
- its structure, operation and supply chains;
- the potential modern slavery risks in its operations and supply chain; and
- the process for assessing and addressing any modern slavery risks which it has identified, including due diligence and remediation processes and processes for assessing the effectiveness of its actions.
No guidance is provided specifically as to the content required to be included in the Statement. Accordingly, in a manner similar to the UK, a reporting entity is likely to have a discretion to determine the level of detail of the information to be included in the Statement.
Generally, whether information should be included in a Statement is likely to be determined (having regard to confidentiality requirements) by factors, such as the industry sector in which the reporting entity operates, the complexity of the reporting entity’s group corporate structure and supply chains, and/or the jurisdictions in which the reporting entity’s suppliers conduct of business.
Reporting entities must lodge a Statement within 6 months of the conclusion of each financial year.
The Modern Slavery Statement Register
All Statements lodged with the Minister will be published on a public register. One of the objectives of the Statements being available for public inspection is to seek to ensure the transparency of businesses in Australia and to encourage businesses to improve risk management practices in respect of modern slavery.
However, the collection and retention of information relevant to a Statement will be regulated carefully to ensure that only limited information is required to be disclosed.
A Statement can be submitted by a single reporting entity or by a corporate group of entities in the form of a joint Modern Slavery Statement.
This allows holding entities to submit a Statement on behalf of its subsidiaries and other entities that it controls.
Certain governance requirements apply to the lodgement of a joint statement. This includes ensuring that the joint statement is approved by the principal governing body of the holding entity, and is signed by a responsible member of that entity (for example, a company director or secretary).
Mechanisms to address non-compliance
No penalties are prescribed in the MSA in respect of non-compliance with the MSA.
However, the MSA establishes various mechanisms to address any non-compliance. These mechanisms are concerned predominantly with reputational repercussions for entities. For example, the MSA grants the Minister power to require suspected non-compliant entities to explain their reasons for non-compliance and to undertake specified remedial action. Also, the Minister may publish information about entities that fail to comply with a request (including the name of the non-compliant entity, the date and details of the requests made and the reasons why the Minister is satisfied that the entity has failed to comply).
New South Wales (NSW) Requirements
NSW has also recently passed the Modern Slavery Act 2018 (NSW) (NSW Act): however, the Act is yet to be proclaimed. It is therefore important to consider how the MSA and the NSW Act will interact.
The reporting requirements under the NSW regime are very similar to the Federal regime. However, the NSW Act provides Australian businesses with an exemption from the obligations under the NSW Act if those businesses are subject to the MSA. Thus, the NSW Act will apply only to businesses that have employees in NSW and supply goods and services in NSW with an annual total revenue between AUD$50 million and AUD$100 million.
How should businesses prepare?
Reporting entities will need to act promptly to prepare for the new Federal regime.
Australian businesses with group revenues of $100 million or more will need to gather information and about modern slavery risks in their organisation’s supply chain and how to best to mitigate any risks.
Comprehensive guidance about reporting requirements and obligations under the MSA is likely to be released early in 2019.
If you would like further information or wish to discuss how these legislative changes may affect your business and what your business can do to prepare, please do not hesitate to contact us.