Specialist Corporate and Commercial Lawyers
How well do you know your supply chain?
On 1 January 2019, the Modern Slavery Act 2018 (Cth) (Act) commenced operation. The purpose of the Act is, as stated by the Assistant Minister for Home Affairs, to “strengthen Australia’s response to modern slavery by establishing a modern slavery reporting requirement.” The Act will require certain organisations to report on and identify any risks of, or actions taken to prevent, the occurrence of modern slavery in their supply chains. Richard Suters of our Corporate and Commercial team has extensive experience advising clients on the commercial risks in their supply chains. In this article, Richard examines the Act and identifies the potential implications for affected organisations.
The Act defines modern slavery as conduct which would constitute certain criminal offences under Australian or international law:
- slavery, servitude, forced labour, deceptive recruiting for labour or services, forced marriage and debt bondage;
- trafficking in persons, organ trafficking and harbouring a victim; and
- the worst forms of child labour.
Importantly, the Act is intended to extend to acts, omissions, matters and things occurring outside of Australia.
If an organisation:
- has a consolidated revenue of at least $100 million in a ‘reporting period’ and:
- is an Australian entity; or
- carries on business in Australia at any time in that financial year; or
- has volunteered to comply with the requirements under the Act for that ‘reporting period’,
it will be a ‘reporting entity’ for the purposes of the Act and be bound by its provisions (Reporting Entity). Reporting Entities also include the Commonwealth and various Commonwealth entities which meet the $100m revenue threshold.
A ‘reporting period’ typically constitutes a financial year (Reporting Period).
A Reporting Entity is required to, within 6 months of the end of a Reporting Period, provide the Minister a modern slavery statement for that entity (Statement). The Statement must:
- identify the Reporting Entity;
- describe the structure, operations and supply chains of the Reporting Entity;
- describe the risks of modern slavery practices in the operations and supply chains of the Reporting Entity, and any entities that the Reporting Entity owns or controls;
- describe the actions taken by the Reporting Entity and any entity that the Reporting Entity owns or controls, to assess and address those risks, including due diligence and remediation processes;
- describe how the Reporting Entity assesses the effectiveness of such actions;
- describe the process of consultation with:
- any entities that the Reporting Entity owns or controls; and
- in the case of a Reporting Entity covered by a statement under section 14—the entity giving the statement; and
- include any other information that the Reporting Entity, or the entity giving the statement, considers relevant.
The Statement must be approved by the governing body of the Reporting Entity, such as the board of directors, and must be signed by a responsible member of the Reporting Entity such as a director.
Once a Statement has been given to the Minister, and provided the Statement is compliant with the Act, the Minister must register the Statement.
The first Reporting Period will be for the financial year commencing 1 July 2019, with Reporting Entities required to provide their Statements to the Minister by 31 December 2020.
The Minister will provide a publicly available register to publish Statements provided by Reporting Entities. If a Reporting Entity fails to provide a Statement, the Minister can may give a written request to the entity to provide an explanation of the failure to comply with the Act and/or to undertake remedial action in relation to that failure.
If an entity fails to comply with such a request given by the Minister, the Minister may publish on the register the identity of the Reporting Entity, details of the request and reasons why the Minister is satisfied the entity has failed to comply with the request. Importantly, the Act does not currently contain any financially punitive measures for non-compliance. In effect, the regime operates on a ‘name and shame’ basis.
Prior to the commencement of the Act, NSW Parliament passed the Modern Slavery Act 2018 (NSW) (NSW Act). The NSW Act contains similar provisions to the Act, including the requirement of a ‘reporting entity’ to prepare a ‘modern slavery statement’. However, unlike the Act, the NSW Act provides for penalties of up to $1.1 million for failing to provide a modern slavery statement. Further, any commercial organisation that has a total turnover of $50 million or more in a financial year will be subject to the provisions of the NSW Act.
The NSW Act has not come into effect at the time of publishing.
This article was co-written by Commercial Litigation Lawyer, Scott Homan.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation.