Modern Slavery: the implications for your business

Key Points: 
  • Any business with a turnover of >$50 million that procures goods and services
  • Government agencies
  • Any business that tenders for work with government agencies
  • Any business that provides goods and services to any person who may be a victim of modern slavery
  • Anyone involved in any of the above, ie most people!!

What’s happened?
NSW has passed the Modern Slavery Act 2018 (NSW) (the NSW Act) and the Modern Slavery Bill 2018 (Cth) (the Cth Bill) has passed the House of Representatives and will now go before the Senate.

The primary objective of both pieces of legislation is to combat modern slavery by assisting the business community in Australia to take proactive and effective actions to address modern slavery.
What is modern slavery?
Modern slavery practices are major violations of human rights and serious crimes including people trafficking, slavery-like practices such as forced labour and forced marriage and the worst forms of child labour (including using children for prostitution or in hazardous work).

It is estimated that there are more than 40 million victims of modern slavery worldwide[1]. Over half of these victims are being exploited in the Asia-Pacific region, in which the supply chains of a lot of large businesses operating in Australia are based.

It is estimated that approximately 15,000 victims of modern slavery reside in Australia (up from 4,300 in 2016) with minority groups, such as migrants, being at greatest risk[2].
What will businesses and government agencies be required to do?
Certain businesses and other entities[3] will be required to publish modern slavery statements regarding their actions to address modern slavery risks in operations and supply chains. These will be made publicly available for customers and the public to scrutinise. The aim is to ensure customers, government agencies and contractual counter-parties are able to assess ethical supply chain decisions.

The NSW Act also creates the position of an Anti-slavery Commissioner to monitor the reporting of risks of modern slavery in supply chains, amongst other functions[4].

Although government agencies are exempt from the NSW reporting requirements the Act does require NSW government entities, including public hospitals, to take reasonable steps to ensure that goods and services procured by and for that entity are not the product of modern slavery[5]. NSW government entities also have an obligation to report on the steps taken to prevent modern slavery in their procurement process[6]. In order to meet these obligations government agencies will need to review modern slavery disclosures made by potential suppliers on the public register where the statements will be published.

A government agency that fails to comply with the NSW Procurement Board’s directions concerning the procurement of goods and services that are the product of modern slavery will also be identified in the public register[7]. The Act also creates a mechanism for the Auditor-General to conduct an audit to assess an agency’s compliance with anti-slavery directions in its procurement activities[8].

The Commissioner, NSW government and non-government agencies that “provide or deal with services or issues affecting victims of modern slavery” must work in co-operation with each other by diclosing information and providing reasonable asistance and support to help them perform their respective functions[9]. The precise scope of this duty will need to be tested but it raises potential privacy issues that we address further below together with significant reporting burdens on agencies that provide services to people who may be victims of slavery. The necessary protocols to comply with these reporting requirements will need to be carefully thought through.
Implications
While the devil will be in the detail and we are still waiting for the NSW Regulations and Cth Bill to be enacted there are sufficient signs that this legislation is going to have a significant impact upon procurement decisions and practices throughout Australia to warrant preparing now.

Modern slavery statements are likely to be required to include:
  • The organisation’s structure, its business and supply chains;
  • Its due diligence processes in relation to modern slavery in its business and supply chains;
  • The parts of the organisation’s business and supply chains where there is a risk for modern slavery, and steps taken to assess and manage that risk;
  • Training available to employees about modern slavery.

All businesses are on notice that they need to be vigilant about the practices of their suppliers to minimise the risk of acquiring any goods or services that may be the product of modern slavery. The more complex the supply chain the more difficult this is going to be.

And it is anticipated that businesses that tender for government work will be scrutinised as part of any procurement process to ensure they are taking these steps – if they do not meet these requirements the prospect of securing such work is likely to significantly diminished.
Penalties for non-compliance
In NSW a penalty of up to $1.1 million applies for:
  • failing to prepare a modern slavery statement
  • failing to publish a modern slavery statement, or
  • providing false or misleading information in connection with a modern slavery statement.

The Cth Bill does not currently contain any such penalties although it is anticipated amendments will be sought to bring it in line with the NSW Act especially since businesses with revenues between $50 million and $100 million could be exposed to penalties under the NSW Act but entities with turnovers of >$100 million are not exposed under the Cth Bill.
Interaction between mandatory reporting requirements and privacy
The NSW Act states that NSW government entities must provide information about a victim of modern slavery despite the Privacy and Personal Information Protection Act 1998 and the Health Records and Information Privacy Act 2002 but only to the extent that it is relevant to the exercise of a function of the Commissioner[10].

The Commonwealth Senate Legal and Constitutional Affairs Legislation Committee identified the risk for breach of privacy for victims of modern slavery, but suggested the risk would be reasonable, necessary and required to fulfill the legitimate aims of the legislation[11]. It might be that the regulation of Cth modern slavery statements will include safeguards which will not compel the provision of personal or health information, may create exemptions for disclosure of this information (as the NSW Act has done) and ensure that potential victims are otherwise advised how their right to privacy is limited in these circumstances[12].
What should you do?
As the potential impact of this legislation is so broad it is recommended that all businesses take steps to:
  • map out their supply chains
  • prepare policies and procedures to manage modern slavery risks
  • be alert to the publication of guidance material including government codes of practice
  • conduct audits of suppliers to assess their approach to managing modern slavery risks

Review contracts with supply chain partners to include terms which identify mutual obligations to identify and address modern slavery risks including warranties and indemnities as appropriate.
Risk factors to be aware of
Business models and conditions that may be more susceptible to modern slavery-like practices include:
  • complex supply chains with numerous subcontractors
  • high flexibility and low profit margins
  • reliance on low-skilled or unskilled labour
  • high numbers of temporary or seasonal workers
  • operations in remote locations. 
Conclusion
Businesses need to start preparing now for the introduction of these reporting requirements.

The risks of not doing so are wide-reaching. This legislation has the potential to give significant competitive advantages to those who are complying and significant reputational risks to those who don’t.

Anti-slavery measures should become a part of businesses’ ethos impacting upon all aspects of how they work in the same way that safety and corporate social responsibility has become. This will extend to training staff, developing performance measures, reviewing policies and procedures and conducting regular audits as well as amending contractual terms to address these significant issues.

If you need assistance in preparing for these changes then we are here to help.

Post by Jennifer Parkes and Sarah Jones

References
[1] Global estimates of modern slavery: Forced labour and forced marriage, International Labour Office, Walk Free Foundation and International Organization for Migration, Geneva, 2017 referred to in the Cth Bill Explanatory Memorandum at [4].
[2] 2018 Global Slavery Index, p 88 and 2016 Global Slavery Index pp 29 and 54 accessed at https://www.globalslaveryindex.org/download/.
[3] For NSW businesses with annual revenue over $50 million and for the Cth businesses with annual revenue over $100 million
[4] Section 9 of the NSW Act
[5] Schedule 5 clause 5.6 [5] of the NSW Act which will insert Section 176 (1A) into the Public Works and Procurement Act 1912 (NSW)
[6] Clause 6(b2), Annual Reports (Departments) Regulation 2015 (NSW); clause 8(b2) Annual Reports (Statutory Bodies) Regulation 2015 (NSW) (to be inserted by schedule 5, clauses 5.1 and 5.2 of the Act)
[7] Section 26(c) of the Act
[8] Section 38G, Public Finance and Audit Act 1983 (NSW) (to be inserted by schedule 5, clause 5.5 of the Act)
[9] Section 14 of the NSW Act
[10] Section 14(5) of the Act
[11] Parliamentary Joint Committee on Human Rights, Human rights scrutiny report (Report 8 of 2018) - 21 August 2018, Parliament of Australia, [17]
[12] Ibid, [18]

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