The Modern Slavery Act - will it impact you?

In late September, 2018, the NSW State government was the first jurisdiction in Australia to enact modern slavery legislation. The Modern Slavery Act was passed through Parliament on the 21st June, with the NSW Act containing some unique differences over the Commonwealth Modern Slavery Bill that entered Federal Parliament earlier this year, and was passed through the House of Representatives, to be debated in the Senate.

The Bill requires businesses and other commercial enterprises to detail the actions that they have taken to minimize the chance of modern slavery in both their own operations, but more specifically, their supply chains. Before you scoff at the notion of your business becoming entangled in the slave trade, don’t forget that companies globally have been caught out; big and small. The world of business has become exponentially more globalized in recent years, accompanied by an increasingly complex web of supply chains.

The International Labour Organisation and Walk Free Foundation have put out a recent report estimating that more than 40-million people globally are victims of modern slavery.

It might have been something you didn’t take into account beforehand, but now – in New South Wales, at least – it’s punitive, enforceable legislation; less of a consideration, and more a very real legal obligation.

Modern Slavery is defined in the bill as employers having anything that resembles power of ownership over their staff, forced-labor practices or any evidence of coercion, servitude, lack of personal freedoms for staff, debt bondage, child labor, human trafficking, forced marriage and deceptive recruiting. While doing business in the developed world is undoubtedly easier to eliminate elements of modern slavery, if your business has suppliers based somewhere that these considerations aren’t taken as seriously, you could end up culpable if you haven’t done your prior research in terms of who you do business with.

This happened a few years ago with one of Apple’s Chinese contractors FoxConn, who was found to be enabling practices of modern slavery like forced labor and unsatisfactory working conditions; the state of some of these facilities were so poor for employees that suicide nets were installed on many of the windows and staircases.

This leads us to our next point: exactly what does this new legislation mandate? And what are the punishments if you’re found to not be in compliance?

Speaking in a federal context, the bill imposes obligations for business entities operating in Australia with revenues of $100-million or more. The government says the bill will apply to more than 3,000 companies, and will require them to provide detail statements to be submitted to the respective minister annually. These reports must elaborate on the company’s structure, operations and supply chains all the way to mid-level and base suppliers of raw ingredients, components or service. In addition, those companies are required to describe the actions they’ve taken to address and mitigate the risk of modern slavery entering their supply chain, increase their staff training and provide evidence of due diligence when dealing with a number of suppliers based domestically, and internationally.

The statements procured by the respective minister will in turn be published on a public register online.

The federal bill diverges from the recently enacted NSW legislation targeting modern slavery in that there are no punitive fines. The Labor opposition has declared its support for the bill, and added an intention to punish companies who are found to be in breach of the Act with fines and penalties.

Referring specifically to the NSW legislation passed in June, companies with an annual turnover of $50-million or more are now in the government’s firing line, and must take many of the same steps in the documenting of their supply chain to mitigate the risk of unethical working practices entering their supply chain. Fines up to $1.1-million will be handed out to businesses found to be non-compliant with the legislation, which includes providing false or misleading information to investigators.

Proponents of the legislation have said that given the threat of public exposure for unethical treatment of their employees – direct or indirect through a supplier – combined with the public’s sensitivity to the topic of modern slavery should be enough motivation for companies to enforce compliance across the board with the new laws.

Some companies on the other side of the discourse however argue that due to the complex nature of their supply chains, actively monitoring and reporting on these requirements is an almost impossible task. They argue that for companies with thousands of suppliers, new teams of employees will have to be hired and trained for the task solely of monitoring the company’s involvement in the slave trade. The counter often made to this argument is that the severity of the problem should be met with an equally-radical response to minimize evidence of modern slavery entering the global commerce supply chain.

Regardless of which side of the argument you stand, this has now become legislation, so we’re looking at it through the lens of a legal requirement, rather than a simple consideration. Whereas beforehand executives might have been blissfully ignorant to the working conditions of their suppliers, a greater emphasis on due-diligence is now forcing companies operating in NSW – and soon, Australia-wide – to assure the government and the buying public that they’ve made every step possible to reduce the risk.

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