Senate passes Modern Slavery Bill

On 28 November 2018, the Senate passed the Modern Slavery Bill with amendments.  This landmark legislation requires certain business entities to disclose on an annual basis the actions they have taken to address modern slavery (exploitation such as slavery, forced labour and human trafficking) in their operations and supply chains.

The Government’s amendments to establish a non-punitive mechanism for non-compliance, strengthen oversight, and provide a pathway for the introduction of future penalties were agreed to.  Amendments moved by the Labor Party to impose civil penalties for non-compliance, remove forced marriage from the definition of “modern slavery”, and introduce a requirement for the responsible Minister to provide a list of entities required to report and entities that failed to report in an annual report to Parliament, were all defeated.  Australian Greens and minor parties’ amendments to appoint an Anti-Slavery Commissioner and ensure a rolling three-year review of the legislation were withdrawn to ensure the passage of the Bill in this term of the Australian Parliament.

The Bill will now return to the House of Representatives for its third reading (a formality) prior to presentation to the Governor-General for Royal Assent.

This alert explains the new laws and the actions that will be required by businesses.

Entities required to report

The reporting requirement will apply to:

  • Australian entities;
  • foreign entities carrying on business in Australia;
  • Australian Government (on behalf of all non-corporate Commonwealth entities); and
  • corporate Commonwealth entities.

Australian entities include companies, partnerships and trusts.

Foreign entities will be considered to be carrying on business in Australia if (among other things) they have a place of business in Australia; use a share transfer or registration office in Australia; or deal with property in Australia.

Entities that are not required to report can ‘opt in’ to the reporting requirement.

Revenue threshold

Entities with an annual revenue below $100 million will not be required to report.  “Revenue” includes the consolidated revenue of the reporting entity and any entities it controls.  The revenue threshold is calculated on the reporting entity’s own financial year or reporting period.  Consolidated revenue is to be determined in accordance with the Australian Accounting Standards, even if those standards do not otherwise apply to the entity.

Modern slavery statements

Depending on their corporate structure reporting entities may prepare either single or joint modern slavery statements.  These statements must identify the reporting entity and address mandatory criteria:

  • the reporting entity’s structure, operations and supply chains;
  • modern slavery risks in the reporting entity’s operations and supply chains (including subsidiary entity operations and supply chains);
  • actions taken (including actions by subsidiary entities) to assess and address those modern slavery risks, including due diligence and remediation processes;
  • how the reporting entity assesses the effectiveness of actions taken; and
  • the process of consultation with subsidiary entities in preparing the modern slavery statement.

Joint statements must address the mandatory criteria for each reporting entity covered by the statement.

The Australian Government is to provide guidance on the meaning of ‘risks’, ‘operations’, ‘supply chains’, ‘due diligence’ and ‘remediation processes’.  It is anticipated that these definitions will align with the UN Guiding Principles on Business and Human Rights.  The expectation is that entities will initially report only on the most severe modern slavery risks, but this will not be restricted to tier 1 (direct) suppliers.

Formal guidance will also be provided on each form of exploitation that comprises ‘modern slavery’: slavery; servitude; forced labour; forced marriage; debt bondage; deceptive recruiting for labour or services; trafficking in persons; harbouring a victim; and the worst forms of child labour.

Further, a template modern slavery statement will be provided to assist businesses in reporting.

The Act enables businesses to submit revised modern slavery statements.  This will allow reporting entities to correct any false or misleading statements, errors, or to revise market sensitive information.

Approval of modern slavery statements

Single reporting entities must ensure their modern slavery statement is approved by the principal governing body of the entity (e.g. a board of directors) and is signed by a responsible member (e.g. a director or trustee).

Joint reporting entities have three options for approval and signature:

  1. the principal governing body and a responsible member of each reporting entity;
  2. the principal governing body and a responsible member of the entity which is in the position to influence or control each reporting entity; or
  3. if the first and second options are not practicable, the principal governing body and a responsible member of at least one reporting entity, accompanied by an explanation as to why the other approval options were not practicable.

The Act authorises the Minister to make rules to clarify the terms ‘principal governing body’ and ‘responsible member’.

Timeframe for reporting

The timeframe for submission of modern slavery statements depends on an entity’s financial year or other annual accounting period (reporting period).

Single reporting entities will be required to submit their modern slavery statement within 6 months from the end of the entity’s reporting period.

Joint reporting entities will be required to submit their modern slavery statement within 6 months from the end of the reporting period that applies to all the reporting entities or within a period to be determined by the Minister.

Modern slavery statements register

The Act requires the Minister to establish and maintain a register of modern slavery statements.  This will be in the form of a freely accessible public website.  Entities can also make their statements available on their own webpages if they wish to do so.

The Minister may decline to register a modern slavery statement that does not comply with the mandatory reporting criteria or the relevant approval, signature and timeframe for reporting requirements.  This discretion is not subject to a merits review.  It is anticipated that the exercise of the discretion to decline registration would only apply in cases of egregious non-compliance and after reasonable attempts to work with such entities in rectifying issues.

Non-compliance

The Act empowers the Minister to request a suspected non-compliant entity to explain why it has not complied with the reporting requirement or to require that entity to undertake specified remedial action.  Remedial action is likely to be limited to giving a modern slavery statement or revising an existing statement to ensure all criteria have been addressed.  Reporting entities will have 28 days to respond to any such requests, however the Minister has a discretion to extend this deadline.

If a reporting entity does not comply with a request, the Minister may then publicly identify the non-compliant entity and disclose:

  • the date and details of the request made, including the period for response and any extensions given;
  • the reasons why the Minister is satisfied the entity has failed to comply with the request; and
  • if the request relates to the entity’s failure to provide a joint modern slavery statement, the identities covered by that joint statement.

This information could be published on the publically accessible Modern Slavery Statements Register, or in any other way the Minister considers appropriate.

A decision by the Minister to identify a non‑compliant entity can be subject to review by the Administrative Appeals Tribunal.

Annual report to Parliament

The Minister must report annually to the Parliament about the implementation of the Act.  The annual report must include an overview of compliance by entities (e.g. the number of entities that have submitted modern slavery statements) and identify best practice modern slavery reporting.  The latter may include identifying reporting entities that demonstrate leading business practices.

Three-year review of the Act

The Act is subject to a three‑year review.  This review must evaluate the operation of the legislation generally and determine whether amendments are required, including the need for the introduction of civil penalties or other compliance mechanisms.

Commencement

The Act will commence on a date to be fixed by Proclamation or six months from Royal Assent (so is currently not known).  However, this will enable the reporting requirement to commence at the beginning of either a calendar year or the Australian financial year.

Entities subject to the Modern Slavery Act (NSW)

On 21 June 2018, the NSW Parliament passed its Modern Slavery Act.  This Act also establishes a modern slavery reporting requirement for certain business entities.

It is anticipated that the NSW Act will not apply to entities required to prepare a modern slavery statement under the Australian Government’s reporting requirement.

Actions businesses need to take

The modern slavery reporting requirement means businesses will need to gain visibility into their local and global supply chains and take action to manage identified risks.  This will involve a range of operational measures and updating of supplier contracts.

Operational measures include:

  • establishing a policy for responsible supply chains that articulates a commitment to responsible business conduct in its own operations and sets out expectations of suppliers;
  • undertaking due diligence, such as the pre-screening of suppliers and supplier assessments or audits;
  • designing and implementing a strategy to respond to identified risks, which may involve a range of responses such as corrective action plans, training and assistance to suppliers;
  • verifying that the actions taken have been effective, which involves the development of performance indicators and data monitoring;
  • training key personnel in the entity’s own business as well as training suppliers on how to identify and mitigate modern slavery; and
  • establishing a clear chain of responsibility with senior level policy oversight and approval of modern slavery statements.

Supplier contracts should be updated to include:

  • commitments to eradicate modern slavery from supply chains;
  • the right to call for compliance statements;
  • assessment/audit rights, including the right to undertake announced and unannounced assessments/audits, assessments/audits by third parties, and the requirement for full cooperation;
  • immediate notification of actual or potential non-conformance;
  • a commitment to follow corrective action plans in instances of non-conformance;
  • the right to suspend or terminate the contract for failure to meet required standards, failure to cooperate with an assessment or audit process or failure to follow a corrective action plan; and
  • the right to inform relevant authorities of the above.

Modern Slavery Bill 2018: Government moves – a little – on non-compliance

The Modern Slavery Bill 2018 aims to establish a modern slavery reporting requirement to strengthen Australia’s approach to combating modern slavery.  Under the Bill, entities with $100 million annual consolidated revenue must prepare a ‘modern slavery statement’ each financial year.  The modern slavery statement must identify the reporting entity and describe:

  • its structure, operations and supply chains;
  • the risks of modern slavery practices in its operations and supply chains, and those of any entities that the reporting entity owns or controls;
  • 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.  This may include the development of policies and processes to address modern slavery risks, and providing training for staff about modern slavery; and
  • the consultation process with entities that the reporting entity owns or controls.

Follow this link for our previous Alert on the introduction of the Modern Slavery Bill.

On 12 September 2018, the Bill received its second reading in the House of Representatives.  The Labour Party moved a number of amendments:

  • the definition of modern slavery exclude forced marriage;
  • the Minister be required to report annually to Parliament on compliance by reporting entities, including a list of entities required to report and entities that have failed to report;
  • a civil penalty ($210,000) for reporting entities that fail to submit a modern slavery statement within the first two years;
  • a civil penalty ($210,000) for reporting entities that fail to submit, or submit inadequate modern slavery statements, to be introduced after two years; and
  • the appointment of an Anti-Slavery Commissioner.

These amendments were defeated.  The Bill is now before the Senate.  It is anticipated that further debate on these matters will occur at the next sitting of the Senate in November 2018.

With this in mind, the Government has moved to address the central issue of non-compliance, introducing into the Senate amendments to improve the operation of key aspects of the Bill, including by leaving the door open for the future introduction of civil penalties.  Whether the Government’s preparedness to look at penalties in the future is enough to secure passage of the Bill in its current form remains to be seen.

Non-compliance

The Government has proposed empowering the responsible Minister to require a suspected non-compliant entity to explain why it has not complied with a modern slavery reporting requirement or to require that entity to undertake specified remedial action.  Remedial action may include a requirement to give a modern slavery statement or revise an existing statement to ensure all necessary criteria have been addressed.  Reporting entities will have at least 28 days to respond.

If a reporting entity does not comply, the Minister may then publicly identify the entity and disclose:

  • the date and details of the request made, including the period for response and any extensions given;
  • the reasons why the Minister is satisfied the entity has failed to comply with the request; and
  • if the request relates to the entity’s failure to provide a joint modern slavery statement, the identities of the entities covered by that joint statement.

This information could be published on the publically accessible Modern Slavery Statements Register which is proposed by the Bill, or in any other way the Minister considers appropriate.

Any decision by the Minister to identify a non‑compliant entity will be subject to review by the Administrative Appeals Tribunal.  This will ensure that a reporting entity that considers it may have been incorrectly publicly identified by the Minister is able to seek a formal review of the Minister’s decision.

Other Government amendments

The Government has also proposed that the responsible Minister report annually to the Parliament about the implementation of the legislation.  The annual report must include an overview of compliance by entities (e.g. the number of entities that have submitted modern slavery statements) and identify best practice modern slavery reporting.

Another amendment seeks to clarify the focus of the three-year review of the legislation.  This review must evaluate the operation of the legislation generally and determine whether amendments are required, including the need for introduction of civil penalties or other compliance mechanisms.  No doubt this amendment will attract some debate.

Family and Domestic Violence Leave

From 1 August 2018, all award covered employees are entitled to five days unpaid family and domestic violence leave.

Background

As part of the four yearly review of modern awards, the Australian Council of Trade Unions (ACTU) made a claim to provide all employees experiencing family and domestic violence with 10 days of paid leave.

On 3 July 2017, the Full Bench of the Fair Work Commission rejected the ACTU’s claim for paid leave, but expressed a preliminary view that unpaid leave should be available. On 26 March 2018, the Full Bench confirmed this view, deciding to provide five days unpaid leave to all award employees experiencing and needing to deal with the impact of family and domestic violence. In making its decision, the Full Bench said:

“Retaining employment is an important pathway out of violent relationships … Absent an entitlement to unpaid family and domestic violence leave, employees will be reliant on the goodwill of their employer.”

On 6 July 2018, the Full Bench delivered a decision finalising the content of the term for unpaid family and domestic violence leave to be inserted into all Modern Awards.

Further to that decision, on 27 July 2018, the Full Bench issued Determinations which vary all Modern Awards by inserting the approved term. The Determinations provide for the new entitlement to come into effect at the start of the first full pay period that commences on or after 1 August 2018.

The Determinations

The Determinations provide:

  • five days’ unpaid leave to deal with family and domestic violence for permanent and casual employees;
  • the leave is available if it would be impractical for the employee to deal with the impact of the family and domestic violence outside their ordinary work hours;
  • the five days is available at the start of each 12 month period of the employee’s employment and does not accumulate from year to year;
  • by agreement between the employer and the employee, the period of unpaid leave may be less than a day or more than five days;
  • the leave does not count as service, but does not break the continuity of service;
  • the employee must give notice of the leave as soon as practicable to the employer and advise the employer of the expected duration of the leave;
  • the employer may require evidence that would satisfy a reasonable person that the leave is being requested to deal with family and domestic violence;
  • employers must take steps to ensure that the notice and evidence of taking leave is treated confidentially.

Next Steps

Employers are not required to provide this new entitlement to non-award covered employees. However, now that a standard has been set, “employers of choice” are likely to follow, to the extent they have not already conferred an entitlement like this on their employees.

The Federal Government has foreshadowed legislation extending this entitlement to all employees in Australia covered by the Fair Work Act 2009.

Australia’s modern slavery reporting requirement for businesses

On 29 June 2018, the Australian Government introduced to the Federal Parliament its much anticipated Modern Slavery Bill. This Bill requires certain business entities to disclose on an annual basis their actions to address modern slavery (exploitation such as slavery, forced labour and human trafficking) in their operations and supply chains.

This alert explains the Bill and the actions that will be required when the Bill becomes law.

Modern slavery reporting requirement

Entities required to report

The reporting requirement will apply to:

  • Australian entities;
  • Foreign entities carrying on business in Australia;
  • Australian Government (on behalf of all non-corporate Commonwealth entities);
  • Corporate Commonwealth entities; and
  • Commonwealth companies.

Australian entities are widely defined and are included irrespective of whether such entities are Australian residents for tax purposes.

Foreign entities will be considered to be carrying on business in Australia if: they have a place of business in Australia; establish or use a share transfer or registration office in Australia; or administer, manage or deal with property situated in Australia as an agent, legal personal representative or trustee. This will capture a foreign entity that carries on business in Australia through an Australian subsidiary.

Australian or foreign entities that are not required to report can ‘opt in’ to the reporting requirement. Such entities must comply with the reporting requirement in the same way as reporting entities.

Revenue threshold

Entities with a total annual revenue below $100 million will not be required to report. “Revenue” includes the consolidated revenue of the reporting entity and any entities it controls. The revenue threshold is calculated based on the reporting entity’s own financial year or reporting period. Consolidated revenue is to be determined in accordance with the Australian Accounting Standards, even if those standards do not otherwise apply to the entity.

Modern slavery statements

Reporting entities (or ‘opt in’ entities) depending on their corporate structure, may prepare either single or joint modern slavery statements. Modern slavery statements must identify the reporting entity and address mandatory criteria:

  • the reporting entity’s structure, operations and supply chains;
  • modern slavery risks in the reporting entity’s operations and supply chains (including subsidiary entity operations and supply chains);
  • actions taken (including actions by subsidiary entities) to assess and address those modern slavery risks, including due diligence and remediation processes;
  • how the reporting entity assesses effectiveness of the actions taken;
  • the process of consultation with subsidiary entities in preparing the modern slavery statement; and
  • any other information the reporting entity considers relevant.

All joint statements must address the mandatory criteria for each and every reporting entity covered by the statement.

The Australian Government is to provide formal administrative guidance on the terms ‘risks’, ‘operations’, ‘supply chains’, ‘due diligence’ and ‘remediation processes’. It is anticipated that these definitions will align with the UN Guiding Principles on Business and Human Rights. It is not intended that entities report on all modern slavery risks or on identified incidences of modern slavery. The initial expectation is to report on the most severe modern slavery risks which is not restricted to tier 1 or direct suppliers.

Formal guidance will also be provided on each form of exploitation that comprises the term ‘modern slavery’: slavery; servitude; forced labour; forced marriage; debt bondage; deceptive recruiting for labour or services; trafficking in persons; harbouring a victim; and the worst forms of child labour. Relevant definitions in the Commonwealth Criminal Code and international human rights law will be drawn upon for this purpose.

Further, a template modern slavery statement will be provided to assist businesses in reporting.
The Bill also enables a business to submit a revised (single or joint) modern slavery statement.

This allows reporting entities to correct any false or misleading statements, errors, or to revise market sensitive information.

Approval of modern slavery statements

Single reporting entities must ensure their modern slavery statement is approved by the principal governing body of the entity (e.g. board of directors) and signed by a responsible member (e.g. director, trustee).

Joint reporting entities have three options for approval and signature:

  1. principal governing body and responsible member of each reporting entity covered by the statement approve and sign; or
  2. principal governing body and responsible member of the entity which is in the position to influence or control each reporting entity covered by the statement approve and sign; or
  3. if the first and second options are not practicable, the principal governing body and responsible member of at least one reporting entity covered by the statement approve and sign, accompanied by an explanation as to why the other approval options were not practicable.

Statements (single or joint) may be signed electronically.

The Bill authorises the Minister to make rules to clarify the terms ‘principal governing body’ and ‘responsible member’ for specific entity types.

Timeframe for reporting

The timeframe for submission of modern slavery statements depends on an entity’s financial year or other annual accounting period (reporting period).

Single reporting entities will be required to submit their modern slavery statement within 6 months from the end of the entity’s reporting period.

Joint reporting entities will be required to submit their modern slavery statement within 6 months from the end of the reporting period that applies to all reporting entities covered by the statement or within a period to be determined by the Minister.

Modern slavery statements register

The Bill establishes a Modern Slavery Statements Register in the form of a public website that will be freely accessible and also requires the Minister to register modern slavery statements. Entities can also make their statements available on their business webpages if they wish to do so.

The Minister may decline to register a modern slavery statement that does not comply with the mandatory reporting criteria or relevant approval, signature and timeframe for reporting requirements. This discretion is not subject to merits review. It is anticipated that the exercise of the discretion to decline registration would only apply in cases of egregious non-compliance and after reasonable attempts to work with such entities in rectifying issues.

Commencement

The Bill will commence on a fixed date by Proclamation or six months from Royal Assent. This is to enable the reporting requirement to commence at the beginning of either the Australian calendar year or the Australian financial year.

Entities subject to the Modern Slavery Act (NSW)

On 21 June 2018, the NSW Parliament passed its Modern Slavery Act. This Act also establishes a modern slavery reporting requirement for certain business entities.

The NSW Act will not apply to entities required to prepare a modern slavery statement under the Australian Government’s reporting requirement (when in force) if such reporting requirement is prescribed as a corresponding law under the NSW Act.

Actions businesses need to take

The modern slavery reporting requirement means businesses with more than $100 million in annual revenue will need to gain visibility into their global supply chains and take action to manage identified risks. This will involve a range of operational measures and updating of supplier contracts.

Operational measures include:

  • establishing a policy for responsible supply chains that articulates a commitment to responsible business conduct in its own operations and sets out expectations of suppliers;
  • undertaking due diligence, such as the pre-screening of suppliers and supplier assessments or audits;
  • designing and implementing a strategy to respond to identified risks, which may involve a range of responses such as corrective action plans, training and assistance to suppliers;
  • verifying that the actions taken have been effective, which involves the development of performance indicators and data monitoring;
  • training key personnel in the entity’s own business as well as training suppliers on how to identify and mitigate modern slavery; and
  • establishing a clear chain of responsibility and assigning senior level approval for policy oversight and in relation to the modern slavery statement.

Supplier contracts should be updated to include:

  • assessment/audit rights, including the right to undertake announced and unannounced assessments/audits, assessments/audits by third parties, and the requirement for full cooperation;
  • immediate notification of actual or potential non-conformance with policy;
  • a commitment to follow corrective action plans in instances of non-compliance with policy;
  • the right to suspend or terminate the contract for failure to meet policy standards, failure to cooperate with an assessment or audit process or failure to follow a corrective action plan; and
  • the right to inform relevant authorities of the above.