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Focus on Regulation

Australia set to join the global fight against modern slavery

The world is slowly taking action against modern slavery. Since the UK introduced the Modern Slavery Act (“the UK Act“) in 2015, a number of countries have followed suit with their own legislative initiatives. The latest country poised to do so is Australia. In 2017, the joint Standing Committee on Foreign Affairs, Defence and Trade (a bipartisan parliamentary committee) investigated the issue of modern slavery and published its findings in a report entitled “Hidden in Plain Sight“, recommending a course of action for the Australian Government that included legislation modelled on the UK Act. Following further debate and national consultation, the Australian Government has announced key details of a proposed Modern Slavery Act (the “MSA“), due to be introduced to Parliament and adopted by the end of 2018. Like the UK Act, it includes a mandatory reporting requirement for companies, which will impact not only Australian companies but also multinationals with business operations in Australia.

What is the definition of “modern slavery”?

The term “modern slavery” refers to a number of exploitative situations where a person cannot refuse or leave work due to threats, violence, coercion or abuse. The Australian Government will likely include slavery, forced labour, debt bondage, human trafficking, and other slavery-like practices in its definition. For the meantime, the definition also includes practices that do not tend to arise in the business context (such as forced marriage). This is slightly different to the approach adopted by the UK Government, which decided to exclude practices not pertinent to business.

What will the MSA require companies to report?

As proposed, business entities will be required to issue an annual modern slavery statement, signed by a director, within six months of the end of the Australian financial year. The statement must cover four mandatory reporting criteria:

  • The organisation’s structure, operations and supply chains
  • Potential modern slavery risks
  • Actions taken to address these risks
  • Assessment of the effectiveness of the actions

This goes further than the UK Act, which only recommends information that companies should aim to include, and expressly allows companies to choose to state that they have taken no steps to ensure there is no slavery or human trafficking in their business and supply chain. Additionally, the Australian proposal includes the creation of a government-run and public central repository of all statements so they are easily accessible. The Standing Committee suggested that the government go one step further by making public a list of all entities required to report and identifying any that have failed to do so – it is not yet clear whether this will be implemented. On this point, the UK’s approach has been softer, relying on the Anti-Slavery Commissioner’s initiative, with the support of non-governmental organisations, to identify and write to non-compliant companies (specifically targeting those in the FTSE 100). There have also been calls in the UK, recently led by the Anti-Slavery Commissioner, to establish a formal registry of statements.

The Australian Government has promised to publish clear and comprehensive guidance on the reporting requirement, which will be prepared in consultation with stakeholders.

Who will be affected by the MSA?

The envisaged scope of application includes businesses, companies, organisations, government agencies, partnerships, and trusts that carry out any part of their business in Australia (even if the entity is headquartered or registered elsewhere), and whose annual revenue is above a certain threshold.

The revenue threshold has been confirmed by the government to be AUD100 million, although the Standing Committee had originally recommended AUD50 million. The latter figure approximately matched the UK reporting threshold of £36 million.

What will the penalties be for non-compliance?

As under the UK Act, the Australian Government does not propose to impose financial penalties for non-compliance with the reporting requirement. Instead, businesses will face public criticism (and potential reputational damage, boycotts etc.) if they do not comply or if they issue inadequate statements. By comparison to the UK Act, which allows for the Secretary of State to bring civil proceedings in the High Court for an injunction requiring a company to comply, there have been no proposals to this effect by the Australian Government.

There have also been calls for the Australian Government not to procure from entities that do not publish a modern slavery statement – an issue that has proved contentious in the UK but not yet translated into legislation.

What does this mean for companies carrying out business in Australia?

Some businesses operating in Australia will already be complying with the UK Act. However, the stricter requirements of the Australian MSA may mean that businesses need to enhance their reporting practices and carry out due diligence on their supply chains. The increased publicity from the government’s list of non-compliant companies may also create a further incentive to comply. Although much of the detail is still to be confirmed, the proposed MSA looks like a constructive attempt to build on the experience of the UK Act and will be welcomed by many as a further step towards eradicating modern slavery around the world.

Draft federal legislation is expected in the next few months – watch out for further updates.

Meanwhile, in New South Wales…

In the meantime, the Parliament of New South Wales (one of Australia’s six states) passed its own Modern Slavery Bill on 21 June 2018. Like the proposed federal legislation, the New South Wales Bill is also modelled on the UK Modern Slavery Act and will require organisations with a business presence in New South Wales, and an annual global turnover in excess of AUD50 million per year, to produce a slavery and human trafficking statement. Failure to report, or publishing misleading or false information in the report, will result in a fine of over AUD1 million – a stark departure from both UK legislation and the Australian Government’s proposal. Similar to the UK Act however, the statement will need to cover the organisation’s operations and supply chains, and due diligence undertaken to identify risks of forced labour. The Bill also includes provisions for a public register, government agency procurement and the appointment of an anti-slavery commissioner – it remains to be seen to what extent federal legislation will follow suit.