Path to establishing modern slavery legislation

Australia is moving closer to establishing modern slavery legislation, including a modern slavery reporting requirement.

In New South Wales, the Modern Slavery Bill 2018 was introduced to combat modern slavery, slavery-like practices and human trafficking, provide support for victims, and to provide for the appointment and functions of an anti-slavery commissioner. The Bill passed the Legislative Assembly with amendments on 6 June 2018. These will now be considered by the Legislative Council.

At a federal level, in the Federal Budget 2018-2019 delivered on 8 May 2018, the Commonwealth Government announced that it will provide A$3.6 million over four years from 2018-19 to establish an Anti-Slavery Unit within the Department of Home Affairs, to manage the implementation of a Modern Slavery Reporting Requirement.

In December 2017, the Parliamentary Joint Standing Committee on Foreign Affairs, Defence and Trade (Committee) delivered its final report into establishing a Modern Slavery Act in Australia entitled Hidden in Plain Sight.

Proposed modern slavery legislation

Committee report recommendations

Key recommendations in the Committee's report included the introduction of a Modern Slavery Act and that the Act should include provisions for:

• The establishment of an Independent Anti-Slavery Commissioner.
• The establishment of mandatory supply chain reporting requirements to require certain entities to report on modern slavery risks in their supply chains.
• Support for victims of modern slavery, including establishing a national compensation scheme.
• Improvement of criminal justice responses to modern slavery.
• Addressing orphanage trafficking and child exploitation in overseas residential institutions.
• Addressing labour exploitation, including establishing a labour hire licensing scheme and making changes to Australia's visa framework.
• Referencing in one location Australia's existing modern slavery offences as outlined in Division 270 and 271 of the Criminal Code Act 1995, as well as offences relevant to combatting modern slavery such as withholding passports under section 21 of the Foreign Passports (Law Enforcement and Security) Act 2005, offences relating to sexual and labour exploitation and offences under the Migration Act 1958.

For Australian businesses, the corporate governance issue to understand will be the reporting requirement. The Committee was supportive of the reporting model proposed by the government in its consultation paper released in August 2017.

Who does it affect?

Under the Commonwealth Government's proposed model, the reporting requirement will require large corporations and other entities operating in Australia (with annual turnover in excess of $50m on the Committee's recommendation) to publish annual statements outlining their actions to address modern slavery in their operations and supply chains.

The four reporting criteria

The consultation paper noted that the proposed reporting requirement would require companies to report against 'substantially the same' four criteria as set by the UK reporting requirement to ensure the business community does not need to comply with inconsistent regulation across jurisdictions.

As with the reporting requirement currently found in modern slavery legislation in the UK, the statements would need to be approved at board level (signed by a director).

The proposed criteria are:

• The entity’s structure, its operations and its supply chains.
• The modern slavery risks present in the entity’s operations and supply chains.
• The entity’s policies and process to address modern slavery in its operations and supply chains and their effectiveness (such as codes of conduct, supplier contract terms and training for staff).
• The entity’s due diligence processes relating to modern slavery in its operations and supply chains and their effectiveness.

In addition, the Committee noted that having prescribed reporting areas would result in a more consistent reporting. The Committee suggested including an additional area inviting entities to report on any further action taken, on the basis that this would 'encourage entities to develop further innovative approaches to reporting, helping to avoid a "tick box" exercise'.

Next steps

MinterEllison has a depth of experience in helping our clients assess and manage their corporate governance requirements including the examination of operating models and supply chains.

We approach operational and supply chain risk by getting to know your business, identifying potential threats and risks, and developing strategies to mitigate risk and ensure you're protected as well as meeting your governance requirements. This may include undertaking risk analysis, compliance and audits; risk mitigation strategies and training; reviewing policies, contracts, negotiation terms and policy termination and disputes.

There is no 'one size fits all' approach, though the proposed Act means there will be a detailed legal framework within which to report.

All relevant entities should already have a compliance plan and supply chain checklist which they should start reviewing in light of their potential new obligations. We would be happy to assist with that process or discuss any questions you may have regarding the proposed legislation.

Other recommendations of the Committee

1. Definition of modern slavery: The Committee agreed that the definition of modern slavery should refer to the human trafficking and slavery offences set out in the Criminal Code, which are consistent with international law. The Committee also considered that the definition should include reference to child labour and the worst forms of child labour, as well as child exploitation through orphanage trafficking.
2. Entities to which the requirement should apply: The Committee noted that the government had proposed the reporting threshold apply to a broad definition of ‘entities’ to include bodies corporate, unincorporated associations or bodies of persons, superannuation funds and approved deposit funds. In its interim report, the Committee had supported a broad definition of ‘entities’ required to report, subject to a certain revenue threshold (discussed below). The Committee reaffirmed in its final report that ‘entities’ should have a broad definition to cover companies, businesses, organisations, governments and other bodies as outlined in the consultation paper.
3. Threshold to determine which entities should report: In its consultation paper, the government proposed entities with a total annual revenue of at least A$100 million be required to report. The Committee recommended a lower threshold of $50 million 'to capture most large entities operating in Australia, and to be internationally consistent with the UK threshold under the Modern Slavery Act 2015'. Consistent with the consultation paper, the Committee recommended that there be a legislated ‘opt-in’ option for smaller entities below the threshold that wish to voluntarily submit a modern slavery statement.
4. Timeframe for reporting: The Committee recommended, consistent with the government consultation paper, that the government require annual modern slavery statements to be provided within five months after the end of the Australian financial year. The Committee also supported a phased introduction of any penalties or compliance measures to ensure smaller entities have adequate time to develop processes to map, assess and address supply chain risks.
5. Approval of modern slavery statements at board level: The Committee noted that the government had proposed that modern slavery statements be approved at the equivalent of board level and be signed by a director, similar to the UK Modern Slavery Act. The Committee supported this approach and recommended that the modern slavery statements be required to be approved at the equivalent of board level and signed by the equivalent director.
6. Public procurement: The Committee agreed that government has an important role to play in setting a positive example for businesses and other entities required to report. On this basis, it recommended that the government introduce a requirement to only procure from entities that complete a modern slavery statement; that Commonwealth public bodies over the prescribed threshold amount, including the Australian Government, be required to provide a modern slavery statement and that the government, through the Council of Australian Governments (COAG) and local government associations, encourage state, territory and local governments to introduce requirements to only procure from entities that comply with the modern slavery supply chain reporting requirement, as well as to submit modern slavery statements.
7. Establishment of a central repository of modern slavery statements: The Committee expressed support for the government's proposal to establish a free, publicly accessible, searchable, central repository of anti-slavery statements. The Committee recommended that: the government establish and support a legislated and government funded central repository of modern slavery statements under the proposed Modern Slavery Act; that an independent third party (eg. a civil society NGO or NGOs) run and administer the central repository, as well as undertake benchmarking and analysis of modern slavery statements and that the Independent Anti-Slavery Commissioner have powers to make recommendations to improve the operation of the central repository. In addition, the report recommended that the government consult with organisations operating existing repositories in the UK.
8. Government consider publishing a list of entities required to report: to improve accountability and transparency, the report also recommended that the government publish a list of entities required to report under the proposed mandatory supply chain reporting requirement, as soon as possible after the commencement of the proposed Modern Slavery Act. The list should be published alongside the central repository of statements.
9. Penalties for non-reporting should apply from second year: The report recommended that the government introduce penalties and compliance measures for entities that fail to report under the proposed Modern Slavery Act, applying in the second year of reporting onwards. This would include publishing a list of entities above the reporting threshold that fail to report after the second year of reporting onwards. In addition, the committee recommended that the government consider the appropriate level of penalties in the proposed Modern Slavery Act and how penalties should be administered, including a possible role for the Australian Securities and Investment Commission and that the proceeds from any penalties collected should be used to support victims of modern slavery (ie. to fund the National Compensation scheme).