31 January 2019

How will Australia’s modern slavery laws affect your business?

Legislation has recently been passed by the NSW and Commonwealth Governments to combat modern slavery. This article summarises the changes and identifies the key steps you will need to take to ensure you comply.


Why are governments introducing modern slavery laws?

Modern slavery includes forced labour, child labour, human trafficking, debt bondage, deceptive recruitment, involuntary servitude, human trafficking, forced marriage and other slavery-like exploitation.

The United Nations has estimated at least 40 million people are victims of modern slavery around the world. Internationally, industries at high risk of modern slavery include agriculture, construction, electronics, extractives, fashion and hospitality.

The UK was the first country in the world to introduce modern slavery laws back in 2015. The laws introduced in NSW and the Commonwealth are modelled on the UK laws, aiming to target companies operating in Australia who have supply chains based in the Asia-Pacific region.

NSW Legislation

What does the legislation involve?

It covers companies, partnerships or associations who have employees in NSW that supply goods and services for profit and gain, and have a total turnover in the past financial year of at least $50 million.

Organisations covered by the legislation must prepare a modern slavery statement for each financial year. These statements will appear on a public online register.

A modern slavery statement should include details on the organisation’s business and supply chains, its due diligence and staff training process, how modern slavery affects its business and supply chains and how the risk will be mitigated. You can read more about the requirements here.

A maximum penalty of $1.1 million applies to any company who fails to prepare or publish a modern slavery statement, or who provides false and misleading information in the statement.

What are the next steps?

The NSW legislation was assented to on 27 June 2018. It is to commence on a day to be appointed by proclamation. In other words, the exact commencement date remains unknown, but it will be coming soon. Affected businesses will need to start taking steps to ensure they will be able to comply, if they have not already done so.

The NSW Government will be appointing an anti-slavery commissioner and introduce regulations to clarify the scope of the annual reporting requirements for organisations. 

Organisations who have less than 20 employees and more than $50 million in turnover will be given at least 18 months to adapt to the changes. 

A copy of the Act can be found here.

Commonwealth Modern Slavery Bill

What does the legislation involve?

The Modern Slavery Bill 2018 (Cth) (Bill) was passed by both Houses on 29 November 2018 and came into force on 1 January 2019. The Modern Slavery Commencement Proclamation can be found here.

The Bill covers companies, resident trust estates and partnerships who have an annual consolidated revenue of more than $100 million that carry on business in Australia. Around 3,000 businesses will be affected.

Organisations covered by the new laws must prepare a modern slavery statement within six months after the end of each financial year. They can file a single modern slavery statement, or a joint modern slavery statement if they are a large company with many subsidiaries.

The company’s board of directors must approve the statement before it is given to the Minister for Home Affairs. Once approved by the Minister, the statement will be uploaded onto a public online register.

A modern slavery statement should:

  • identify modern slavery risks in its operations and supply chains;
  • identify due diligence, remediation processes and staff training to address the risks; and
  • assess how effective those actions have been.

You can read more about the requirements here.

The explanatory memorandum states that even if an organisation does not identify any modern slavery risks, they must still outline how they address modern slavery risks and how effective those actions have been.

There are no civil or criminal penalties for organisations who fail to produce a modern slavery statement, or who have false and misleading information in their statements.

However, before passing the Bill, the Senate implemented a provision allowing the Minister to request an explanation for an entity’s failure to comply with a requirement for a modern slavery statement, and/or that the entity undertake specified remedial action (s 16A), and a provision allowing the Minister to publish information about a failure to comply with such a request.

What are the next steps?

As of 1 January 2019, the Modern Slavery Act 2018 (Cth) (Act) has commenced. 

Alongside amendments to section 16A, the Senate also amended the Bill to include a requirement for the Minister to prepare an annual report about implementation of the Act (s 23A), and a provision for the three-year review of the Act to include consideration of compliance over that period, and whether any additional measures should be taken to improve compliance such as the imposition of civil penalties (s 24). 

A copy of the Act can be found here.

Case Study: Fortescue Metals Group

Fortescue Metals Group recently outlined in a government submission how it combats modern slavery. The large mining company engages at least 2,000 suppliers to supply construction materials, fuel and labour hire.

The company conducted a thorough audit and found one major supplier was using forced labour. Asian workers had their passports confiscated and were forced to work to pay off huge debts because of excess recruitment fees. Fortescue ensured excessive recruitment fees were repaid and helped the foreign workers to keep their passports using deposit boxes.
Since then, Fortescue has developed a range of measures to tackle modern slavery risks such as:

  • a whistleblower hotline to report modern slavery;
  • making suppliers sign a statutory declaration that their supply chains are free from modern slavery;
  • prioritising suppliers in the procurement process who commit to eradicating modern slavery; and
  • hiring a business integrity manager to audit supply chains regularly and conduct risk management process.

The company has now produced their first voluntary modern slavery statement that summarises the efforts they’ve taken to combat modern slavery.

Key Takeaways

Businesses covered by the legislation should be taking steps to ensure they will comply with modern slavery laws when these new laws take effect. The required steps may include:

  • coming to grips with the legislation and understanding what it means for your business;
  • developing internal anti-slavery policies;
  • auditing supply chains;
  • reviewing procurement methods; and
  • developing resources to train staff on modern slavery risks.

Businesses who fail to comply with the new modern slavery requirements are likely to face monetary penalties. Businesses may also risk their reputations if they don’t address the issue or continue to work with suppliers that engage in modern slavery.

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About the Author

Andrew Hernandez | Lawyer

During his time with Turtons, Andrew has been involved in a range of contentious and non-contentious work (particularly in the construction space).


andrew.hernandez@turtons.com | (02) 9229 2918

About Turtons

Turtons is a commercial law firm in Sydney with specialist expertise in privately owned construction and technology businesses.

Andrew Hernandez | Lawyer

Author

Andrew Hernandez | Lawyer

andrew.hernandez@turtons.com

During his time with Turtons, Andrew has been involved in a range of contentious and non-contentious work (particularly in the construction space).


andrew.hernandez@turtons.com | (02) 9229 2918

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