The Modern Slavery Act – time to take note

The Modern Slavery Act – time to take note

Richard Sallybanks and Jonathan Flynn discuss the new provisions under section 54 of the Modern Slavery Act 2015.

 

The Modern Slavery Act came into force in the United Kingdom on 26 March 2015. Section 54 of the Act requires commercial organisations who supply goods or services and have an annual turnover of £36 million or more to prepare a slavery and human trafficking statement at the end of each financial year. A “commercial organisation” is defined as a body corporate (wherever incorporated) or a partnership which carries on a business or part of a business in any part of the United Kingdom.

Section 54 came into force on 29 October 2015. However, the transitional provisions mean that commercial organisations do not need to submit a statement for a financial year which ends before 31 March 2016. By way of example, a business with a year-end of 30 November 2016 would need to submit its first statement “as soon as reasonably practicable” after this date, covering the period of 1 December 2015 to 30 November 2016. Although there is no statutory deadline for submitting a section 54 statement, the Home Office encourages commercial organisations to comply within 6 months of their financial year-end. Therefore, in practical terms, an organisation may choose to publish a statement alongside its annual report.

The statement itself must set out the steps that were taken during the previous financial year to ensure that slavery and human trafficking have not taken place within the organisation. Significantly, this extends to the organisation’s supply chains and any parts of its own business.

The broad scope of section 54 may cause difficulties for some large-scale, multijurisdictional companies which have complex business structures. For example, a parent company which is caught by the provisions will need to submit a statement covering its own activities and the activities of any of its subsidiaries which form part of its supply chain or business, regardless of whether those subsidiaries are individually caught by section 54. However, if an individual subsidiary is also caught by section 54, it too will need to submit its own statement or a joint statement with the parent company.

In terms of the type of information which should be included within the statement, the Act provides a non-exhaustive list of six points, supplemented by guidance issued by the Home Secretary entitled ‘Transparency in supply chains: A practical guide’ (“Home Office Guidance”). The list includes:

  • Details of the organisation’s structure, its business and its supply chains.
  • The organisation’s policies in relation to slavery and human trafficking within its business and supply chains.
  • The organisation’s due diligence processes in relation to slavery and human trafficking within its business and supply chains.
  • Identifying where there is a risk of slavery and human trafficking within the organisation’s business and supply chains, and outlining the steps taken to assess and manage that risk.
  • The organisation’s effectiveness in preventing slavery and human trafficking within its business and supply chains, measured against performance indicators.
  • Details of slavery and human trafficking training available to the organisation’s staff.

A completed statement must be approved by the commercial organisation and published on the company’s website, with a link on a prominent part of the website’s home page. If a company does not have a website it must provide a copy of the statement within 30 days of receiving a written request.

There is no penalty for non-compliance. However, the Home Office Guidance states that if an organisation fails to submit a statement when it is required to do so the Secretary of State may seek an injunction in the High Court (or the equivalent in Scotland) to force the organisation to comply.

Under section 54(4)(b), a commercial organisation can submit a statement that it has taken no steps in the previous financial year to prevent slavery and human trafficking. However, this carries a clear reputational risk for the business and the Act envisages that consumers, investors and Non-Government Organisations will apply pressure to those which, by their own admission, have failed to take any preventative measures whatsoever, or which have not even published a statement on their website.

The new provisions outlined above may already be familiar to commercial organisations operating in the United States; section 54 was in part modelled on the Transparency in Supply Chains Act, which was introduced in California in 2012. However, for large-scale organisations supplying goods or services in the United Kingdom which are unfamiliar with section 54 and whose financial year-end is 31 March 2016, the requirement to submit a statement is fast approaching.

Notwithstanding the absence of formal sanction for non-compliance, the Home Office no doubt hope that the reputational risk for commercial organisations which ignore section 54 is such that anti-modern slavery and human trafficking policies move up the corporate compliance agenda.

A copy of the Home Office Guidance is available here.

 

Richard Sallybanks & Jonathan Flynn

BCL