Monday, 7 January 2019

Large businesses to report on slavery risks

The Federal Government has passed the Modern Slavery Act 2018 (the Act) which establishes new reporting obligations, requiring large businesses and other entities in Australia to make annual public reports on their actions to address modern slavery risks in their operations and supply chains.

The objective of the new reporting requirements is to assist the business community in Australia to take proactive and effective actions to address modern slavery and to mitigate the risk of modern slavery practices occurring in the supply chains of goods and services in the Australian market.

Who does the Act apply to?

The reporting requirements apply to entities based or operating in Australia which have an annual consolidated revenue of at least $100 million (‘reporting entities’).

What does the Act require?

Each year, reporting entities will need to submit a “Modern Slavery Statement” which must cover mandatory criteria including the risks of modern slavery practices in its operations and supply chains and the actions taken to assess and address those risks.

The Modern Slavery Statement must be signed by a responsible member of the entity (such as a company director). The Modern Slavery Statements will be published on a publicly available online register.

A reporting entity can submit a Joint Modern Slavery Statement for itself and any of its subsidiaries that are also reporting entities, if approved by the governing body of each reporting entity or the higher entity that influences or controls the reporting entities.

The Modern Slavery Statements must be submitted within 6 months after the end of the financial year (or other applicable annual reporting period of the entity). For most businesses, this means the first Modern Slavery Statements will likely be due by the end of 2020, for the 2019/2020 financial year.

Consequences for non-compliance

While the Federal legislation does not impose penalties for non-compliance with the reporting requirements (unlike the proposed NSW legislation discussed below), the Minister in serious cases of non-compliance can publicly identify entities that do not comply with a request of the entity to explain why it had failed to comply with the reporting requirements. There was some debate about whether or not civil penalties should be imposed but the Government ultimately considered that publicly identifying a non-compliant entity is likely to cause reputational damage to that entity and act as an incentive to comply.

Interaction with NSW legislation

Earlier in 2018, the NSW Government also passed its own modern slavery legislation, which except for the consequences for non-compliance and threshold revenue ($50 million under NSW legislation) is largely the same as the Federal legislation. While it is not confirmed yet, it is likely that entities required to report under the Federal legislation may not also be required to report under the NSW legislation. This means entities which would be captured by both the NSW legislation and the Federal legislation may not be required to prepare Modern Slavery Statements under each law.

Implications

Businesses should consider whether they are considered reporting entities under the Act. If they are, ahead of the first reporting period (at the start of the new financial year), reporting entities should prepare for the reporting requirements to ensure the timeframes in the Act are met, and to avoid further scrutiny for non-compliance.

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This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.

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