New South Wales takes lead in combatting modern slavery with new Act, and Commonwealth not far behind

On 21 June 2018, the NSW State Parliament passed the Modern Slavery Bill 2018, the first of its kind in Australia.

Businesses caught by the NSW law are now required to make annual public reports on their actions to address modern slavery risks in their operations and supply chains. Importantly, the NSW law only  applies to organisations do not report under the Commonwealth law, once that is enacted.

The passing of the NSW law and the introduction of the Commonwealth Bill to Parliament are strong signals to corporate and government entities, operating not just in New South Wales but Australia-wide, to become familiar with, and start to implementing, proactive and effective anti-slavery policies and procedures in their business and supply chains.

Entities subject to the new Modern Slavery Reporting Requirement

Commonwealth

The Commonwealth Bill will establish a Modern Slavery Reporting Requirement, requiring reporting entities to provide annual Modern Slavery Statements to the responsible Minister to be published online on a central register.

Under the Commonwealth Bill, Australian entities and foreign entities "carrying on business" in Australia with annual revenue of at least $100 million Australian dollars will be caught by the reporting requirement.

The Commonwealth law will have extraterritorial effect with foreign entities considered to be carrying on business in Australia where their activities meet the test for carrying on a business set out in the Commonwealth Corporations Act 2001. In this legislative context, "carrying on business in Australia" means undertaking activities engaged in for the purpose of profit on a continuous and repetitive basis in Australia.

New South Wales

The reporting requirement under the NSW law captures smaller commercial organisations with employees in NSW that supply goods and services for profit with a turnover threshold of $50 million Australian dollars.

Entities that are not required to report can volunteer to provide annual public Modern Slavery Statements.

What must be included in a Modern Slavery Statement

Commonwealth

Under the Commonwealth Bill, a Modern Slavery Statement must cover the following mandatory criteria describing:

• the entity’s structure, operations and supply chains;
• the potential modern slavery risks in the entity’s operations and supply chains;
• actions the entity has taken to assess and address those risks, including due diligence and remediation processes; and
• how the entity assesses the effectiveness of those actions.

Modern Slavery Statements must also identify the reporting entity, describe consultation with other entities and details of approvals, and can include other relevant information. An entity can revise and re-publish its Modern Slavery Statement to correct any false or misleading statements, or other errors or to revise information that may be market sensitive.

Importantly, the Commonwealth Bill provides the Minister with the discretion to decline to register a Modern Slavery Statement that does not comply with minimum requirements.

New South Wales 

Under the NSW law, the reporting criteria will be set out in the regulations, but may include the same issues as the Commonwealth Bill, and also a description of the organisation's training of employees on modern slavery.

Reporting entities must report on their operations and supply chains as well as the operations and supply chains of any subsidiary entities and other relevant entities owned or controlled by the reporting entity (irrespective of whether the subsidiary or other relevant entity is operating in Australia or is part of the entity’s core business). Where a parent entity and subsidiary entity both must report, the parent entity will be able to choose whether to report on the subsidiary's behalf.

Finalising and lodging a Modern Slavery Statement

A Modern Slavery Statement must be:

• signed by a responsible member for the entity;  and
• approved by the principal governing body of the entity.

Under the Commonwealth Bill, Modern Slavery Statements must be provided to the responsible Minister within six months from the end of the entity’s financial year.

In respect of the NSW law, the Regulations, when gazetted will determine within what timeframe of the organisation's end of financial year Modern Slavery Statements will need to be provided to the Anti-Slavery Commission for registering.

Definition of modern slavery

For the purposes of the reporting requirement, under both the Commonwealth Bill and the NSW law, modern slavery will be defined as incorporating the human trafficking, slavery and slavery-like practices criminalised and defined in Divisions 270 and 271 of the Commonwealth Criminal Code. This means modern slavery will encompass trafficking in persons, slavery, servitude, forced labour, forced marriage, debt bondage and deceptive recruiting for labour or services.

It will also include the worst forms of child labour as defined in the 1999 Convention on the Worst Forms of Child Labour, but not practices such hazardous working conditions for adults or broader human rights issues.

Application to Government

The Australian Government recognises that it needs to show leadership in combating modern slavery and that government procurement is not immune from modern slavery risks, so it will publish an annual Modern Slavery Statement covering Commonwealth procurement.

Corporate Commonwealth entities and Commonwealth companies will be required to publish separate Modern Slavery Statements if they meet the $100 million revenue threshold. The Australian Government will also encourage Australian State and Territory Governments to publish Modern Slavery Statements.

Under the NSW law, although government agencies of NSW are not strictly caught by the reporting requirements, government agencies will be monitored by the Auditor-General and the NSW Procurement Board to monitor the effectiveness of their due diligence procedures to ensure the procurement of their goods and services are not the product of modern slavery. For that reason, it is likely that government agencies will only procure from entities that have prepared and published a modern slavery statement. 

Public register of Modern Slavery Statements

The Australian Government has decided it will not publish a list of entities which must report, or introduce punitive measures for non-compliance with the reporting requirement, but it will make Modern Slavery Statements available through a free, publicly accessible central register. In addition to this central publication, reporting entities can publish their statements themselves on their webpages or in annual reports or other relevant documents.

Similarly, the NSW Modern Slavery Commissioner will keep, and make publicly available free of charge, an electronic register identifying:

• those commercial organisations that have complied with the requirement to publish a Modern Slavery Statement, and disclosed that there may be slavery in their supply chains and the steps the organisation is taking to address the concern;
• any organisation that has voluntarily published a Modern Slavery Statement and disclosed that there may be slavery in its supply chains, and the steps the organisation is taking to address the concern; and
• any government agency failing to comply with any directions from the NSW Procurement Board.

Penalties and fines for non-compliance

The biggest difference between the NSW law and the Commonwealth Bill is that there are penalties and fines for non-reporting or breaches in respect of the NSW law, but not under the Commonwealth legislation.

Under the NSW law, commercial organisations that fail to publish a Modern Slavery Statement in accordance with the Regulations, and individuals who provide false or misleading material in connection with the statement, will be liable for a maximum penalty of $1,100,000.

In addition, courts can make a "modern slavery risk order" which prohibits a person from engaging in conduct specified in the order for a period of at least two years.

The order can be made when:

• a person is convicted of any modern slavery offences as defined in the legislation; and
• there is reasonable cause to believe that person will engage in this conduct again; and
• an order will protect persons generally from harm.

Contravention of a modern slavery risk order carries a maximum penalty of $55,000 or two years' imprisonment, or both.

NSW Anti-Slavery Commissioner

Another difference between the NSW law and the Commonwealth Bill is that the Commonwealth Bill does not include provisions establishing an Anti-Slavery Commissioner.

Under the NSW law an Anti-Slavery Commissioner will be appointed, whose functions will include advocating for, and promoting, action to combat modern slavery. A primary role for the Commissioner will be to prepare a strategic plan to combat human trafficking and raise public awareness about modern slavery. However, the role does not include investigating or dealing directly with individual cases.

Getting ready for Modern Slavery requirements

Commonwealth

The Senate Legal and Constitutional Affairs Legislation Committee is expected to produce a report on the Commonwealth Bill on 24 August 2018. Chris Crewther MP stated at the World Law Forum Conference on Modern Slavery that this report is likely to respond to those matters raised in the Commonwealth's Final Report, "Hidden in Plain Sight", that are were not required to be the subject of the Commonwealth Bill, such as the implementation of a national compensation scheme for modern slavery victims or the modern slavery hotline.

The Explanatory Memorandum to the Commonwealth Bill indicates that the Commonwealth legislation is likely to be enacted prior to December 2018. In that circumstance, it is expected that most reporting entities will release their first Modern Slavery Statements between January to December 2020.

New South Wales

The NSW law was assented to on 27 June 2018, and will commence upon proclamation; the Hon. Paul Green MLC stated at the same conference that this will happen very shortly, along with the gazettal of regulations. Organisations caught by the law will be required to submit their first Modern Slavery Statement for the next financial year of the organisation (apart from some small businesses which may receive an 18 month grace period).

Considering the penalties and fines under the NSW law, as well as the potential reputational and brand damage organisations would face for non-compliance with either the NSW or Commonwealth laws, organisations must take immediate action. As noted above, as NSW Government agencies must ensure there is no modern slavery in their procurement, even companies that are not required to report will need to do so if they are in commercial arrangements with the Government.

We recommend that organisations:

• review their existing policies and contracts to identify whether modern slavery issues are adequately addressed;
• update or draft new policies and procedures which respond to the proposed Reporting Requirements;
• task a member of your senior leadership team with the responsibility for implementing and administering the proposed policies and procedures, monitoring compliance and reporting to the Board;
• identify what business areas may be vulnerable to modern slavery, including high risk sectors and high risk goods;
• identify the type of internal and external audits/due diligence that may need to be undertaken; and
• consider the training required to assist employees in applying modern slavery policies and procedures.