The Modern Slavery Act 2015 (the Act) is a new piece of legislation which cracks down on modern slavery practices, both within the UK and beyond.

The Act will have far reaching consequences for the commercial arrangements of many businesses with activities in the United Kingdom. The Act imposes annual reporting requirements on organisations with an annual turnover of £36 million or more.

The Act also consolidates the offences of slavery and human trafficking, introduces new civil preventative measures, establishes the office of Anti-Slavery Commissioner and introduces measures to support victims.

WHICH BUSINESSES HAVE TO COMPLY WITH THE ACT?

In a climate of increasing expectations on businesses to respect human rights, the Act is aimed at a wide range of businesses deemed to have the resources to undertake due diligence on suppliers, and exert influence on their supply chains. This, in turn, is likely to impact upon smaller businesses within their supply chains.

In its consultation paper “Modern Slavery and Supply Chains”, the Home Office acknowledges that the reporting requirement should “ensure that large businesses cannot turn a blind eye to modern slavery simply because of their corporate status or domicile”.

Organisations within scope of the Act are:

  • companies and partnerships (wherever formed);
  • that carry on business in the UK;
  • with turnover at or above £36 million.

The £36 million threshold includes sums derived from the provision of goods or services falling within the ordinary activities of the organisation and its subsidiary undertakings after deduction of trade discounts, VAT and other taxes. All such global turnover must be included in the calculation, not only revenues derived from UK-based transactions.

WHAT IS THE REPORTING OBLIGATION?

The Act imposes a requirement on certain organisations to prepare an annual report in relation to slavery and human trafficking within their respective supply chains. The intention behind this is to encourage organisations to take more action as a result of increased pressure from stakeholders and public perception.

The statement must be:

  • approved by the board;
  • signed by a director;
  • included on the organisation’s website, with a prominent link to the document on the home page. Organisations will be able to consolidate statements between a parent company and its subsidiaries.

In terms of content, the statement must either:

  • set out the steps that the organisation has taken to ensure that there is no slavery or human trafficking in its supply chains; or
  • state that no such steps have been taken.

The Act suggests that the statement may include, amongst other things, information on the organisation’s structure, business and supply chains, its policies in relation to slavery and human trafficking and the steps taken to assess and manage the risk of slavery and human trafficking. See also the Home Office guidance on what should be included in the statement and how it should be presented.

WHEN WILL THE FIRST STATEMENTS HAVE TO BE PUBLISHED?

The annual reporting obligation came into force on 29 October 2015. There are, however, transitional arrangements intended to assist those businesses with a financial year end in close proximity to October 2015.

Businesses with a financial year end on or before 30 March 2016 will not be required to publish a statement for the 2015-2016 financial year. The first businesses required to produce and publish a statement will be those with a financial year ending on 31 March 2016. The Government has indicated that it expects statements to be published within six months of the year end.

What are the penalties for non-compliance?

If a business does not comply with its obligation to publish a statement, the main impact is likely to be reputational damage.

Under the Act, the Secretary of State may seek an injunction requiring the business to comply. If the business does not comply with the injunction, an unlimited fine may be imposed for contempt of court.

TIPS FOR COMPLIANCE 

Organisations within the scope of the Act need to be considering the steps the organisation needs to take to comply with the Act. The approach of course needs to be tailored to the characteristics of the organisation, but we offer the following ‘top tips’ which are likely to assist most businesses:

  • High level communication is needed with executives. The Guidance underscores the importance of top-down compliance and buy-in from the upper echelons of management;
  • Review the operations of the business, and the way it procures goods and services. Are there any areas of higher risk, for example operations in countries where forced labour or human trafficking are known to be a problem? Are there any divisions of the business in which there is an elevated risk of the business coming into contact with modern slavery or human trafficking?
  • Know your suppliers - consider an audit. This could include a questionnaire, site visit and/or interviews with managers and employees of the supplier. Ask questions about the suppliers’ own supply chains.
  • Train staff. Do they understand what modern slavery is and could they spot the warning signs?
  • Communicate the values of the organisation in relation to modern slavery. Drafting a policy on the issues is a clear signal of an organisation’s commitment to corporate social responsibility and ethical trading. A policy sets a standard for everyone in the organisation to strive towards. It ought to make the eventual publication of the organisation’s slavery and human trafficking statement that much easier.

This article was originally published in Purely Payroll, December 2015