The UK’s Modern Slavery Act 2015 (the “Act”) is intended to “stamp out modern slavery”. Modern slavery is considered to be a particularly complex crime, encompassing human trafficking, slavery, forced labour and domestic servitude.
RATIONALE FOR CHANGE
The UK’s previous legislation was no longer considered fit for purpose with modern slavery in the UK thought to be a substantial problem. As well as consolidating the existing legislation the Act (amongst other things) from 31 July 2015:
- increased the maximum sentence for offences to life imprisonment;
- created two new civil orders (Slavery and Trafficking Prevention and Risk Orders) to help courts prevent modern slavery;
- made greater provision for the protection of victims; and
- established a new Anti-Slavery Commissioner (tasked with preventing modern slavery, protecting victims, prosecutions, encouraging national and international partnerships and acting as a central point for the collection of data).
During the Act’s legislative progress there was a suggestion that businesses could do more to tackle modern slavery and in particular should not turn a “blind eye” to it. Evidence was heard that UK supply chains were vulnerable to being infiltrated by modern slavery. As a result, from October 2015 the Act will require large businesses to disclose each year what, if any, steps they have taken to ensure there is no slavery or human trafficking in their business or supply chains.
Which businesses does the provision apply to?
The business transparency provision has a wide application. It potentially applies to a “commercial organisation” which includes a body corporate or partnership, wherever incorporated or formed, which carries on a business or part of a business in any part of the UK. The Act and the business transparency provision are not restricted to UK entities but will apply to any business, wherever formed that is within scope, making this obligation extra-territorial.
A commercial organisation is within scope if it carries on a business or part of a business in any part of the UK and:
- supplies goods or services (in any sector); and
- has a total turnover in excess of £36 million (reflecting one of the thresholds set out in the Companies Act 2006 for determining the size of a large company).
The Government recently published draft legislation setting out how turnover will be determined. Group companies are aggregated for the purpose of meeting the turnover test and turnover is based on the existing definition in the Companies Act 2006. There is currently no proposal to require a minimum amount of turnover to be generated in the UK.
What must businesses do?
Slavery and human trafficking statement
The Act requires all “commercial organisations” over a certain size to produce a “slavery and human trafficking statement” for each financial year. The statement must disclose steps they have taken to ensure their business and supply chains are slavery free, or a statement that no such steps have been taken. The Government is clear that it wants disclosure to be meaningful and expects disclosures to differ from company to company but will provide guidance on the kinds of information that may be included. It does not require organisations to take any particular action, aside from producing a statement, or meet a particular standard. The Government’s intention is that by requiring businesses to be more transparent about what they have, or have not done, consumers and investors will have the information to call for more action if they consider it appropriate.
The statement must be approved by the organisation’s management body. For example if the business is a company the statement must be approved by the company’s board of directors and signed by a director.
If the organisation has a website it must:
- publish the slavery and human trafficking statement on that website; and
- include a link to the statement in a prominent place on the website’s homepage.
If the organisation does not have a website, it must provide a copy of the slavery and human trafficking statement to anyone who makes a written request for one.
Guidance on content of statement
The Act notes that the statement may include information on a number of key areas each of which is expected to be covered by the Government’s guidance:
- the organisation’s structure;
- the business’ policies on modern slavery;
- the availability of staff training on modern slavery;
- the organisation’s principal risks related to modern slavery and their methods of evaluating those risks; and
- key performance indicators to assist assessment of the effectiveness of the organisation’s steps to ensure their business and supply chains are slavery free.
The Government has also committed to giving businesses a clear steer on when a statement should be published, advice on where it should be published and ideas as to how modern slavery could be identified. The guidance is also expected to contain good practice for businesses to consider in relation to
due diligence processes. The guidance will not however dictate the type of activities businesses should undertake or how they should carry them out. The Government is clear that individual businesses must determine what activities they think are reasonable and proportionate.
TIMING AND NEXT STEPS
Since 2013 UK quoted companies have had to report, in their annual strategic report, on human rights “where relevant for an understanding of the business” and many businesses’ corporate and social responsibility programmes will already consider this issue. In addition, international businesses may be required to comply with similar provisions under another jurisdiction’s legislation, for example in California. The breadth and extra- territorial nature of the UK’s obligation, with the absence of a requirement for a certain level of turnover to be generated in the UK will potentially have much wider resonance. If within scope, businesses will now need to consider whether they have adequate procedures to ensure slavery and human trafficking is not taking place in any of their supply chains or in any part of their group’s business.
The transparency in supply chains provision has a provisional implementation date of October 2015. To give businesses sufficient time to prepare, the Government has confirmed that transitional provisions will be developed so that statements are not required where an organisation’s financial year end is within close proximity to the date that the duty comes into force. The Government’s guidance on the statement is expected to be produced and published to “coincide with the duty coming into force”. Even with the envisaged transitional provisions, businesses are unlikely to have clarity on the content of the statement more than a few months before they are required to disclose what, if any, action they have taken to ensure there is no modern slavery either in their business or supply chains.