Executive Summary: U.S. companies with operations in Australia may soon be impacted by the establishment of a new Modern Slavery Act (the MSA) in Australia.
In December 2017, the Australian Joint Standing Committee on Foreign Affairs, Defence and Trade issued its final report containing 49 recommendations regarding the establishment of the MSA. Since the release of the report, the Australian government has indicated that it plans to release draft legislation for the MSA in the first half of 2018.
Modeled after and expanding upon the UK’s Modern Slavery Act and the California Transparency in Supply Chains Act, the recommended MSA is aimed at combating modern slavery in Australia. Modern slavery includes slavery, forced labor, wage exploitation, involuntary servitude, debt bondage, human trafficking, forced marriage and other slavery-like exploitation.
The recommended MSA includes mandatory supply chain reporting by a broad range of entities including, but not limited to, businesses, companies, organizations, government agencies, partnerships and trusts operating in Australia with annual revenue of AUD50 million or more, irrespective of where the entity is headquartered. This means that a U.S. headquartered company operating in Australia that meets the revenue threshold will fall under the purview of the proposed MSA.
Under the recommended MSA, covered entities would be required to issue an annual modern slavery statement, approved at the board level and signed by a director, or equivalent, within five months of the end of the Australian financial year. Companies would be required to report on, at a minimum:
- the organization’s structure, its business and its supply chains;
- its policies in relation to modern slavery;
- its due diligence and remediation processes in relation to modern slavery in its business and supply chains;
- the parts of its business and supply chains where there is a risk of modern slavery taking place, and the steps it has taken to assess and manage that risk;
- its effectiveness in ensuring that modern slavery is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
- the training about modern slavery available to its management and staff; and
- any other actions taken.
The inquiry report recommendations include that Modern Slavery Statements should be published on a central repository that will likely be run by the Australian government and be searchable by the public. Likewise, the Australian Government should publish a list of entities required to report and whether they have actually reported.
Punitive penalties and compliance measures for those entities that fail to report are also contemplated in the recommended MSA. However, the amount of the proposed penalties has not yet been defined. The recommended MSA also restricts the Australian government from procuring from entities that do not complete a modern slavery statement.
The Bottom Line: Multinationals with operations in Australia, including U.S. based companies, are likely to be impacted by the enactment of the proposed MSA. Companies should ensure that they are, at a minimum, implementing policies regarding modern slavery, company supply chains, and due diligence processes. Companies that do not have visibility into their global supply chains should work to identify risks and operational measures that can be taken to minimize the exposure that could result from the proposed reporting requirements.