On 25 March 2020, the Standing Committee on Social Issues (Committee) put the NSW Modern Slavery Act 2018 (NSW Modern Slavery Act) back on the agenda when it presented its final report on the NSW Modern Slavery Act to Parliament. This may come as a shock to many, who thought last year that it may be ‘binned’ altogether.
Instead, the Committee has recommended that the NSW Modern Slavery Act should commence on or before 1 January 2021.
This means that there may be a significant increase in organisations needing to comply with a reporting requirement on modern slavery risks in their operations and supply chains – not just large organisations currently captured under the Commonwealth Modern Slavery Laws 2018 (Commonwealth Act) which is in full swing.
Our modern slavery law compliance experts break down the key findings of the Inquiry and what you should be doing.
What’s happened so far
The NSW Modern Slavery Act was passed in June 2018 but is not yet in force. As a recap of our earlier report, the NSW Modern Slavery Act was referred to the Standing Committee on Social Issues for inquiry (Inquiry) to determine whether the NSW Modern Slavery Act is necessary; and whether inconsistencies or duplication between the NSW Modern Slavery Act and the Commonwealth Act have been sufficiently addressed by the Draft Modern Slavery Amendment Bill 2019 (Amendment Bill) and Draft Modern Slavery Regulation 2019 (NSW) (Draft Regulation).
After reviewing over 102 submissions and holding a public hearing on 4 November 2019, the Committee has concluded the Inquiry and tabled its final report to Parliament on 25 March 2020 with the NSW Modern Slavery Act very much back on the agenda.
Key recommendations of the Committee and what they mean for your organisation if adopted by NSW Government
The Committee supports the commencement of the NSW Modern Slavery Act on or before 1 January 2021 following some amendments.
The Committee recommended that the NSW Modern Slavery Act contain a statutory review to be conducted in conjunction with the Commonwealth Government’s statutory review of the Commonwealth Modern Slavery Act (which would occur in January 2022). The NSW Government has six months to consider whether it adopts the recommendations of the Committee. Here are the key takeaways from the Committee’s recommendations about the NSW Modern Slavery Act:
Who will need to report?
Under the NSW Modern Slavery Act (as currently drafted) and Draft Regulation, a commercial organisation with $50 million to $100 million in annual turnover will need to submit a modern slavery statement with the Anti-Slavery Commissioner of NSW. The criteria to be addressed in the modern slavery statement are intended to be the same as the seven mandatory criteria of the Commonwealth Act. From our experience with the Commonwealth Act, preparation to address these criteria takes time. The Committee supports the reporting requirements in the NSW Modern Slavery Act and Draft Regulation but has recommended that the NSW Government replace the term “turnover” with “consolidated revenue” and that all modern slavery statements be made publicly available on a statement register.
In relation to government agencies, the NSW Modern Slavery Act (if it commences) will enable the NSW Procurement Board to issue directions about modern slavery, and requires annual reporting by government agencies about action taken to ensure that goods and services procured are not the product of modern slavery. The Committee has recommended that the NSW Government work to develop legislative amendments to be introduced following the statutory review to provide procurement and reporting obligations for local councils equivalent to those imposed on NSW government agencies, together with a regulation making power to exempt any council or class of councils from this obligation.
The Amendment Bill (if passed) will mean that State owned corporations are treated as commercial organisations for the purposes of the NSW Modern Slavery Act i.e. they would need to report if their consolidated revenue is $50 million to $100 million.
Will there be exemptions from reporting requirements?
The Committee supported the exemption of charities and not-for-profit organisations from the mandatory reporting requirements at least until the statutory review of the NSW Modern Slavery Act. The intention is to allow time to obtain sector input and implement mechanisms to support the sector in meeting their obligations.
In addition, the Draft Regulation (if enacted) will provide for exemptions from reporting under the NSW Modern Slavery Act for:
- entities who voluntarily report under the Commonwealth Act, including those that fall within the NSW Modern Slavery Act threshold
- subsidiaries of entities reporting under the Commonwealth Act,
but such entities will still be on the hook for penalties under the NSW Modern Slavery Act if they provide false or misleading information.
It is the intention for small businesses with fewer than 20 employees to be exempted from the NSW reporting obligations. The Committee recommended that the Anti-Slavery Commissioner regularly examine and report on matters regarding the suitability of bringing franchisors, on behalf of franchisees not otherwise captured by the NSW Modern Slavery Act, under the state legislation.
Can my organisation volunteer to report under the NSW Modern Slavery Act?
Yes, the Committee has recommended that the NSW Government provide a voluntary reporting mechanism for businesses falling under the $50 million reporting threshold, to be rolled out following the statutory review recommended.
Will the penalties under the NSW Modern Slavery Act remain?
To recap, the NSW Modern Slavery Act (as currently drafted) will impose penalties of up to $1.1 million for failure to prepare a modern slavery statement, failure to publish a statement and providing false or misleading information. There are no financial penalties for non-compliance under the Commonwealth Act.
The Committee has supported retaining the penalties in the NSW Modern Slavery Act as necessary to improve compliance and pave the way for the introduction of a similar penalty regime at the Commonwealth level. It has recommended appointing a relevant authority, being either the Anti-Slavery Commissioner or the Director of Public Prosecutions, under the NSW Modern Slavery Act for the prosecution of breaches of the NSW Modern Slavery Act reporting obligations. However, the Committee has recommended the repeal of the proposed modern slavery risk order scheme in the NSW Modern Slavery Act in favour of an extended operation of the risk-based offender management scheme to deal with slavery offences.
Action items for your organisation
Your organisation should consider if the NSW Modern Slavery Act will likely apply to it should the NSW Government decide to adopt the Committee’s recommendations. Modern slavery laws compliance is an emerging issue that will affect more organisations.
In relation to organisations who must report under the Commonwealth Modern Slavery Act, we have already seen the compliance knock-on effects as they incorporate ethical sourcing into their procurement practices. This means that even if your organisation does not need to submit a modern slavery statement under the Commonwealth Modern Slavery Act and is unlikely to need to do so under the NSW Modern Slavery Act (if it comes into effect), it will be asked about its modern slavery risks and responses if it is supplying to organisations that must report under either Modern Slavery Act.
Watch this space for further developments as the NSW Government now has 6 months to consider and respond to the recommendations of the Committee.
What about that Commonwealth Act?
If the Commonwealth Act applies to your organisation then the clock is certainly ticking and your organisation should be taking steps so that it can address all of the mandatory criteria and submit its modern slavery statement on time. We have been very busy helping a number of clients prepare their compliance programs and modern slavery statements. To find out more about this regime and how we can help, see our previous article.