This enactment enacts the Fighting Against Forced Labour and Child Labour in Supply Chains Act, which imposes an obligation on certain government institutions and private-sector entities to report on the measures taken to prevent and reduce the risk that forced labour or child labour is used by them or in their supply chains. The Act provides for an inspection regime applicable to entities and gives the Minister the power to require an entity to provide certain information.
This enactment also amends the Customs Tariff to allow for a prohibition on the importation of goods manufactured or produced, in whole or in part, by forced labour or child labour as those terms are defined in the Fighting Against Forced Labour and Child Labour in Supply Chains Act.
The Modern Slavery Act establishes a new transparency framework to a broad segment of Canadian business and federal government bodies. These new reporting obligations apply to:
Any “government institution” that produces, purchases or distributes goods anywhere in the world.
Any Canadian-linked “entity” that produces, sells or distributes goods anywhere in the world, imports goods into Canada, or controls an entity engaged in any of these activities.
The term “entity” is broadly defined as a business that’s either (a) listed on a stock exchange in Canada or (b) has a place of business in Canada, does business in Canada or has assets in Canada and meets at least two of the following conditions for at least one of its two most recent financial years:
has at least $20 million in assets
has generated at least $40 million in revenue
employs an average of at least 250 employees
The meaning of an “entity” may also be prescribed by regulations.
Entities and government institutions subject to the Modern Slavery Act are required to, on or before May 31 each year, report to the minister of public safety and emergency preparedness (the “Minister”) in prescribed form on the steps the entity has taken during its previous financial year to prevent and reduce the risk that forced labour or child labour is used at any step in the production of goods made by the entity or imported into Canada by the entity. These reports are also required to include information on the entity’s supply chains and its due diligence processes in relation to forced labour and child labour.
Entities are obligated to make their reports (and any revision to a report) publicly available. In addition, entities incorporated under the Canada Business Corporations Act or another federal statute are required to provide annual reports to their shareholders together with annual financial statements. Reports must also be made available to the public by publishing them in a prominent place on an entity’s website and through a public registry accessible through the website of the Department of Public Safety and Emergency Preparedness.
The Modern Slavery Act includes extensive investigative powers. The Minister is empowered to designate persons to verify compliance, including searching any premises, including residential properties, on which there are reasonable grounds to believe that there’s anything to which the Modern Slavery Act applies or any document relating to administration of the law. Except in the case of residential properties, such searches would be warrantless. The Minister could also order an entity to take any measures considered to be necessary to ensure compliance with the Modern Slavery Act.
The new law also expands the prohibition on the importation of goods made with the use of forced labour in the Customs Tariff to cover the use of “child labour”.
CONSEQUENCES FOR NON COMPLIANCE
Subject to a due diligence defence in the case of individuals and agents acting on behalf of an entity, every person or entity that fails to comply with requirements under the Modern Slavery Act is guilty of an offence and liable to a fine of up to $250,000. This applies, among other things, to failing to file an annual report or a revised report or failing to cooperate with or comply with any compliance order issued pursuant to the legislation.
The government has indicated its intention to hold directors and officers accountable for the disclosure. Any director, officer, agent or mandatary of an entity who directs, authorizes, assents to, acquiesces in or participates in commission of an offence under the Modern Slavery Act is a party to and guilty of the offence and liable to punishment whether or not the entity itself is also prosecuted or convicted.
ATTESTION OF REPORTS AND PERSONAL LIABILITY
The reports required under the Modern Slavery Act must be approved by each respective entity’s governing body and such approval must be “evidenced by the signature of one or more members of the governing body of each entity that approved the report.” This leads to the question as to whether the individuals signing the reports can also be held personally liable for any misrepresentations in the report. While this wording requires a member of the governing body to essentially attest to the fact that the board approved the report, it doesn’t go so far as to require the member to certify that the report itself is correct.
This in and of itself would unlikely impose personal liability on a board member who simply attests to the fact that the report was approved by the board. However, as noted above, the government has indicated its intention to hold directors and officers accountable for the disclosure required under the Modern Slavery Act and, based on the current wording, if any such persons direct, authorize, assent to acquiesce in or participate in knowingly providing false or misleading information, they can be fined up to $250,000.