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07 Aug 2015

Modern Slavery Act 2015

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The Modern Slavery Act 2015 received Royal Assent on 26 March 2015 and section 54, which creates an obligation on a business to publish an annual Statement as to the steps it has taken to ensure that slavery and human trafficking are not taking place in any part of the business or any part of the supply chain, is expected to come into force in October this year.
 
Scope of the Obligation
 
Section 54 of the Act requires a commercial organisation to prepare a Statement for each financial year of the organisation where it:  

(i)
supplies goods or services; and
(ii)
has a total annual turnover of £36 million or more.

For these purposes, a commercial organisation means a body corporate (wherever incorporated) or a partnership (wherever formed) which carries on business or part of a business in any part of the UK.
 
Content of the Statement
 
The Statement can either (i) set out the steps the organisation has taken during the financial year to ensure that slavery and human trafficking (as defined in section 54(12)) is not taking place in any of its supply chains (assume that this means both direct and indirect supply chain) or in any part of its business; or (ii) state that the organisation has taken no such steps.
 
Some have commented that the second option will provide an easy way out and that the Act does not, in any event, impose an obligation to take any steps at all.  That has not been the experience, however, in California, where similar legislation is in place and where the real sanction is the public opprobrium likely to be visited on those who are not taking steps.  The Act does not create a criminal offence, but the section 54 obligation may be enforced by proceedings in the High Court by the Secretary of State for an injunction.
 
A link to the company's Statement must be visible in a "prominent place" on the company's website homepage.
 
At present, the Act does not mandate what the Statement must contain. That said, section 54(5) sets out six areas of information that a business may include in its Statement:  

(i)
the organisation's structure, its business and its supply chains;
(ii)
its policies in relation to slavery and human trafficking;
(iii)

its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
(iv)


the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
(v)


its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate; and
(vi)
the training about slavery and human trafficking available to its staff.

Who signs off the Statement?
 
Approval of the Statement must be obtained from the board of directors (or equivalent management body) and signed by a designated director and, in the case of a partnership, a designated partner. 
 
Next Steps
 
The Government has confirmed that it will publish Guidance about the duties imposed on organisations by section 54 and that there will be transitional provisions to allow businesses sufficient time to prepare their Statements where the financial year end of the business is within close proximity to the date the obligation comes into force.
 
Immediate thought needs to be given to:   

(i)

how the requisite approval is to be obtained in organisations where there are a substantial number of directors or partners;
(ii)

which companies in a multi-national commercial organisation are caught by the Act;
(iii)

a risk assessment of the organisation's vulnerable businesses, the parts of the world in which it works and its suppliers;
(iv)
whether there should be a "steps" or a "no steps" Statement; and
(v)
if it is to be a "steps" statement, what they are to be.

Thereafter, and subject to the provisions of the Guidance, organisations should:         

(i)

ensure that staff, particularly in procurement, are fully aware of the organisation's steps and what to do when issues arise;
(ii)

set a "tone from the top" and appoint an individual at senior level to monitor compliance an ensure the annual obligation is met;
(iii)
ensure that contracts with suppliers contain appropriate warranties; and
(iv)

consider further what due diligence steps, on a risk based approach, are required.

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