The Modern Slavery Act 2015 (the "Act") consolidates offences relating to trafficking and slavery and section 54 of the Act includes a provision for commercial organisations to prepare a slavery and human trafficking statement each financial year stating the steps they have taken to ensure their business and supply chains are slavery free (the "Statement"). The Act came into force in July 2015 and section 54 came into force on 29 October 2015. The government has provided guidance for many organisations that are subject to the Act - Transparency in Supply Chains etc. A practical guide.
Will section 54 apply to you?
Section 54 applies to commercial organisations which:
- supply goods or services; and
- have a global turnover of £36 million or more; and
- carry on business in the UK.
Commercial organisation in this context 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.
When do we need to make the Statement?
The transitional provisions provide that organisations with a year end of 31 March 2016 will be the first organisations required to publish a Statement covering the current financial year. The guidance sets an expectation that organisations should publish their Statement as soon as reasonably practicable and are encouraged to do so within six months of the end of the financial year.
What needs to go into the slavery and human trafficking statement?
The Statement must include either a statement:
- Of the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains and in any part of its own business; or
- That the organisation has taken no such steps.
The Statement may include, amongst other things, information about:
- the organisation's policies in relation to slavery and human trafficking;
- the organisation's structure, business and its supply chains;
- the organisation's due diligence processes in relations to slavery and human trafficking in its business and supply chains;
- the organisation's training about slavery and human trafficking available to staff;
- the parts of the business and supply chains where there is a risk of slavery and human trafficking taking place; and
- the effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains.
What is slavery and human trafficking?
For the purposes of the Statement, slavery and human trafficking includes slavery, servitude, forced or compulsory labour and human trafficking where those activities would constitute an offence if they took place in the UK. We anticipate that these terms will be broadly interpreted and may have unintended consequences such as having an impact on the use of unpaid interns.
Who needs to approve the Statement?
The Act requires the Statement to be approved and signed by an appropriate senior person in the business. For a body corporate the Statement must be approved by the board of directors and signed by a director. Where the organisation is a limited partnership it must be approved by the members and signed by a designated member. For a limited partnership, registered under the Limited Partnerships Act 1907, a general partner must sign it and if the organisation is any other kind of partnership a partner must sign it.
Where should the slavery and human trafficking statement be disclosed?
If the organisation has a website, it must publish the Statement on that website and include a link to the Statement in a prominent place on its homepage. If the organisation does not have a website, it must provide a copy of the Statement to anyone who makes a written request for one within 30 days from the date the request is received.
What if we don’t want to?
There is no fine for failing to comply with the reporting requirement. Rather, the Secretary of State may enforce the reporting requirement by seeking an injunction in the English courts to compel the organisation to issue a Statement. If the organisation fails to comply with the injunction, they will be in contempt of court which is punishable by an unlimited fine. The government has indicated that it expects pressure from civil societies, shareholders and competitors to encourage organisations to implement the reporting requirement.
What should businesses be doing to prepare?
Some companies, including UK quoted companies in their strategic reports and some entities with a US presence, will already report on human rights and slavery issues and the effectiveness of any company policies on these issues. They may therefore already be in a position to comply with the new duty. Irrespective of when a company's first Statement is due, the guidance states clearly that organisations caught by the Act must start to set in motion the measures to ensure compliance from October 2015. Organisations should be thinking about:
- mapping supply chains by identifying suppliers and contractors and where they operate;
- identifying who within their organisation will be responsible for compliance;
- identifying those areas of their business where the risk of modern slavery is the greatest;
- what staff training will be needed for those employees involved in procurement and supply chain management and for staff more generally and how this might be provided;
- whether contracts with suppliers and contractors ought to include appropriate provisions regarding their own procedures.
Stephenson Harwood has a breadth of experience across its core practice areas that can assist organisations in compliance with the Act.