09 Nov 2015

Modern Slavery Act 2015 – s.54 in force and long-awaited guidance provided

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We reported in the summer of this year on the wide-ranging and far-reaching requirement for certain commercial organisations to publish a slavery and human trafficking statement, for each financial year of the organisation, setting out the steps it has taken to ensure that slavery and human trafficking is not taking place in its supply chains or own business, or state that the organisation has taken no such steps (a "Statement"). As of 29 October 2015, this requirement (under s.54 of the Modern Slavery Act 2015 (the "Act")) is now in force and the government has provided much needed additional guidance for the many organisations that fall subject to the Act.

What's new?

It has been well known since August that the Act will apply to commercial organisations in any sector who (i) supply goods or services; (ii) have an annual turnover of £36m or more; and (iii) carry on a business, or part of a business, in the UK. On 30 October 2015, the Home Office published the long-awaited Transparency in Supply Chains etc. A practical guide. The guidance goes some way to clarifying the expectations on commercial organisations caught by the Act. Below is a summary of some of the key provisions: 

  • The Government has not been prescriptive about the layout or specific content of a Statement. That said, it is clear that the Home Office has paid attention to the clamour for clarity as it has detailed, in Annex E of the guidance, the information that can be expected from a Statement.
  • "Turnover" is to be the amount derived from the provision of goods and services falling within the ordinary activities of the commercial organisation or subsidiary undertaking, after deduction of certain trade discounts and tax.
  • Turnover is to be calculated as including turnover of any of its subsidiaries, regardless of where those subsidiaries are based or carry on their business.
  • If a number of subsidiaries within a group meet the requirement to publish a Statement, as well as the parent company, the parent may produce one statement for those subsidiaries to use to meet the requirement, provided that the statement fully covers the steps that each of the organisations required to produce a Statement have taken in the relevant financial year. Alternatively, if a number of subsidiaries fall within the requirement, they can produce an individual Statement covering their activities only.
  • The courts will be the final arbiter as to whether an organisation 'carries on a business' in the UK. In any case, a 'common sense approach' will be applied.

When?

Transitional provisions are in place to accommodate the varying year-ends within commercial organisations. Businesses with a year-end of 31 March 2016 will be the first businesses required to publish a Statement covering that financial year. A business with a 31 March 2016 year-end may have already started to undertake relevant activities to comply with the Act prior to October 2015, which of course should be reflected in their first Statement. For those companies that have started to comply with the requirement from October 2015, it is sufficient for the company to only detail the activities from October 2015 to March 2016.

The guidance sets an expectation that commercial organisations should publish their Statement as soon as is reasonably practicable, and in any case within six months of the end of the financial year.

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. The guidance provides a number of helpful suggestions on how the Statement should be shaped, and the steps that can be taken in order to ensure compliance, such as recommending that organisations: conduct a supply chain audit to identify high-risk geographies and sectors; establish a modern slavery policy; examine internal business procedures to ensure that internal practices do not encourage behaviour that is caught by the Act; promote suitable KPIs and not those that may unintentionally increase pressure on those who supply goods or services; and how best to implement training.

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Tony Woodcock

Tony Woodcock
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