Legal development

Modern slavery enforcement watchdog announced

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    The Department for Business, Energy & Industrial Strategy ("BEIS") has confirmed, in a response to a consultation carried out in 2019, that it will be creating a workers' rights watchdog – a single enforcement body responsible for combatting modern slavery, enforcing employment rights and protecting agency workers.

    The creation of the new body was announced as part of the Government's delayed response to a consultation published in July 2019 ("Good Work Plan: establishing a new single enforcement body for employment rights"), which was published last week (the "Response Paper"). This is important news for companies operating in the UK, that have been seeing an increase this year in outbound communications from the Home Office about modern slavery enforcement, and have been waiting to hear about when modern slavery compliance requirements will be stepped up.

    Prevention of modern slavery

    At present, under section 54 of the Modern Slavery Act 2015 (the "Act"), businesses operating in the UK with a turnover higher than a prescribed level must publish an annual slavery and human trafficking statement. The only mandatory disclosure is the statement setting out the steps the organisation has taken during the last financial year to eliminate slavery and human trafficking from its business and supply chains – or a statement that no such steps have been taken – which must be approved by the board of directors and published on the homepage of the company's website. The Home Office expects organisations to publish their annual statement within six months of their financial year end.

    However, at present the Government has little in the way of powers to enforce the requirements under the Act – the only means is to seek an injunction in the High Court requiring a company to comply.

    In September 2020, in response to a 2019 consultation on the Act, BEIS indicated its commitment to strengthening enforcement and set out a number of proposed reforms to achieve this. Among other changes intended to clarify and enhance reporting requirements under the Act, the government stated that it would:

    • consider the introduction of a new single enforcement body for employment rights; and
    • create an online registry on which organisations would be encouraged to publish their modern slavery statements before the legislation is in place to make it mandatory.

    At present, the online registry is operational and organisations are encouraged, but not required, to published their statements.

    See here for our briefing on the scope of the requirement to publish a modern slavery statement under the Act and the government's proposed reforms.

    The Response Paper

    BEIS has now outlined the following key changes for businesses:

    A single enforcement body

    The creation of a workers' rights watchdog will bring HMRC National Minimum Wage Enforcement, the Gangmasters and Labour Abuse Authority, and the Employment Agency Standards Inspectorate under a single umbrella enforcement body.

    The purpose of this is to create what has been described by the government as a "one-stop shop" – a well-recognised body for individuals to appeal to for help. It will also enable processes to be streamlined through intelligence sharing, better use of resources and the ability to coordinate multi-faceted enforcement actions.

    Among other things, this new enforcement body will be responsible for:

    • enforcing transparency in supply chains;
    • enforcing modern slavery statement reporting;
    • enforcing holiday pay for vulnerable workers; and
    • regulating umbrella companies.

    Guidance will be provided to help businesses understand and comply with the new rules.

    New enforcement powers

    The new enforcement body will have the power to impose:

    • financial penalties for non-compliance with modern slavery statement reporting; and
    • civil penalties for any breaches under the gangmasters licensing and employment agency standards regimes resulting in wage arrears.

    The government also intends to extend the 'naming scheme' to cover the areas which now are covered by civil penalties. It hopes that this will act as an effective deterrent to force employers to pay employees statutory sick and holiday pay.

    Enforcement powers: transparency in supply chains and modern slavery

    The Response Paper confirmed that the new enforcement body will have the power to impose financial penalties on organisations that fail to comply with their statutory obligations under the Act.

    Interestingly, the government has said that the Home Office will continue to monitor and oversee the online modern slavery statement register, which will in turn be used to highlight organisations that have fallen short of their statutory reporting requirements. This is despite the fact that use of the register is voluntary, not obligatory: companies are not currently required to publish their modern slavery statements on the online registry. It will then fall to the new workers' watchdog to step in and impose financial penalties. 

    What happens next

    The timeline for the creation of the enforcement body is not yet known. It will be subject to government approval and the creation of primary legislation "when parliamentary time allows".

    Are there any other changes in the pipeline?

    There has been no indication yet of when the government intends to implement the reforms set out in September 2020 in relation to the Act. Given the government's plan to use the online registry for modern slavery statements as a means to monitor organisations' adherence to the Act, we anticipate legislation which will make use of the online registry mandatory. Without such a change, monitoring of the registry will be a blunt enforcement tool. Such a legislative change would be significant, because it would require businesses to disclose publicly more information that the Act currently requires. We await further announcements in relation to these anticipated changes.

    Authors: Ruby Hamid, Ruth Buchanan and Catherine Lillycrop.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.

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