Are far-reaching changes to the Modern Slavery Act on the horizon?
The government has recently launched a consultation on proposed changes to the transparency supply provisions in the Modern Slavery Act 2015 (the "Act").
Background
Under section 54 of the Act, certain organisations must publish an annual statement setting out the steps they have taken during the last financial year to ensure that slavery and human trafficking is not taking place in their own business and in their supply chains.
Currently, an organisation is required to publish a statement if it meets all of the following criteria:
- it is a ‘body corporate’ or a partnership, wherever incorporated or formed;
- it carries on a business, or part of a business, in the UK;
- it supplies goods or services; and
- it has an annual turnover (including the turnover of its subsidiaries) of £36 million or more.
As section 54 currently stands, the only mandatory disclosure required is the statement setting out the steps the organisation has taken during the financial year to eliminate slavery and human trafficking from its business and supply chains (or a statement that no such steps have been taken). There are no other mandatory content requirements for the statement. While section 54 includes suggestions for additional content which an organisation "may" wish to include, and government guidance states that organisations should "aim" to include this information in the statement, this is not a legal requirement.
Organisations must publish their annual statement on their website via a prominent link on their homepage, or, if they do not have a website, a written copy must be provided within 30 days to anyone who makes a request for one. Statements must also be approved by the board of directors (or the equivalent in the case of a partnership or LLP) and signed by a director, or equivalent. The Home Office expects organisations to publish their annual statement within six months of their financial year end.
What does the consultation say?
In 2018, the government commissioned an Independent Review of the Act to explore four core themes, including how the transparency measures have worked and whether they can be strengthened or implemented differently. The Independent Review's final report was published in May of this year making extensive findings and recommendations in respect of the Act's provisions on transparency in supply chains.
In light of the review, the government has recently launched its "Transparency in supply chains" consultation which closes on 17 September 2019. The core message is that the government is committed to strengthening section 54 and ensuring that the transparency requirements and reporting process are as clear and straightforward as possible.
The key proposals are:
- Increasing the statement's content: One proposal is to make reporting on specific topics compulsory. Currently the way in which organisations prepare their statements varies so much that it difficult to compare and benchmark statements. To retain adequate flexibility, organisations would be permitted to omit topics provided they justify why they have not reported on those specific criteria. To minimise the time spent by multinational organisations meeting different reporting requirements, reporting areas may be aligned with reporting requirements in other jurisdictions.
- Enhancing transparency and compliance: In order to increase the accessibility of statements and to improve scrutiny and comparison, the government is proposing to create an online registry on which statements must be published. The government has also suggested the introduction of a single reporting deadline by which all organisations must publish their statement each year. This would be aimed at bringing clarity and facilitating increased scrutiny and engagement. It would also enable the Home Office to provide more timely and targeted support to organisations which have failed to comply or have published statements which could be improved upon.
- More effective enforcement: One possible option set out in the consultation is to introduce a variable monetary penalty which could be capped. The Home Office would send warning letters providing opportunities to ensure compliance ahead of taking formal enforcement action. These changes would not come into force until a minimum of one year after other potential changes to the transparency reporting requirements to allow organisations sufficient time to ensure compliance.
- Including public sector supply chains: The Government has committed that from 2020/2021 onwards individual ministerial departments will publish their own statements. The Government proposes to extend reporting requirements to capture public bodies not already in scope of the Act which have a budget of £36 million or more.
Any changes to the Act will be phased in and the government intends to take a proportionate approach to enforcement and compliance. The aim is to create the right incentives and support for organisations to identify and address modern slavery risks, strengthen their approach over time, and effectively safeguard vulnerable workers in their operations and supply chains.
Are there any other changes in the pipeline?
The Modern Slavery (Transparency in Supply Chains) Bill (the "Bill") is currently going through the UK Parliament. This is a private members' bill which also seeks to address some of the identified areas of weakness of section 54 of the Act and, to some extent, overlaps with the government's proposals. If passed, the Bill would:
- expand the scope of the Act so that its requirements would apply to every public authority in addition to commercial organisations which fall within the scope of the Act;
- require any organisation which publishes a statement saying that no steps have been taken to combat slavery and human trafficking to explain the reasons why no such steps have been taken;
- state that the six categories of information which currently organisations should "aim" to include in their statement instead "must" be included in their statement;
- require the Secretary of State to publish a list (in a place and format that is easily accessible) of all organisations that are required to publish a statement and categorise that list according to sector; and
- restrict businesses that have not met their obligations to publish a modern slavery statement from being awarded certain government or public authority contracts.
It should also be noted that the Department for Business, Energy and Industrial Strategy and the Home Office have issued a joint consultation on establishing a single enforcement body for employment rights. Labour exploitation and modern slavery could form part of the core remit of this body. The body could also be responsible for enforcing minimum wage, safeguarding agency workers and enforcing holiday pay for vulnerable workers as well as other areas such as discrimination, harassment and bullying. The consultation closes on 6 October 2019.
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