Far-reaching changes to the Modern Slavery Act are on the horizon
The government has confirmed, in response to a consultation carried out last year, that it will be making significant changes to the transparency supply provisions in the Modern Slavery Act 2015 (the "Act"). There is no timeframe for these reforms as yet with the government stating only that it will introduce the necessary changes to the Act "when parliamentary time allows".
The current position
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 are the changes?
The government's core message is that it is committed to strengthening and future-proofing the transparency provisions of the Act and ensuring that both the transparency requirements and reporting process are as clear and straightforward as possible.
The key changes which the government intends to make are as follows:
- Increasing the statement's content: The government will amend the Act in order to mandate the areas that the statement must cover. If organisations have not taken steps within a specific area, then they must state this clearly and will be encouraged to provide reasons for the inaction. The existing voluntary areas will become mandatory. These cover:
- the organisation's structure, business and supply chains;
- its policies on slavery and human trafficking;
- its related due diligence processes;
- its related risk assessments;
- its effectiveness in ensuring there is no slavery or human trafficking in its business or supply chains; and
- related staff training.
The government is still considering how the statement reporting areas can be amended to incorporate some of the additional topics which were suggested through the consultation process. These included remediation, disclosure of instances of modern slavery and whistleblowing mechanisms. Updated guidance is promised in 2020 including best practice for reporting against the future required areas.
- Publication on a government registry: In order to increase the accessibility of statements and to improve scrutiny and comparison, the government will create an online registry on which statements must be published. Organisations will be encouraged to publish their statements on this new designated government registry website once it is launched and before the legislation is in place to make it mandatory.
- Single reporting deadline: Rather than reporting on activities undertaken during their financial year, all organisations will be required to report on the same 12-month period between 1 April and 31 March. There will then be a single reporting deadline of 30 September by which all organisations must publish their statement each year, giving them six months to prepare it. This amendment aims to bring clarity and to facilitate further scrutiny and engagement, including increased comparability between organisations. 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.
- Approval requirements: The government will also reinforce the approval and signature requirements for private sector statements by legally requiring that annual statements include the date of board (or equivalent) approval and the date of the director (or equivalent) sign-off. Additionally, group statements will be required to name the entities covered by each statement.
- More effective enforcement: Consultation responses on the nature and level of proposed civil penalties for non-compliance were varied. The government has said that it will consider enforcement options in line with the development of a new single enforcement body for employment rights and will issue a further update "in due course".
- Including public sector supply chains: The government will extend reporting requirements to capture public bodies not already within the scope of the Act and which have a budget of £36 million or more. Further proposals include permitting public bodies to publish group statements, and to require public sector statements to be signed off by the accounting officer, chief executive or equivalent role and approved by the senior management body, in order to bring about consistency with the private sector.
What happens now?
As mentioned above, the government does not provide any information on when these reforms will be progressed, except to state that legislative change will be introduced "when parliamentary time allows". The guidance promised before the end of the year will hopefully enable both commercial and public sector organisations to get a headstart in preparing for their new reporting obligations. Organisations should start to plan now for the systems and processes they will need to put in place to ensure future compliance. We would of course be willing to offer any assistance you might need with this.
Are there any other changes in the pipeline?
As alluded to above, in July 2019 the Department for Business, Energy and Industrial Strategy and the Home Office issued a joint consultation on establishing a single enforcement body for employment rights. Part of its remit could be labour exploitation and modern slavery. The body could also be responsible for enforcing the minimum wage, safeguarding agency workers and enforcing holiday pay for vulnerable workers, as well as other areas such as discrimination, harassment and bullying. We still await the government's response to the consultation which, it now seems, will also address the issue of enforcement options in relation to modern slavery statements.
Further information
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