New Modern Slavery Reporting Obligations For Australian Entities.
Legal News & Analysis - Asia Pacific - Australia - Regulatory & Compliance
5 July, 2018
Federal Government Bill and NSW legislation introduce mandatory reporting on modern slavery risks and actions.
What you need to know
The Federal Government has introduced a Bill proposing to implement recommendations made in the final report of the Inquiry into Establishing a Modern Slavery Act in Australia.
Under the current terms of the Bill, all Australian entities or other entities carrying on business within Australia with annual consolidated revenue of more than $100 million will be required to report annually on the risks of modern slavery in their operations and supply chains and actions taken to address those risks.
Under the Bill, "modern slavery statements" will be freely available to the public online on a Government run register.
The Federal Government will also publish an annual consolidated modern slavery statement for all non-corporate Commonwealth Entities. Commonwealth corporations and companies will publish separate modern slavery statements if they meet the prescribed revenue threshold.
The Bill follows the Modern Slavery Act 2018 (NSW) that was assented to last week, which introduces a similar reporting scheme in New South Wales. The NSW legislation applies to corporations (including incorporated partnerships), and other associations or bodies, which have a total turnover in a financial year of at least $50 million.
What you need to do
Consider whether your entity will be covered by the new mandatory reporting regime in the Bill, and if not, whether it may be covered by the NSW regime.
If so, take steps to ensure the company or other entity will be able to comply with the new reporting regime. This could include reviewing existing company policies on anti-slavery, conducting an audit or due diligence on suppliers and supply contractors, taking any necessary steps to address any modern slavery risks identified and assessing the effectiveness of those steps.
Review and update Board procedures to address the compliance obligations under the new regime.
Why is this an issue now?
These developments follow the introduction of a similar scheme in the UK in 2015. Australian companies or partnerships carrying on business in the UK and meeting a prescribed revenue threshold are already required to publish a slavery and human trafficking statement. Differences between the UK and proposed Australian regimes include that:
- the Australian regimes will prescribe certain content that must be included in the statements, rather than a list of optional content; and
- under the Australian regimes the statements will be freely accessible online via public registers.
Entities that will be covered by both the UK and new Australian regimes will need to review their existing UK statement and consider whether it will meet the requirements of the new Australian regimes.
|Turnover/revenue threshold||$100 million consolidated revenue per financial year.||$50 million in turnover of entity per financial year (or as per regulations).|
|How often do statements need to be produced?||Each financial year.||Each financial year.|
|Information required in modern slavery statement||Information about the entity's structure, operations and supply chains, any risks of modern slavery in each, actions taken to assess and address those risks (including due diligence and remediation processes), and how the reporting entity assesses the effectiveness of those actions.||To be released in regulations, but expected to be similar to Federal regime.|
|Penalties for non compliance||None.||10,000 penalty units (currently $1,100,000).|
|Publication of modern slavery statements||Publically available online register.||The organisation must make the modern slavery statement publically available (in accordance with regulations).
A public register will also be kept.
Who will the regime apply to?
If the Bill is passed, the following entities will be required to comply with the mandatory reporting regime:
- all Australian entities, and entities carrying on business in Australia during a financial year, with consolidated revenue of at least $100 million for that financial year (being the total revenue of that reporting entity and any entities it controls where those entities are considered as a group under Australian Accounting Standards);
- the Commonwealth; and
- a corporate Commonwealth entity or a Commonwealth company with a consolidated revenue of at least $100 million for the year.
In addition, any Australian entity, or entity carrying on business in Australia, can volunteer to comply with the modern slavery reporting requirements.
"Australian entity" is defined broadly to include a wide range of Australian based entities including companies, partnerships and trusts that are Australian residents for tax purposes and any other partnerships or entities which are formed or incorporated within Australia or for which the central management and control of the entity is in Australia.
The NSW legislation applies to any corporation, incorporated partnership, association or other body which:
- has employees in NSW;
- supplies goods and services for profit or gain; and
- has a total turnover in a financial year of not less than $50 million (or such other amount as prescribed by regulations, which have not yet been released).
However, the NSW regime will not apply to an organisation that is subject to reporting obligations under a law of the Commonwealth or another State or Territory prescribed as a corresponding law. We expect that the Bill, if passed, will be prescribed as a corresponding law such that organisations required to comply with the federal reporting regime are not required to also report under the NSW regime.
What will you have to do?
Entities that are required to report under the Federal regime will need to provide a modern slavery statement with certain prescribed information as set out in the table above. The types of "modern slavery" that entities must report on is defined broadly to include all forms of trafficking in persons, slavery and slavery like practices, including servitude, forced labour, forced marriage, child labour, and instances of deceptive recruitment for labour and services, including where that conduct occurs in a foreign country by a foreign national.
It will be possible for a joint modern slavery statement to be submitted which covers more than one reporting entity, for example, reporting entities that are all within the same group.
Organisations covered by the NSW legislation will be required to prepare a modern slavery statement for each financial year of the organisation.
The mandatory content of the modern slavery statement will be set out in the regulations.
However, the legislation provides that the regulations may require a modern slavery statement to include information that essentially reflects that outlined above in respect of the proposed federal regime.
What else do you need to consider?
Where are the modern slavery statements kept?
Under the Federal regime, all modern slavery statements will be kept on an online register, accessible for free by the public.
The NSW legislation requires that organisations make the modern slavery statement publically available in accordance with the regulations. A public register will also be established.
What happens if you don't comply?
The current terms of the Bill do not include any oversight regime or enforcement mechanisms.
This is the primary recommendation that has not been adopted from the final report of the Inquiry into Establishing a Modern Slavery Act in Australia; the recommendation that the office of an Independent Anti Slavery Commissioner be created. Non-compliance could have significant reputational and goodwill impacts, particularly for large and well-known companies.
Conversely, the NSW regime includes penalties for non-compliance with the requirement to prepare a modern slavery statement, for failure to make the statement public in accordance with the regulations, and for provision of information that a person knows or ought reasonably to know is false or misleading. The NSW legislation also establishes an Anti-slavery Commissioner. Among other things, a function of the Anti slavery Commissioner will be to monitor reporting of modern slavery risks in supply chains.
Approval of modern slavery statements
Under the Federal Bill, each modern slavery statement must be approved by the principal governing body of the entity and signed by a responsible member of the entity. In the case of a company, this means that the modern slavery statement will need to be approved by the board of directors of the company and signed by a director.
There is no corresponding requirement in the NSW legislation.
The Bill was introduced to the House of Representatives on 28 June 2018. It has been referred to the Senate Legal and Constitutional Affairs Committee, which is expected to release its report by 24 August 2018.
The NSW legislation was assented to on 27 June 2018. It is to commence on a day to be appointed by proclamation.
For further information, please contact:
George Cooper, Partner, Ashurst