Modern Slavery

Articles Written by Samantha Daly (Partner), Lara Douvartzidis (Associate)
Image of a rusty chain.

At its simplest, modern slavery is any instance of slavery, servitude or forced labour to exploit children or other persons which may occur in the supply chains or internal operations of government, non-government agencies or commercial organisations. It can also include actions such as deceptive recruiting for labour or services. Under the NSW and Modern Slavery Acts it also includes any conduct which constitutes a ‘modern slavery offence’ within other existing criminal law regimes.

Modern slavery is a significant problem on both a global and local scale. It is estimated that over 40 million people globally are victims of modern slavery practices. Of that, around 24 million people are located in the Asia Pacific region.

Australia is estimated to have at least 15,000 people in modern slavery conditions, the majority of which are from Australian supply chains linked to the Asia Pacific region. This number is an estimate only – modern slavery practices within supply chains are often underreported, particularly in relation to deceptive recruitment and forced labour in regional Australia. For example, in early November 2021 many Pacific Island workers have threatened a class action against labour hire companies for alleged wage theft and ‘slave labour’, with over 1,200 people absconding from their work post citing ‘slave like conditions’.

The Modern Slavery Act 2018 (Cth) (Modern Slavery Act) commenced operation 1 January 2019 and applies to entities based or operating in Australia with an annual consolidated revenue of more than $100 million. The relevant reporting period is the first Australian or international financial year after this date (e.g. 1 July 2019 – 30 June 2020 or 1 October 2019 – 30 September 2020). The modern slavery statement must be submitted within six months after the relevant reporting period. The term entity includes any of the following:

  • an individual
  • a body corporate
  • a body politic
  • a partnership
  • any other unincorporated association or body of persons
  • a trust
  • a superannuation fund
  • an approved deposit fund

If the Modern Slavery Act applies to an entity, the entity is required to submit a Modern Slavery Statement via the Australian Government’s Online Register of Modern Slavery Statements, available at www.modernslaveryregister.gov.au. This Online Register is administered by the Australian Border Force, which sits within the Department of Home Affairs. The entity must submit the modern slavery statement within six months after the end of the reporting period and must submit it to the relevant Minister so that it may be added to the Federal Modern Slavery Statements Register.

Section 16 of the Modern Slavery Act contains seven mandatory criteria which the reporting entity must address:

1.     identify the reporting entity;

2.     describe the structure, operations and supply chains of the reporting entity;

3.     describe the risks of modern slavery practices in the operations and supply chains of the reporting entity, and any entities that the reporting entity owns or controls;

4.     describe the actions taken by the reporting entity and any entity that the reporting entity owns or controls, to assess and address those risks, including due diligence and remediation processes;

5.     describe how the reporting entity assesses the effectiveness of such actions;

6.     describe the process of consultation with:

  • any entities that the reporting entity owns or controls;
  • in the case of a reporting entity covered by a statement under section 14—the entity giving the statement; and

7.     include any other information that the reporting entity, or the entity giving the statement, considers relevant.

Note that for the purpose of the Modern Slavery Act, actions taken by the reporting entity may include the development of policies and processes to address modern slavery risks, and the provision of training for staff about modern slavery.

Under the Modern Slavery Act, the Minister has the power to issue a written request if an entity fails to prepare a modern slavery statement within the reporting period. The failure to respond to the request does not attract a penalty, however the Minister has the power to “name and shame” the entity and provide details of its non-compliance to the public, creating a significant risk in terms of reputational damage globally.

It is clear that in addition to the examination of existing modern slavery risks in supply chains, reporting entities should also consider the impacts of its supply chains due to COVID-19, as it may have caused an increase in human rights violations and instances of modern slavery due to pressures of resourcing various industries that may have operated, or are still operating, in flux. For businesses that have been impacted by COVID-19, the Australian Border Force has developed a guidance tool to assist when reporting under the Modern Slavery Act, outlining “key actions entities can take to reduce the risk of vulnerable workers in their operations and supply chains becoming exposed to modern slavery as a result of COVID‑19.

First round of reporting in 2021 – trends and numbers

The end of the FY21 marked the end of the first full cycle of reporting the Modern Slavery Act. The first cycle of reporting saw over 2,500 Modern Slavery Statements being published on the Modern Slavery Registry. The Modern Slavery Registry allows for the public and businesses alike to see how reporting entities are combatting modern slavery in its supply chains. The publication also demonstrates that there are commonalities amongst businesses and reminds us of the tangible outcomes of failing to report modern slavery risks.

Crunching the numbers

At the time of writing there are 2,727 Statements currently available on the Registry which includes 2,391 mandatory statements and 336 voluntary statements. The mandatory statements were lodged by reporting entities caught by the definition of having an annual consolidated revenue of AUD$100 million, and includes major corporations such as Wesfarmers and Coles Group. The voluntary statements were lodged by companies that are not required to publish a statement but have done so to demonstrate their commitment to address modern slavery, a move that can be considered as market leading or best practice. The statements report on 5,550 entities and have entities headquartered across 41 countries. The interest in the reporting entities modern slavery risks is high, with over 480,000 searches performed on the Registry.

Commonalities

The Statements vary widely in the depth of detail provided and length. Despite the range of responses, there are commonalities in the risks and actions taken to combat modern slavery in the reporting entities supply chains.

One clear observation is that the majority of entities have only recently mapped its supply chain and undertaken modern slavery risk assessments. This commonality demonstrates how many entities are only now, as part of the compliance process, considering the real risks of modern slavery in supply chains and business operations. The large amount of entities mapping their supply chains and operations for the first time also display the wide range of approaches of where to start with assessing for risks and how far down the supply chain entities should go. The vastly different approaches across reporting entities highlights the lack of guidance in the Act and from ABF on how far entities should go when mapping their supply chains for modern slavery risks, particularly in circumstances where “supply chain” is not defined under the Act.

Common actions taken to combat or address modern slavery risks include:

  • implementing grievance mechanisms in their supply chains and operations;
  • undertaking modern slavery risk training for its employees;
  • incorporating modern slavery clauses into contracts; and
  • completing due diligence procedure such as requiring suppliers to complete questionnaires.

A very positive trend that is demonstrated across the reports is the collaboration between different sectors of entities to produce one cohesive report. Entities operating in many different sectors have made a concerted effort to have sector informed modern slavery risk assessment across its diverse supply chains. Positive examples of collaboration can be seen in entities forming working groups with representatives from each sector to map, assess and report as a group.  

The  Australasian Centre for Corporate Responsibility (ACCR) June 2021 report identified methods for entities to improve Statements, including:

  • engaging with impacted stakeholders and representatives to collaborate externally as well as internally;
  • focusing on practical training and knowledge for employees;
  • disclosing locations of suppliers and listing those suppliers operating in high risk sectors; and
  • detailing the actions they are taking to address modern slavery risks and how they are tailored to that entities’ risks.

With the first round of reporting over, entities will be expected to critically review current internal frameworks designed to assess and address modern slavery risks within its business operations and report on progress in their next statement.

Future focus of ABF

The Australian Border Force’s (ABF) focus is squarely on the second round of reporting. The ABF identified two key areas of failure in its review of the first round of reporting, being:

  • technical failures:  The ABF reported that the Act’s technical signing requirements were interpreted differently and many entities did not meet the technical requirements of the Act.
  • substantive failures: the substantive requirements of describing the consultation process and effectiveness of the entities actions to combat modern slavery risks were not uniformly met.

The ABF stated that they are looking for entities to not only actively address the technical and mandatory criteria but to go further by:

  • increasing the sophistication of Statements;
  • collaborating across entities and sectors both internally and externally; and
  • improving supplier engagement by actively engaging with suppliers beyond questionnaires;
  • focusing on global supply chain and including onshore operations; and
  • identifying the effectiveness of the entities actions to combat modern slavery since the first reporting period.

The ABF have already taken action to remediate these areas of non-compliance by returning Statements to entities with letters outlining where the entity was non-compliant and how to remediate their non-compliance. The ABF have also released further guidance material that gives more in depth guidance on complying the mandatory criteria on the Act. The new guidance material also goes further to give entities explanations of what the ABF considers good practice beyond box ticking compliance. Finally, the ABF are preparing an annexure that entities can use to guide how they can comply with the mandatory criteria. The ABF have also commented that the annexure can be included as an addition to the entities Statement.

It the next reporting cycle it is likely that the ABF will expect reporting entities to address and take meaningful action against modern slavery, beyond mandatory reporting, and to engage with the wider community on how key goods such as cotton may be picked by forced labour and how that cotton, tainted by human rights abuses, is then used in leading brand supply chains.

Modern slavery in NSW: A separate act

On 17 November 2021 the NSW Parliament passed the Modern Slavery Amendment Act 2021 (NSW) (2021 MS Act), which amended the Modern Slavery Act 2018 (NSW) (2018 MS Act) as previously passed in 2018 and tabled by parliament. The 2018 MS Act was never given a commencement date.

The Amendment Act commenced on 1 January 2022. The 2021 Act made a number of significant amendments. Whilst there is still an Anti-Slavery Commissioner with minor amendments made to provisions relating to their cooperation with other agencies and preparation of reports, there is no longer a penalty provision dealing with the maximum monetary penalty for an offence under s 33(2). Importantly, s 24 (relating to transparency of supply chain) and s 29 (enabling courts to make certain post-conviction orders relating to modern slavery offences) have been repealed.

For corporates, the 2021 MS Act means that the NSW regime is only tangentially relevant in the sense that a company’s value chain may include supplies and goods sourced in NSW from government (that may be the subject of reporting), and therefore the company can be provided with the modern slavery statement to understand their own supply chain better in order to report under the federal Modern Slavery Act. Also, corporations will not get the benefit from the Anti-Slavery Commissioner actively investigating modern slavery issues, so modern slavery issues in procurement and supply chains may not be discovered in Australia as efficiently.

While the 2018 MS Act would have meant companies caught between the bracket of $50 - $100 million in revenue would have been made to report, that section has been repealed such that a company’s value chain will benefit from the knowledge but corporations do not have to lodge a statement.

Finally, corporate should note that one of the amendments stipulates that the Minister must review the Act within 12 months, so it is likely that the 2021 MS Act will be the subject of future law reform next year to reintroduce provisions that were recently removed.

Moving towards transparency: Proposed law to ban import of goods produced by forced labour

On 23 August 2021, the Senate passed the Customs Amendment (Banning Goods Produced By Forced Labour) Bill 2021 (Bill) that proposes to ban anyone from importing goods made using forced labour. The Bill is currently before the House of Representatives. It is yet to be passed but may become law in the future.

The Bill would amend the Customs Act to prohibit the import of goods produced or manufactured, in whole or in part, through use of forced labour regardless of their origin. This means that imported goods could be held at the Australian border where there is suspected forced labour. The import of goods produced by forced labour will be subject to the same penalties that apply to other prohibited imports. The Bill defines the use of forced labour by reference to s 270.6 of the Criminal Code Act 1995 (Cth) definition of forced labour as:

the condition of a person (the victim) who provides labour or services if, because of the use of coercion, threat or deception, a reasonable person in the position of the victim would not consider himself or herself to be free: to cease providing the labour or services; or to leave the place or area where the victim provides the labour or services.

The Bill, as introduced by Senator Rex Patrick, was in direct response to the concerning reports of genocide in Xinjiang against the Uyghur peoples – where 20% of the world’s cotton is produced. There are well documented reports from human rights groups that the cotton produced in Xinjiang is being picked using forced labour as part of a growing push to arbitrarily detain Uyghur in “re education” camps and exploit them as a captive labour force. Aside from cotton, the Australian Strategic Policy Institute (ASPI) estimated that in 2020, at least 80,000 Uyghur detainees had been assigned to the following factories in China, including electronics, textiles and automotive industries. In his second reading speech dated 23 August 2021, Senator Patrick observed that:

ASPI identified 27 factories in nine Chinese provinces that are using Uyghur labour transferred from Xinjiang since 2017. Some 83 foreign and Chinese companies, allegedly, were directly or indirectly benefiting from the exploitation of Uyghur workers outside Xinjiang through abusive labour programs. Some of the international brands allegedly involved are very well known, including Apple, Esprit, Fila, Abercrombie & Fitch, Adidas, Amazon, BMW, The Gap, H&M, Marks & Spencer, Nike, North Face, Puma and Samsung.”

The Bill was also in part triggered by the recommendations made by the Senate Standing Committee on Foreign Affairs, Defence and Trade report released in June 2021. The Bill has also been endorsed by human rights activist and trade union groups who are calling on the Australian government to take meaningful action against slavery on an industrial scale, in step with the United States, United Kingdom and European Union. President Biden issued an executive order in January 2021 banning the importation of cotton and other products with its origins in Xinjiang, with the US Senate passing a bill in June 2021 banning the importation of all products from Xinjiang. Modern slavery laws are being introduced and bolstered across Europe.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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