Will Canada finally pass a law addressing the resort to modern slavery and child labour by commercial stakeholders and their supply chains?
On November 24, 2021, the Honorable Julie Miville-Dechêne, Senator, introduced a bill in the Senate to fight against the use of forced labor and child labor, in Canada and elsewhere, by companies doing business in Canada. Considering that Canada is a party to the Forced Labour Convention (No. 29) adopted in Geneva in 1930, the Abolition of Forced Labour Convention (No.105) adopted in Geneva in 1957 and the Worst Forms of Child Labor Convention (No.182) adopted in Geneva in 1999, to name just a few, some would conclude that the adoption of this bill is imminent.
However, Bill S-211 An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (“Bill S-211”) is the third version of a bill addressing modern slavery presented by Senator Miville-Dechêne. Her first two attempts, Bill S-211 An Act to enact the Modern Slavery Act and to amend the Customs Tariff and Bill S-216 An Act to enact the Modern Slavery Act and to amend the Customs Tariff, introduced on February 5, 2020 and October 29, 2020 respectively, did not complete the legislative process. This was also the case with Bill C-423 An Act respecting the fight against certain forms of modern slavery through the imposition of certain measures and amending the Customs Tariff introduced in the House of Commons by the Honorable John McKay on December 13, 2018, which was abandoned when Parliament was dissolved in the fall of 2019.
On December 14, 2021, Bill S-211 has successfully completed the second reading by the Senate and has been referred to the Standing Senate Committee on Human Rights for further consideration. This fourth attempt to pass modern slavery legislation may well be the one, thus marking the first step towards giving effect to Canada's international commitment to participate in the fight against forced labour and child labour around the world.
Bill S-211: An improved version of Canadian legislative attempts to fight modern slavery
Although similar to its previous versions, the text of Bill S-211 has been revised to better address certain realities overlooked by its prior versions.
First, its application was extended to distributors and federal government institutions. These important stakeholders in the Canadian market cannot be exempted from efforts to combat modern forms of slavery without substantially reducing their practical impact. This was highlighted in recent forced labour allegations made against Supermax Inc., a supplier of Supermax Healthcare Canada Group, to which the federal government awarded a $220 million contract for the purchase of disposable gloves in 2020.
Second, the most recent version of the bill expands the scope of the information that must be disclosed in annual reports, thus taking into consideration the overall business reality of companies doing business in Canada, whose operations include, most of the time, recourse to supply chains. If Bill S-211 is passed, it will undoubtedly force reporting entities to reflect further on the practices of their supply chains and their own actions against the use of forced labour and child labour within their business and their supply chains.
Finally, although further clarification would be welcome, the changes made to the definition of “child labor” will allow for a more practical and digestible interpretation for reporting entities. The definition set out in previous versions included work provided or offered to be provided abroad by individuals under the age of 18 in circumstances that would be contrary to applicable law in Canada if provided or offered to be provided within its territory. Defined in this way, the law would have left some uncertainty surrounding the minimum standards required in terms of acceptable working conditions for individuals under 18 of age abroad and would have potentially led to conclusions that were not adapted to the various foreign realities.
The revised definition reads as follows:
child labour means labour or services provided or offered to be provided by persons under the age of 18 years and that
(a) are provided or offered to be provided in Canada under circumstances that are contrary to the laws applicable in Canada;
(b) are provided or offered to be provided under circumstances that are mentally, physically, socially or morally dangerous to them;
(c) interfere with their schooling by depriving them of the opportunity to attend school, obliging them to leave school prematurely or requiring them to attempt to combine school attendance with excessively long and heavy work; or
(d) constitute the worst forms of child labour as defined in article 3 of the Worst Forms of Child Labour Convention, 1999, adopted at Geneva on June 17, 1999.
Bill S-211: an overview
There are currently two main approaches taken in modern anti-slavery legislation adopted around the world: (a) those imposing due diligence obligations on companies, as is the case with laws adopted in France, the Netherlands and Germany; and (b) those that focus on transparency in the operations of companies and their supply chains by providing for periodic reporting obligations, as is the case with laws enacted by the United Kingdom, Australia and California. Bill S-211 is aligned with the latter approach.
Scope of Bill S-211
The legislation as proposed will apply to private corporate entities (i.e. corporation, trust, partnerships and other unincorporated organizations) who produce, sell or distribute goods in Canada or abroad, or who import goods into Canada produced abroad, and to entities who control such entities, directly or indirectly, when these entities meet one of the following three criteria:
- are listed on a Canadian stock exchange;
- have an establishment in Canada, carry on activities or own assets there and, during their last two financial years, have met at least two of the following criteria:
- have assets of at least $20 million;
- generated income of at least $40 million; and
- employ an average of at least 250 employees.
- are designated by regulation.
In addition, Bill S-211 will apply to federal government institutions that produce, purchase or distribute goods in Canada or elsewhere.
Annual reports
If Bill S-211 is passed, the entities subject to its application will be required to file an annual report with the Minister of Public Safety and Emergency Preparedness, which will be made available to the public in an online registry maintained by the Minister, as well as through a prominent publication on their website. In the case of federally incorporated entities, they will also be required to provide a copy of the report with their annual financial statements.
In addition to information concerning its structure, its commercial activities, and those of its supply chains, reporting entities must include in their annual report information concerning the policies and due diligence mechanisms put in place to avoid any resort to forced and child labour, as well as any measures taken to remedy such resort. Reporting entities will also have to disclose the steps taken to identify and assess the risks of resorting to forced and child labour that may affect certain parts of their business and supply chains, as well as the risks thus identified, if any.
Finally, the training on forced child labour given to their employees, as well as the methods used to assess their efforts to combat modern slavery within their operations and those of their supply chains should be disclosed in the annual report.
It is interesting to note that Bill S-211 allows reporting entities to comply with their annual obligations by filing a joint report on several reporting entities.
Powers of the Minister under Bill S-211
Bill S-211 gives designated persons broad investigative powers, including the power to enter the premises of a reporting entity, examine everything in the place, use any means of communication and any computer systems therein, to examine and reproduce their data, as well as to take pictures and make recordings. Bill S-211 also empowers the Minister to order a reporting entity to take any corrective action it considers necessary to bring it into compliance with the law.
Punishments
Reporting entities who fail to comply with the provisions of Bill S-211 or who knowingly make a false or misleading statement may be subject to fines of up to $250,000. In addition, the directors, agents, mandataries or officers of the offending entity may be held liable if they ordered or authorized the infringement or consented to or participated in it.
Conclusion
If Canada enacts Senator Miville-Dechêne’s bill in the next year, it may be necessary for companies subject to it to comply with its provisions as soon as January 1st, 2023. They will thus have to develop and implement the tools necessary to identify their risks, and, for those who wish, the relevant policies and processes to prevent and remedy the use of modern forms of slavery within their operations. Many of these policies can be integrated into a company’s existing compliance program, in particular by reassessing the scope of their third party business partner due diligence processes to ensure it captures all entities in the company’s supply chain.
In any case, organizations in the Canadian market should remain particularly aware of new developments related to human rights and corporate governance. The pressure on Canada to catch up on this important issue continues to grow, both politically and judicially – taking for example the court decision Nevsun Resources Ltd. v. Araya, 2020 CSC 5 – and internationally.
Our seasoned team of lawyers with proven expertise in corporate governance and corporate ethics and compliance are available to help you navigate the new anti-modern slavery requirement and develop the tools to comply with them.
