Canada passes first bill against modern slavery

After five attempts in as many years, Canada has passed its first bill to combat modern slavery: 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 (the “Act”). The Act comes into force on January 1, 2024, and requires that certain companies submit their first report identifying the risks of modern slavery within their supply chain no later than May 31, 2024. 

Who is required to report annually?

The scope of the Act is broad: it captures most companies that do business in Canada which produce, sell or distribute goods in Canada or abroad.

First, the Act applies to “entities”, which are defined to include entities listed on a Canadian stock exchange, have a place of business in Canada, do business in Canada or have assets in Canada. For companies not listed in Canada, they are only deemed to be “entities” if they also meet at least two of the following three criteria based on their consolidated financial statements over the last two financial years:

• The entity has at least $20 million in assets;
• The entity generates at least $40 million in revenue;
• The entity employs an average of at least 250 employees.

Entities that control these enterprises must also comply with the requirements of the Act.

Second, the Act applies to “entities” which produce, sell or distribute goods, either in Canada or abroad. It also applies to “entities” that import goods into Canada that are produced outside of Canada. Entities dealing in goods, either in Canada or abroad, will also be subject to the Act.

The Act, as currently drafted, does not specify whether the three criteria above must be assessed in light of the Canadian activities of the business or globally. Given the severe penalties that may apply in the event of non-compliance, it would be prudent for businesses to consider their aggregate assets, revenues or headcount when evaluating the criteria and take the necessary measures to closely review the requirements of the Act as they apply to their entire organization.

What must reporting entities do to comply with their new obligations?

The reporting entities must submit and publish an annual report that must identify the risks of modern slavery within their supply chains and the steps taken to mitigate them. This will also include details as to the following:

• their business structure
• relevant due diligence policies and processes
• training provided to employees
• steps taken to address any use of modern slavery
• measures taken to remediate the loss of income to the most vulnerable families that may be affected by those steps taken to eliminate the use of modern slavery.

The annual report, approved by the organization’s governing body, should also describe how the organization assesses the effectiveness of its efforts to avoid the use of modern slavery in its operations and supply chains. For more information on the obligations created by the Act, we invite you to consult our article “Canada on the verge of enacting legislation against modern slavery in global supply chains”.

The new disclosure requirements are significant. In order to avoid the risk of hefty penalties (up to $250,000 per violation) for non-compliance or the reputational risk associated with inadequate disclosure, it is necessary for reporting entities to act quickly.

There are a number of measures, procedures, mechanisms and tools that companies can put in place to identify the risks of use of modern slavery in their operations and increase their oversight on their supply chains, as well as to combat and remedy the use of modern slavery. In collaboration with DLA Piper’s UK and Australian offices, our Canadian team will soon be offering a webinar discussing the new obligations established in the Act and the steps companies can take to comply with them.