What Australian businesses need to know about Canada’s new modern slavery law

Last month, Canada passed modern slavery laws focused specifically on forced labour and child labour. This comes in the context of an emerging global trend of new national modern slavery laws. In Australia, a statutory review of the Modern Slavery Act 2018 has been released and is being considered by the government. Canada’s approach is similar to transparency models used in Australia and the UK, as opposed to stronger due-diligence models adopted by France, Germany and the Netherlands.

The new laws have been years in the making, with the first version of the bill presented to parliament in 2018. The law was introduced into the Canadian senate in 2021 and, after receiving final parliamentary approval on 3 May 2023, the Fighting Against Forced Labour and Child Labour in Supply Chains Act—formerly known as Bill S-211—will take effect on 1 January 2024.

So what does this mean for businesses operating in Canada? And is there anything in Canada’s approach that Australian businesses and the government should note?

Canada’s new law imposes a reporting framework focused on forced labour and child labour. It places new reporting obligations on ‘government institutions producing, purchasing or distributing goods in Canada or elsewhere’ and ‘entities producing goods in Canada or elsewhere or in importing goods produced outside Canada’.

An entity is defined broadly as a corporation or a trust, partnership or other unincorporated organisation that is listed on a stock exchange in Canada, has a place of business in Canada, does business in Canada or has assets in Canada.

To be covered by the act, entities must meet at least two of three conditions for at least one of the two most recent financial years: having at least C$20 million in assets, generating at least C$40 million in revenue, and employing an average of at least 250 employees. Alternatively, they can be prescribed as entities by regulation.

Both government institutions and entities meeting these criteria will be required to report annually to Canada’s minister for public safety and emergency preparedness, outlining the steps taken over the previous financial year to ‘prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity’. The first reports are required to be filed by 31 May 2024.

The annual reports must disclose a range of information about the entity, including its structure, activities and supply chains; its policies and its due-diligence processes in relation to forced labour and child labour; and the parts of its business and supply chains that carry a risk of forced labour or child labour. Entities will have to report on what steps they have taken to assess and manage that risk, along with any measures taken to rectify any forced labour or child labour.

They will also have to outline measures taken to remedy loss of income to the most vulnerable families that results from any measures taken to eliminate the use of forced labour or child labour; the training provided to employees on forced labour and child labour; and how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

These reports will be publicly available in an electronic registry, mirroring Australia’s online register for modern slavery statements. A summary report is also required to be tabled in parliament each year by the minister.

Senator Julie Miville-Dechêne, who sponsored Bill S-211, described it as ‘a first step in the right direction’ and ‘a reasonable, pragmatic approach that will raise awareness of modern slavery in corporate boardrooms and can lead to positive change’.

Additional anti-slavery reform efforts are ongoing in Canada. For example, Bill S-224 aims to align trafficking-in-persons offences in Canada’s criminal code with the international definition outlined in the Palermo protocol.

Australia should consider whether and how this new law might impact its own ongoing reforms. Specifically, the statutory review of the Modern Slavery Act led by John McMillan, which was tabled in parliament last month, makes 30 recommendations to strengthen Australia’s legislation that are being considered by the government.

There are three key lessons that the government should draw from Canada’s new legislation as it considers the findings of the statutory review.

The first is the importance of stronger enforcement. The appointment of designated individuals to enforce the new Canadian law and the inclusion of extensive investigative powers will boost compliance and likely drive changes in business behaviour.

The second is the imposition of penalties for non-compliance. The legislation imposes a fine of up to C$250,000 on any person or entity that fails to comply with the law, knowingly makes a false or misleading statement, or provides false or misleading information. Australia’s Modern Slavery Act lacks any substantial method of enforcement for non-compliance and doesn’t impose any financial penalties.

The third is its scope. The Canadian legislation defines covered entities broadly to ensure that a wider range of companies—including offshore entities that otherwise meet the threshold requirements—are subject to reporting obligations. In addition, it places the revenue threshold for reporting at C$40 million, imposing obligations on smaller entities. That’s considerably lower than the threshold of A$100 million that applies under Australia’s law.

Australia’s statutory review recommends reducing reporting thresholds to A$50 million, recognising that ‘human rights abuses must be the concern of all businesses’, and says this change is needed to bring Australia in line with other countries. If Australia were to do this, consistent with the approach taken in Canada, it would expand reporting obligations to a greater range of entities and encourage all organisations to improve their practices with respect to modern slavery risks.

Finally, it’s important to consider the global context of both countries’ reform processes. The weakness of the new Canadian laws is that they’re based on a transparency model rather than the due-diligence models that are considered best practice. When the proposed Canadian legislation was considered by the International Justice and Human Rights Clinic’s Supply Chain Law Scorecard, it received the second lowest ranking of the 12 supply-chain laws assessed.

The only country that received a lower ranking was Australia, since its law contains just one of the six features listed as crucial to a strong supply-chain law—reporting requirements, due diligence requirements, enforcement mechanisms, remedies for victims, independent oversight and broad scope. Supply-chain laws from the Netherlands and the European Union were assessed as being the most robust. The statutory review of Australia’s law recommends the introduction of a due-diligence requirement like these countries, but it remains to be seen whether the government will accept the proposed reform.

Canada’s move to strengthen its modern slavery law is a welcome development, but it also highlights the importance of Australia continuing to improve its own frameworks. The statutory review gives the Australian government an important opportunity to do just that. As Professor McMillan observed in the review’s final report: ‘It will be unfortunate if Australia, having been at the forefront in this field, is seen to be lagging behind.’.