The Modern Slavery Act 2015 (the “Act”) became law in the UK on March 26, 2015 and came into force on October 29, 2015. Companies subject to the Act are now required to publish an anti-slavery statement as soon as possible (and within a maximum of six months) of the end of their financial year which falls on or after March 31, 2016.
What is the Modern Slavery Act?
The Act consolidates previous UK legislation tackling slavery, child labour, and human trafficking offences, and demands that organisations make public the steps they are taking to ensure that modern slavery offences are not taking place in either their business, or their supply chain.
Offences under the Act include:
- slavery, bonded, forced, or compulsory labour;
- human trafficking;
- criminal exploitation;
- sexual exploitation; and
- domestic servitude.
In part, the Act is a response to depressingly frequent headlines revealing the abhorrent abuse of adults and children conducted both close to home and in the hidden complexities of global supply chains.
In 2012, the UN’s International Labour Organization estimated that 21 million people were victims of forced labour around the world.
In 2013, working conditions in garment factories in South Asia were brought into sharp focus by the Rana Plaza tragedy. More than 1,300 people are reported to have died as a result of the collapse of Rana Plaza, a substandard and decaying building housing a number of Bangladeshi companies manufacturing garments for some of the world’s best-known clothing brands. Following this disaster, numerous reports of inhumane working conditions and the use of child labour in the garment industry in South Asia emerged.
In 2014, stories of fishing fleets’ extensive use of trafficked, bonded, and forced labourers in the Andaman sea started to make the headlines. Some fishing vessels were reported to be keeping labourers in cages during the infrequent stretches when they were allowed off the boats.
In 2015, Kevin Hyland, the UK’s first Independent Anti-Slavery Commissioner, reported that up to 13,000 people in Britain were forced to work as slaves. This statement followed an earlier warning by Theresa May, the UK Home Secretary, that slavery in Britain “is all around us. It is walking our streets, supplying shops and supermarkets, working in fields, factories or nail bars, trapped in brothels or cowering behind the curtains in an ordinary street.”
What other legislation targeting modern slavery exists?
There are similarities between the Act, the 2010 California Transparency in Supply Chains Act (CTSCA), and the 2000 U.S. Trafficking Victims Protection Act. There are also a multitude of laws and conventions aimed at tackling modern slavery offences through the 3P paradigm first outlined in the UN Palermo Protocol:
- Prosecute traffickers;
- Protect victims; and
- Prevent the crime through the implementation of national anti-trafficking laws.
The Modern Slavery Act is remarkable in that it:
- is the first of law of this type in Europe;
- asks that companies go further in their reporting obligations than the EU Non-Financial Reporting Directive (2014/95/EU);
- has wide extraterritorial implications; and
- is explicit in its requirements that businesses apply more rigour in identifying and preventing the use of ill-treated labour when selecting third parties in their supply chain.
Unlike CTSCA, the Modern Slavery Act covers companies that supply services as well as goods. While CTSCA is only applicable to California-registered businesses with a turnover of more than $100 million (c. £69 million), the latest UK Ministry of Justice guidance makes clear that the Act applies to:
- any organisation, in any part of a group structure which is “carrying on a business in the UK”; and
- has an annual turnover of £36 million or more after tax.
This means that UK companies and partnerships, as well as UK subsidiaries of overseas businesses and subsidiaries of UK companies, are subject to the Act if the turnover of the organisation and its subsidiaries is over the £36 million threshold.
While no strict definition of “carrying on a business in the UK” has been issued to date, the guidance indicates that a common sense approach will be taken, so if your organisation employs staff, conducts business, or issues invoices from the UK and has total turnover of over £36 million you are likely to be subject to the Act.
How do you best comply with the Act?
Organisations subject to the Act are required to publish an anti-slavery statement as soon as possible (and within a maximum of six months) of the end of their 2015/16 financial year which falls after March 31, 2016. This statement needs to be signed by a company director and approved by the board. The “Transparency in supply chains” section of the Act (Part 6, section 54) specifies that this anti-slavery statement should:
- be published on your company website, with a “prominent” link to the relevant page displayed on your corporate homepage; and
- outline all the steps taken by your company to prevent offences listed under the Act from taking place in your company and supply chain.
It is possible to be compliant by publishing a statement that formally declares that your company has not taken any formal steps to ensure that modern slavery offences do not take place in your wider organisation and supply chain.
To date, we have seen most companies taking a pragmatic and risk-based approach and focussing their efforts on enhancing their standard due diligence on higher-risk third parties and relying on self-certification and contractual assurances of compliance with the Act from more established suppliers of goods or services.
Which sectors or areas of activity are particularly at risk?
Any commercial activity relying on low margin, labour-intensive products or services represents a risk under the Act. Sourcing goods or services through a convoluted supply chain or from countries where levels of labour protection are lower than the UK are additional risk factors.
Key sectors that can be considered to have an elevated risk of modern slavery offences include:
- Construction: The use of forced labor in the construction of infrastructure for major sporting events has recently attracted media attention and provoked public outrage. The routine use of displaced and sometime unskilled labour hired through a myriad of subcontractors often puts the construction sector at risk.
- Hospitality: The high turnover of staff, low wage, seasonal nature of work, and extensive use of agency and migrant workers make this sector vulnerable in all markets, developed and emerging.
- Food production and processing: There are plenty of high-profile reports of the abuse of seasonal migrant workers by gangmasters, placement agencies, and employers across Europe and elsewhere. The UK’s Morecambe Bay tragedy where 23 men and women died is a particularly tragic example of the exploitation of illegal workers in the agricultural sector.
- Garment and footwear: Uzbekistan is the world-leading exporter of cotton, and antislavery.org reports that it is “one of the few countries in the world where the use of forced labour in the cotton industry is systematically organised by the state”. Working conditions in the footwear and garment industry in South and South East Asia have also been the subject of numerous critical reports by a plethora of NGOs. Obtaining comfort that staff uniforms are sourced through appropriate suppliers is a growing concern for a number of UK businesses.
- Timber & minerals: The U.S. Department of Justice lists diamonds from six African nations and granite from three, alongside numerous other mined products originating in Africa, in its “list of goods and their source countries which it has reason to believe are produced by child labor or forced labor in violation of international standards”. In Russia’s Far East, the U.S. Department of State reports that around 40,000 North Koreans are the victims of forced labour in the local logging industry.
What are the penalties?
The Act introduces tougher sentences for traffickers. Persons found guilty of slavery, servitude, and forced or compulsory labour or human trafficking offences (sections 1 or 2 of the Act) are liable to sentences that include life imprisonment. Persons found guilty of aiding, abetting, counselling, or procuring Modern Slavery offences (section 4) are liable to terms not exceeding 10 years on conviction. Summary convictions listed under section four can lead to imprisonment for a term not exceeding 12 months or a fine or both.
However, there are no immediate financial penalties for companies that fail to publish an anti-slavery statement in line with the Act. Should a company choose not to comply with section 54 of the Act, it could be made subject to a High Court injunction, and persistent failure to comply could lead to company directors being found in contempt and fined.
In conclusion, compliance with section 54 of the Act relies heavily on companies’ willingness to comply and on the potential negative publicity that would be generated by a refusal to demonstrate a willingness to take modern slavery offences seriously. Companies with strong anti-bribery and anti-corruption processes will find that complying with the Act and presenting a comprehensive anti-slavery statement will be a very straightforward process, while companies that do not currently screen their supply chains will find effective compliance harder to achieve.