Author: David Baverstock
Modern slavery, a problem of modern society but an issue for border police and perhaps large clothing companies, not for the majority of businesses, right?
Well no. If your business group has a worldwide turnover in excess of £36 million per year, supplies goods or services in any sector and carries on business, in whole or in part, in the United Kingdom then you will need to comply with the UK’s Modern Slavery Act 2015 (MSA).
Heralded by Prime Minister David Cameron as “a huge step forward, introducing greater accountability on business for the condition of their supply chain” the MSA received Royal Assent on 26 March 2015. The MSA increases the maximum sentence for offences to life imprisonment, introduces new civil orders to help enforcement, creates the post of Anti-Slavery Commissioner and, probably of most relevance to the majority of businesses, introduces new disclosure requirements. Unlike much of the rest of the MSA, these new disclosure requirements, contained in section 54 of the MSA, come into force in October 2015.
Consequently, from autumn of this year any business, to which the MSA applies, will be required to disclose, on an annual basis, what steps, if any, it has taken to tackle slavery and human trafficking in its own business or supply chains. By electing to catch businesses with turnovers of £36 million or more (the Government had initially considered setting the turnover condition at £1 billion), it is predicted that approximately 12,000 UK companies will be required to make this disclosure.
So, the obvious questions:
What constitutes slavery and human trafficking?
The first part of the MSA sets out what constitutes the relevant offences. An offence is committed if a person holds another person in slavery or servitude or requires another person to perform forced or compulsory labour. The MSA also covers the offence of human trafficking and prohibits the arrangement or facilitation of the travel of another person with a view to that person being exploited.
What should be included in the disclosure?
Simply put, the disclosure must state either that the organisation has taken steps to address slavery and human trafficking or that it has taken no such steps. Presumably the Government hopes that the fear of reputational damage from electing to give a negative statement, and the consequential impact on commercial success will compel businesses to take a pro-active response to the issue. If a positive statement is made, the MSA suggests that each organisation’s disclosure includes information about:
The Government intends to publish further guidance on what should be included in the disclosure statement but it is clear this guidance will be limited to what should be disclosed rather than the practical steps on how risks can be reduced. Businesses will be required to identify and mitigate risks that are particular to their industry, activities and structure.
In addition, subsidiaries will be required to make these disclosure statements, if they are also qualifying entities under the MSA. However, they can replicate or modify their parent company’s statements as appropriate.
How and when should the disclosure be made?
The disclosure will need to be made at the end of each financial year. The MSA requires that the statement be approved by the board of directors of a limited company or by all members of an LLP. Depending on the type of organisation the disclosure statement should then be signed by a company director, the designated member of an LLP, a general partner of a limited partnership or by a partner in respect of any other kind of partnership.
Once approved, an organisation must make the statement available on its website and include a link to the statement in a prominent place on the homepage of that website. In the absence of a website, an organisation must provide a copy of the statement to anyone who makes a written application, within 30 days of receiving the request.
Are there any consequences if businesses don’t publish the statement?
Yes, the Secretary of State may force the production of the statement by obtaining an injunction.
As the MSA comes into force in October there may be a limited time for businesses to prepare for production of the disclosure statement ahead of the end of their financial year. Transitional provisions are expected but these will not be released until the MSA comes into force. As discussed above, the additional guidance is also not yet available. It would therefore be sensible for businesses to consider their obligations under the MSA as soon as possible. Sensible steps for those preparing statements may include:
David Baverstock, Associate, Fladgate LLP (email@example.com)