In March 2015 the UK passed the Modern Slavery Act 2015 (the Act). The Act aims to increase transparency in supply chains and prevent labour exploitation. It came into force on 29 October 2015.
The Act is the first piece of legislation to specifically address modern slavery and human trafficking; in 2013 it was estimated that there were between 10,000 and 13,000 victims of modern slavery in the UK. The Act introduces three offences: slavery, servitude and forced or compulsory labour; human trafficking; and committing an offence with intent to commit the offence of human trafficking. Committing an offence with intent to undertake human trafficking holds the maximum penalty of 10 years imprisonment, whilst the penalty for slavery and human trafficking offences is life imprisonment.
Effect on businesses
Of particular interest to businesses is the inclusion in the Act of a provision designed to encourage organisations to take action to ensure that their supply chains do not make use of slave labour. The Act requires all “commercial organisations” that operate either wholly or partly in the UK, supply goods or services and have a minimum turnover of £36m to publish a “Slavery and Human Trafficking Statement” for each financial year. It will not apply to subsidiaries or sister companies that operate wholly outside the UK.
The Act obliges companies meeting the above criteria to publish a statement on its website each financial cycle, that either:
- Details the steps the company has taken that year to ensure human trafficking and slavery is not taking place in its business or supply chains; or
- States that no such steps have taken place.
This statement may, but does not need to, include information about:
- The organisation’s structure, its business and its supply chains;
- In relation to slavery and human trafficking:
- Its policies;
- Due diligence process at its business and supply chains;
- The parts of its business and supply chains at greatest risk, and the steps it has taken to assess and manage that risk;
- Its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against key performance indicators; and
- The training available to its staff.
Any such statement must be approved by the board of directors and signed by a director. This statement should be published in a prominent position on the organisation’s website or, if the organisation has no website, the statement must be made available to anyone who makes a written request to see it.
Penalties for failing to comply
If a company fails to comply with the requirement, the UK Secretary of State can bring civil proceedings for an injunction forcing the organisation to make a “Slavery and Human Trafficking Statement”. A statement to the effect that the organisation has taken no steps to ensure that offences under the Act are not occurring within the business or its supply chains is likely to satisfy such an injunction.
What does this mean for your business?
In practice it may well be that organisations’ current policies and procedures only require minor changes in order to meet their obligations under the Act. For example, they could have suppliers/counterparties attest that they are fully compliant with the Act. Additionally, due diligence and anti-corruption processes could be amended to address modern slavery and other human rights risks, particularly in conducting training and risk assessments.
As the Act only requires the production of a statement, rather than the putting of any anti-slavery procedures or policies in place, it is the reputational, rather than legal, consequences that would be of most concern to a business; even in the event that an organisation produces a positive statement, there are no legal or financial penalties for non-compliance with such statement.
Ultimately it is the organisation’s reputation that will suffer if a positive statement is published which is subsequently found to be false. Equally publishing a negative statement may be detrimental if it is construed (particularly by the media) as condoning or turning a blind eye to slavery. The Act therefore provides another aspect of compliance that organisations are now forced to consider and need to understand, particularly those that work in industries and countries that present the highest risk of human trafficking and slavery.
In order to allow organisations to adequately respond to this requirement, the first businesses affected by the provision will be those with a year-end of 31 March 2016. However, organisations should start thinking about their requirements under the Act now, as statements must be published outlining procedures in place for the 2015/2016 financial year; if the organisation has no anti-slavery and human trafficking procedures in place when the provision came into force, the statement must outline what has been done between October 2015 and the company’s year-end.
A practical guide outlining organisations’ obligations has been published on the Gov.uk website. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/471996/Transparency_in_Supply_Chains_etc__A_practical_guide__final_.pdf