The Modern Slavery Act 2015 - Should I be worried?

Alice Samuel, Legal Secretary in the Company Commercial team reviews The Modern Slavery Act which was passed in March 2015 and is intended to tackle modern slavery by consolidating and defining various offences that relate to human trafficking and slavery. It provides for two main offences that relate to holding another person in slavery, servitude and forced or compulsory labour and arranging or facilitating the travel of another person with the intention of exploiting them.

There are an estimated 13,000 victims of forced labour, domestic servitude and exploitation in the UK and the provisions of this Act are aimed at reputable businesses and big brands as well as organised crime and individuals.

The Modern Slavery Act 2015 introduces:

• tougher sentences for traffickers; (up to life imprisonment)
• an independent anti-slavery commissioner;
• the right to confiscate traffickers’ assets and then use them to compensate victims;
• a new statutory defence for slavery or trafficking victims forced to commit crime; and
• a new obligation for Transparency in Supply Chains (“TiSC”) for large businesses

Section 54 of the Act relates to TiSC and will be significant to businesses of all sizes. Large businesses will now be required to report annually on their efforts to ensure that the business, its workers and its supply chains are free of slavery and human trafficking, by producing a slavery and human trafficking statement.

Which Businesses?

Section 54 applies to all commercial organisations that supply goods or services, and have a minimum annual turnover of £36 million. It extends to UK and non-UK entities with a presence in the UK and includes their overseas subsidiaries and their suppliers. They must demonstrate their due diligence processes by producing a statement each financial year that must be published on their website. Approximately 12,260 companies in the UK will be directly affected by this new legislation.

Even if your own business is not large enough to come within section 54, you may still be affected if you supply goods or services to a company that does. Smaller companies that trade with these large businesses will also need to adopt and implement the same high standards in order to report to their larger customers that they, and their supply chains, are free of slavery and trafficking. If they cannot do that they will risk losing those customers.

Businesses preparing for sale should also be mindful of this new disclosure obligation. These issues are likely to become part of pre-purchase due diligence and buyers may be unwilling to take the risk on any business that does not take this new obligation for transparency seriously.

Slavery and Human Trafficking Statements:

The slavery and human trafficking statement must include one of the following statements:

1. The steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains and in any part of its own business; or
2. That the organisation has taken no such steps.

Although companies have flexibility as to what they include the statement, the Act lists six areas that should be included:

• The organisation’s structure, its business and supply chains;
• Its policies in relation to slavery and human trafficking;
• Its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
• The parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, 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 such performance indicators as it considers appropriate;
• The training about slavery and human trafficking available to its staff

What are the consequences of non-compliance?

There are no direct financial or criminal penalties for not complying with this new disclosure obligation. But, if a business does not produce either an option (a) or (b) statement, the Secretary of State has the power to apply to the High Court for an order requiring the business to comply with their obligations under section 54. Failure to comply with such an order would incur penalties. The real risk to the business, however, may be the damage done to its reputation as a result of high profile negative publicity.

Large companies will be thinking about compliance now and the Government will be producing detailed guidance on this new obligation. Smaller businesses involved in “at risk” supply chains should be preparing for approaches from their larger customers asking what they are doing about their supply chains.

At first glance s54 is only relevant to big businesses. The reality is likely to be very different as it is those further down the supply chain that will have to do all the hard work.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.