Canada continues to move toward affirmation of its commitment to fight against modern slavery in supply chains. The recently tabled Bill S-216, An Act to enact the Modern Slavery Act and to amend the Customs Tariff (the Bill), was introduced to the Senate on October 29, 2020. The Bill is an updated version of Bill S-211, which died on the order paper with prorogation. The Bill includes all of the provisions found in Bill S-211, as well as a few additional requirements. (Click here to see our previous article on Bill S-211.) Like its predecessor, the Bill aims to combat modern slavery by imposing supply chain reporting requirements on businesses that meet certain criteria and that produce, sell or import goods in Canada, or that control an entity that does one of those things.
The key changes in the new Bill include (i) expanded definitions of “child labour” and “forced labour,” (ii) the requirement for the Minister of Public Safety and Emergency Preparedness (the Minister) to maintain a publicly accessible electronic registry containing a copy of every report, and (iii) a new provision mandating a review of the proposed legislation five years from the date of its enactment by a committee of Parliament. The Bill also expands Bill S-211’s import ban, which prohibited the importation of goods manufactured or produced by forced labour or child labour, to goods mined by forced labour or child labour.
Will the Bill apply to your business?
Knowing whether your business is caught by the Bill is important, as entities that meet the prescribed criteria will be subject to mandatory reporting requirements and non-compliance may result in a criminal offence.
Like Bill S-211, the Bill applies to businesses that are listed on a Canadian stock exchange, or that have a connection to Canada and that meet at least two of the following conditions for at least one of the two most recent financial years as shown on their consolidated financial statements:
- the entity has at least $20 million in assets;
- the entity has generated at least $40 million in revenue; or
- employs an average of at least 250 employees.
The definition of “control” also remains quite broad: an entity is considered to control another entity if it exercises control over it in any manner, whether directly or indirectly, including all the controlled entity’s subsidiaries. The Minister may also pass regulations expanding the definition of entity.
The only exception is for businesses that solely provide services, which are not caught by the Bill, unless those businesses control an entity that falls under the Bill’s definition.
The Bill creates a disclosure obligation
Like Bill S-211, the Bill will require entities to publicly display their modern slavery reports in a “prominent place” on their website. The reports must outline any actions taken during that financial year to prevent and reduce the risk of child and forced labour being used in the entity’s supply chains.
The report must include information about: the entity’s structure and the goods that it produces or imports into Canada; its policies in relation to forced and child labour; activities it participates in that carry a risk of forced or child labour being used and the steps it has taken to assess and manage that risk; measures taken to remediate forced or child labour; and the training provided to employees on forced and child labour. A director or officer will be required to attest to the truthfulness, accuracy and completeness of any information contained in the report.
Canada on the international stage
Approaches adopted by other countries to combatting modern slavery in supply chains through legislation include both mandated reporting requirements and imposing obligations to establish due diligence plans. The main distinction between reporting requirements and due diligence plans is the latter requires corporations to meet minimum positive obligations to combat modern slavery, whereas reporting requirements only require businesses to comply with a disclosure regime.
The approach adopted in the Bill is a reporting regime similar to the approaches taken in California, Australia, and the UK. It differs from France, where the mandated due diligence approach is adopted. The Corporate Duty of Vigilance Act requires businesses to draft, publish and follow a due diligence plan with a detailed risk analysis, procedures to regularly assess and monitor risks, including in subsidiaries, subcontractors and suppliers, and an action plan to mitigate identified risks.
However, a key difference in the Bill lies in its amendment to the Customs Tariff. Similar to provisions in federal US trade law, the Custom Tariff amendment will wholly exclude goods from entering Canada if they are manufactured by forced labour or child labour.
The Bill provides for fines and far-reaching investigative powers in the event of non-compliance. The Minister may order any reasonable measures to bring the entity into compliance and any entity found guilty of an offence is liable to a fine of up to $250,000 per offence. There is also director, officer and agent liability where the individual has any role in directing, authorizing, participating or acquiescing in the business’ contravention of its statutory requirements.
By putting their social licences to operate at stake, the Bill aims to combat modern slavery by pressuring businesses to improve supply chain transparency and impose higher standards on their suppliers.
Canadian businesses would be well advised to proactively assess any risk in their own global supply chain and ensure that they understand all aspects of any subsidiaries’ production processes as well. Further, directors, officers and other individuals working in executive positions should be especially mindful of reporting obligations relating to modern slavery given their personal exposure to liability for any non-compliance with the Bill.
With the support of the All-Party Parliamentary Group to End Modern Slavery and Human Trafficking, the hope is that the Bill will have a better chance than its predecessor, Bill S-211, at becoming law. The Bill had its debate at second reading in the Senate November 5, 2020 – the progress toward enshrining the Bill in law will continue to contribute to a broader conversation about modern slavery among businesses, investors, unions and Canadian consumers generally.
Norton Rose Fulbright has extensive experience advising clients on supply chain management, human rights due diligence and policy development and implementation against modern slavery, and our global reach ensures we can provide guidance on how to ensure compliance with the law even when the operations in question are located in overseas jurisdictions.
The authors wish to thank Terry Wright for his assistance in preparing this update.