By Luke Geary, Partner, Naomi Brodie, Associate and Erin Smith, Paralegal
Since the “Hidden in Plain Sight” inquiry launched by the Australia Government in 2017, a spotlight has been shone on modern slavery practices occurring here in Australia and in supply chains controlled by Australian companies around the world. In reaction to this exposé and the growing total of individuals enslaved globally, Australia has now become one of the very first nations to establish anti-slavery laws.
Modern slavery is a pandemic that has been allowed to fester through the tolerance of the lesser abuses of child labour, deceptive recruitment practices, underpayment of wages and poor working conditions and grow into serious exploitation including forced labour, human trafficking, bonded labour and severe forms of child labour. With over 40.3 million silently suffering in enslavement, threats, violence and coercion – modern slavery is a dangerous enterprise that calls for immediate intervention.
In Australia alone an estimated 15,000 individuals are enslaved in industries ranging from agriculture and farming to hospitality and construction. This abuse, occurring in our own backyards, includes underpayment, inhumane workers’ living conditions and exploitation of subcontractors. Supply chains and subcontractors are particularly vulnerable to mistreatment due to a lack of regulation, a lack of auditing and a lack of accountability. Due to the nature of being a “hidden workforce” the opportunity for large companies and contractors to turn a blind eye to the abuse of subcontractors without any repercussions is too available. Furthermore, over 74% of the world’s total enslaved population are in Asia Pacific alone. By continuing relationships and conducting business with such organisations without requiring such conglomerates to be accountable and transparent with their supply chains, Australia is inadvertently responsible for the growing modern slavery situation.
Consequently, on 29 November 2018, Australia’s anti-slavery bill, Modern Slavery Bill 2018 (MSA), passed the Senate and House of Representatives, setting an example to the rest of the world that Australia no longer has a tolerance for slavery. The MSA, in particular, sets to oppose slavery and slave-like practices in Australia such as servitude, forced labour, debt bondage, organ trafficking, deceptive recruiting, forced marriage and child brides.
Until now, the global legislative stance against modern slavery by a nation was spearheaded solely by the United Kingdom who, in 2015, enacted the UK Modern Slavery Act (UK Act) to impose obligations on commercial organisations. The UK Act requires any companies with an annual turnover of £36 million to audit their supply chain and prepare a modern slavery statement for each financial year that outlines the steps taken by the organisation to address modern slavery in their supply chains. The statement is then required to be published on their organisation’s website where it is visible to the public. Whilst there are currently no penalties provided for under the UK Act apart from the ability to seek an injunction, the UK government intends for the publication of the modern slavery statement to create public pressure for accountability and act as a motivator to eliminate slavery. Since its inception, over 6,300 modern slavery statements have been produced under the UK Act which provide insight into business structures, operations and supply chains and demonstrates the change and action the legislation has advanced. Moreover, the UK has also seen a 63% increase in victims speaking out and seeking help, reiterating the impact legislative intervention can have.
Similarly, the Australian legislation will target large organisations and endeavour to use a non-penalty strategy to encourage compliance for Australian organisations, with the option of a review in three years and potential reform if deemed to be insufficient. Australia has adopted a reciprocal approach to the UK Act in many aspects; additionally, the New South Wales Parliament has passed its own Bill but which is yet to come in to force. To assist in identifying the differences between each of these pieces of legislation, Mills Oakley has prepared a comparative table.
The MSA will apply to any Australian entity or company that carries on business in Australia at any time and who have consolidated revenue, over a reporting period or financial year, of AUD100 million or more. This is likely to encompass over 3,000 organisations nationally. According to section 16 of the MSA, relevant organisations will be required to produce a modern slavery statement that:
- identifies the reporting entity;
- describes the structure, operations and supply chains of the reporting entity;
- describes the risks of modern slavery practices in the operations and supply chains of the reporting entity, and any entities that the reporting entity owns or controls;
- describes the actions taken by the reporting entity and any entity that the reporting entity owns or controls, to assess and address those risks, including due diligence and remediation processes;
- describes how the reporting entity assesses the effectiveness of such actions;
- describes the process of consultation with:
- any entities that the reporting entity owns or controls; and
- in the case of a reporting entity covered by a statement under a joint modern slavery statement – the entity giving the statement; and
- includes any other information that the reporting entity, or the entity giving the statement, considers relevant.
Statements will be required to be made within six months of the end of the financial year or relevant reporting period for that company, which could see organisations being required to report as early as the end of calendar year 2020. The responsibility of producing such statements will fall to the Board, responsible members or those responsible for the governance functions of the organisation whose obligation it is to ensure the accuracy of the contents of the statement. These requirements and the involvement of senior decision-makers creates transparency in business, a high production of information regarding organisational supply chains and establishes a strong corporate responsibility to ending modern slavery.
The Minister for Home Affairs, along with the Business Engagement Unit in the Department of Home Affairs, will oversee the reporting and will maintain a register of statements. This Modern Slavery Statements Register, according to ss. 18 and 19, must be made available for public inspection, without charge, online. Similar to the UK Act, the MSA does not provide for any financial penalties for non-compliance, despite much controversy on the topic. As a compromise on the original Bill, amendments were made to grant the Minister the power to request an entity to explain why they have failed to comply with the MSA and require them to provide a statement. Any failure to meet a request from the Minister will allow the Minister the ability to publish the identity of the non-compliant organisation online and detail their failures to comply. Whilst avenues for dispute for any such publication to the Administrative Appeals Tribunal were also provided for under section 16A, the government’s deducible intention is for public opinion, accountability and investor scrutiny to be a strong motivator for compliance. In the event that they are not, the potential inclusion of financial and criminal penalties has already been flagged for consideration at the three year review.
Managing supply chains in large organisations that often source goods and services from international entities is a complex and involved task that requires analysis of business conduct at every level. Organisations will be required to undertake extensive audits of all of their suppliers to ensure they are identifying and remedying risks within their supply chains in order to provide comprehensive, well informed and transparent statements under the MSA. With reporting requirements launching as early as 2020, now is the time for Australian operating organisations to get their house in order, prepare for how they may best address issues of modern slavery within their supply chains and overall contribute to a more just and free global society. Mills Oakley offers a full range of services to clients in this regard, having already completed engagements for a number of existing and new institutional clients of the firm. By collaborating with other experts who are non-lawyers, we are able to provide clients with a specialised human rights auditing service.
The introduction of the MSA is a necessary and much anticipated step forward in eliminating modern slavery within organisations operating within Australia. Through obligating entities to provide detailed statements that analyse the supply chains and employment standards utilised in their businesses, the MSA has the power to make large, influential organisations more responsible and accountable for their actions. Capturing companies that carry on business in Australia as well as Commonwealth and certain other government entities, the MSA has the ability to be far reaching and encourage change in influential domestic organisations as well as international organisations in countries where modern slavery is most prevalent. Furthermore, by aligning itself with the UK Act, these two Acts have the ability to encourage international reform and bring countless other leading industrial countries into the fight against modern slavery.
Luke Geary is a Partner of Mills Oakley and heads up the Brisbane Not-For-Profit team and the firm’s work in the area of modern slavery regulation compliance. He has particular experience with running cases for victims of trafficking and slavery related offences over the last decade. He also contributed to various parliamentary inquiries on these issues.
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