Disputes - What to look out for in 2019: Modern Slavery

Expect increased enforcement activity in 2019, following criticism from the Public Accounts Committee that the government’s approach to businesses' compliance has so far been inadequate.

In brief

  • 2019 will see the government take a more pro-active approach to the enforcement of reporting obligations under the Modern Slavery Act (MSA), which may include injunctive action.

  • The government has commissioned an independent review of the MSA. That review (due to be completed by March 2019) will consider whether legislation should be strengthened to ensure that companies take action to address forced labour in their supply chains.

  • There is increasing commercial pressure on companies to actively address the issue of modern slavery.

Current reporting requirements

The UK was the first country to require businesses to report on the steps they have taken to tackle modern slavery. Those requirements are set out at section 54 of the MSA, which obliges any commercial organisation that (i) supplies goods or services; and (ii) conducts business or part of a business in the UK; and (iii) has an annual turnover of at least £36m, to produce a slavery and human trafficking statement each financial year. That statement can simply say that no steps have been taken.

Anti-slavery legislation has also been introduced by other countries, including France, the Netherlands and Australia.

A more pro-active approach to enforcement

Failure to comply with section 54 may result in the Secretary of State seeking an injunction against the relevant organisation to compel compliance. However, to date, no injunctions have been sought.

The Home Office estimates that only 60% of companies in scope have published a statement, many of which are poor in quality or fail to meet the basic legal requirements. However, the government has not been monitoring compliance and holds no clear data indicating precisely how many qualifying firms have completed the required statement.

Following criticism from the Public Accounts Committee that the government’s approach to businesses' compliance with section 54 is too “hands-off”, the Home Office indicated that it would be taking a more pro-active approach to enforcement in 2019.

Specifically:

  • The creation of a ‘Tackling Modern Slavery in Supply Chains’ group will drive forward work to hold businesses to account by identifying patterns of forced labour within businesses and supply chains and sharing best practice.

  • Chief executives of 17,000 businesses will be contacted by the Home Office to inform them that continued non-compliance with reporting requirements under the MSA will not be tolerated.

  • Companies who fail to meet reporting requirements will feature on a name-and-shame list of non-compliant organisations (to be published at the end of the financial year). Persistent breaches may well lead to injunctive action.

Legislative change?

In July 2018, the Home Office also launched an independent review of the MSA to consider whether the law should be strengthened to ensure companies take action to address forced labour in their supply chains. The review (which specifically includes section 54 in its Terms of Reference) aims to report to the Home Secretary before the end of March 2019. This may well result in the introduction of more stringent reporting requirements for companies.

Race to the top

Despite the relatively light-touch reporting obligations of section 54, and the historic lack of enforcement of those requirements, an increasing number of corporates are engaging with stakeholders to tackle the issue of modern slavery in supply chains.

The 2018 Business Against Slavery Forum was attended by CEOs of some of the largest companies in the UK, including Aviva, Co-op, BT, Hewlett Packard and Barclays. 2018 also saw the launch of Tech Against Trafficking (a collaborative effort by technology companies and civil society to support the eradication of forced labour using technology) and the publication of a report by the Chartered Institute of Building to tackle modern slavery in construction supply chains.

These initiatives, along with higher consumer awareness of the issue, has put increasing pressure on companies to not only comply with reporting requirements, but to take positive steps to eradicate modern slavery.

Interplay between the MSA and the UNGPs

In anticipation of the possible introduction of more onerous modern slavery reporting requirements,

The UN General Principles on Business and Human Rights (UNGPs) are a set of international standards, adopted by states in 2011, which set out (non-binding) guidelines on states and businesses to respect human rights, protect against breaches and to provide a remedy where transgressions have occurred.

As they have gained prevalence, many companies are now taking steps to comply with the UNGPs. Complying with the MSA is one aspect of what would be expected of a company to be UNGP compliant. Other requirements include to produce a human rights policy statement, conduct human rights due diligence and to implement grievance mechanisms to enable the remediation of any adverse impacts on human rights linked to its business activities.

Whilst the requirements of the UNGPs are voluntary, they have gained traction globally and we are seeing businesses coming under pressure from investors, consumers and civil society to adopt the recommendations. There is also the possibility that the UK government could legislate to require companies to comply with certain aspects (as France has done). Whilst this is not expected in the 2019 Parliamentary programme, we nevertheless expect there to be increased focus on compliance with UNGPs by businesses in 2019.

What it means for you

The UK government is taking modern slavery seriously. Not only is it continuing to drive the modern slavery agenda internationally, it is also set to increase national spend on this area by 56% in 2018/19.

The pressure to identify and tackle modern slavery in supply chains is therefore set to increase during 2019, with the promise of more robust enforcement by the Home Office and a possible strengthening of the existing reporting regime.

  • If your company is obliged to produce a modern slavery statement, but has not yet done so, such a statement should be published to avoid negative publicity and possible injunctive action.

  • In anticipation of the possible introduction of more onerous modern slavery reporting requirements all companies should consider what steps they might take to identify and prevent modern slavery in their supply chains.

  • Conventional techniques for human rights due diligence, focussing on particularly risky sectors, countries and contractors, can be less effective in addressing modern slavery, where the issue may not be with the immediate contractual counterparty.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.