The modern day fight against commercial slavery - is your business compliant with the new requirements in the United Kingdom?

As part of the on-going battle against the offences of slavery and human trafficking, a new piece of legislation has been brought into force in the United Kingdom: the Modern Slavery Act 2015 (the “Act”). Whilst this legislation has been in force since 29 October 2015, companies with a year end of 31 December will come within the remit of its requirements for the first time in respect of the financial year 2016 and are required to comply “as soon as reasonably practicable” after year-end.

In addition to containing provisions relating to the offences of slavery and human trafficking, the Act introduces a new legal requirement for companies to publish an annual statement about steps that have been taken in the preceding financial year to address potential modern slavery abuses in their company or group and also at all stages of the supply chain. This provision, contained in section 54 of the Act, is aimed at preventing such offences from being committed through transparency at all stages of the supply chain and ensuring that companies over a certain size are actively tackling this issue.

Is my company affected?

The Modern Slavery Act introduces publication obligations for the following:

• any commercial organisation (regardless of its legal form or country of incorporation),
• which supplies goods or services in the United Kingdom, and
• which has a global turnover (taking into account the entire corporate group if applicable) of at least £36 million. 

What do I have to do to comply with the law?

If your business qualifies as falling within the scope of the Act you are obliged to prepare a “Slavery and human trafficking statement” (“Statement”) at the end of each financial year. Enquiries will have to be made across the business as to the steps that are being taken to ensure that the information set out in the Statement is accurate and complete. 

The Statement must be signed by a senior executive of the business in accordance with the provisions of the Act and must then be published. The Act expressly provides that the Statement must be uploaded to the website of the business and a prominent link to it must be included on the homepage of the website.

If more than one entity in a group structure supplies goods or services in the United Kingdom then the parent company may give a Statement on behalf of each of these entities, provided that the Statement addresses the steps taken by each entity.

What should the Statement cover?

A qualifying business has two choices: either make a statement that no steps have been taken to combat modern slavery or include details of the steps that have been taken by the business in the previous financial year.

In practical terms, choosing to make a declaration that no steps have been taken is not likely to be a viable option for most businesses due to the associated reputational impact of doing so.

When preparing the statement, details should be included about the steps taken to ensure modern slavery and human trafficking is not occurring within a business (including the wider corporate group if applicable). In addition, details must also be included about steps that have been taken to ensure that the same is not occurring within any of the business’ supply chains. It is this second element which is likely to require special consideration since third party entities in the supply chain do not fall within the control of the business. This is particularly the case for businesses with an international supply chain involving countries where statutory protection against such offences is less stringent than in the United Kingdom. In this context it is important to note that the Statement is not intended to be a guarantee that no such offences are taking place in the supply chain but rather details of the steps that have been taken by the business to reduce the likelihood of such offences occurring.

The Act provides some guidance as to what is meant by slavery and human trafficking for these purposes. The focus of the Act is on combatting slavery, servitude, forced or compulsory labour and human trafficking with a view to exploitation. It is important to keep in mind that these terms are not specifically defined and should be interpreted broadly.

The Act also sets out a non-exhaustive list of examples of the types of information which could be included in such a statement. These include details about:

• the structure of the organisation and its supply chains.
• the corporate policies in place to combat and prevent such offences.
• the due diligence processes undertaken by the business to ensure compliance with policies.
• areas in the business or supply chain where there is a particular risk of an offence being committed and steps that have been taken to address this increased risk.
• measures implemented to assess the effectiveness of the corporate policies in this respect and details of how effective the business has been applying such criteria.
• training and information which is offered to staff to assist with compliance.

 

When do I have to make such a Statement”?

The Statement is to be made “as soon as reasonably practicable” after the end of each financial year.

The obligation came into force with regards to businesses with a financial year ending 31.03.2016 or after and relates to measures implemented since the Act came into force in October 2015. This is illustrated by some simple examples:

• A qualifying business with a year-end of 31.12. has to publish its first Statement at year end 31.01.2016. This Statement should cover the entire financial year.
• A qualifying business with a year-end of 31.01. has to publish its first Statement at year end 31.01.2017. This Statement should cover the entire financial year.
• A qualifying business with a year-end of 30.04. has to publish its first Statement at year end 30.04.2016. This Statement should cover the period October 2015 until 30.04.2016.

Therefore following the end of the financial year December 2016, all businesses falling within the remit of the Act should now be publishing a Statement at the end of each financial year. For those businesses with a year end of 31.01 such a statement should be prepared without unreasonable delay.

What happens if my business does not comply with the requirements?

The Secretary of State may take action to force a business to comply with the Act. However, the main impact of non-compliance will be on the reputation of the business. Commercial partners are increasingly alive to the risks of being tainted by an association with perceived slavery or similar offences. A business that has failed to comply with the statutory requirements in this respect can expect to be treated with caution which is likely to have a noticeable impact on the economic health of that business. 

One of the stated aims of the Act is to force larger businesses to actively engage with the problem of modern slavery and to take steps to combat it. Regardless of turnover size, businesses that have not yet implemented corporate policies designed to address these risks across their business and wider supply chain should give serious thought to doing so.

How do I find out more?

The Secretary of State has produced guidance as foreseen by the Act to assist businesses in complying with the new requirements. It can be accessed here.

We are also available to answer any questions you may have about mandatory compliance legislation in the United Kingdom or to assist you with preparing a Statement if your business falls within the remit of this legislation.