Legislation at committee stage, could receive Royal Assent as early as Jan. 1, 2023
Ottawa will soon enact a modern slavery bill that will require companies to examine supply lines and produce annual reports.
The Fighting Against Forced Labour and Child Labour in Supply Chains Act has made its way through the Senate and House of Commons and awaits examination by the Standing Committee on Foreign Affairs and International Development. The bill originated in the Senate, sponsored by independent Senator Julie Miville-Dechêne.
The legislation’s stated purpose is for Canada to “contribute to the fight against modern slavery,” as a party to the International Labour Organization’s 1930 Forced Labour Convention, the Abolition of Forced Labour Convention of 1957, and 1999’s Worst Forms of Child Labour Convention.
Once the bill passes the committee stage it must go through third reading. It could receive Royal Assent as early as Jan. 1, 2023.
Canadian entities which produce, sell, or distribute goods in Canada, import foreign goods into Canada, or control entities which do will need to produce an annual, public report about their corporate structure and supply chains. The reports must detail the companies’ actions toward eliminating forced labour and child labour. The bill will apply to government institutions, public companies listed on Canadian stock exchanges, or corporations, trusts, partnerships, and unincorporated entities which meet certain size thresholds. In at least one of the two prior financial years, they must have two of the three: $40 million in revenue, $20 million in assets, or 250 employees.
“It's important to note that the proposed legislation is what I would call transparency legislation, meaning that it aims to shine a light on certain behaviours – in this case, forced labour and child labour – that Canada has committed to fight,” says Laura Levine, a securities lawyer and counsel in Stikeman Elliott’s knowledge management group.
“Importantly, the legislation does not penalize the actual bad conduct here,” she says. “It does not penalize forced labour, child labour, per se. Rather, it aims to impact, in a sense, the reputations of companies that are knowingly or unknowingly relying on forced labour or child labour in their supply chains and manufacturing processes by requiring these companies to publicly report those practices.”
Levine notes that additional entities may be prescribed by regulation, which are forthcoming. The legislation is also unclear on whether, for foreign companies doing business in Canada, the size thresholds apply to their global operations, or only their Canadian operations, she says.
Those required to report will submit to the Minister of Public Safety and Emergency Preparedness. They need to include steps they took to prevent and reduce the risk of forced labour or child labour being present in their operations, policies and due diligence processes in place to address the issue, and any measures they took to remove forced labour or child labour. When companies find and eliminate forced and child labour, they will also be required to report on what they did to “remediate the loss of income” for the families of those who were engaged in the labour.
Failure to comply with reporting obligations will invite a fine of up to $250,000, which may also apply to directors, officers, agents, and mandataries.
The bill also allows for warrantless searches. To verify compliance, a person designated by the Minister may enter any place they have reasonable grounds to believe contains anything applicable to the annual report. This does not apply to a dwelling house, for which a warrant is still required.
“For companies that have yet that get captured by the legislation and have yet to examine their supply chains, the legislation will effectively force them to consider these types of practices and may unearth practices that certain entities did not know existed,” says Levine. “That discovery process and the disclosure process might change behaviour for certain entities, and it may also impact consumer behaviour.”
“As a nation, I think we've decided to participate on a global level in fighting these practices and ensuring that human rights are taken care of in supply chain and in production processes,” she says. “This is a step in the direction of doing that.”