Australia's Two Modern Slavery Acts

Foley Hoag LLP - Corporate Social Responsibility
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Foley Hoag LLP - Corporate Social Responsibility

[co-author: Helen Clapp]

The Australian Government has launched an online register that publishes companies’ statements on their compliance with the country’s Federal Modern Slavery Act of 2018. The website, which is searchable and available to the public, marks the first government-run website tracking companies’ compliance with efforts to eradicate modern slavery. Unlike comparable legislation passed recently in other jurisdictions, including the U.K. Modern Slavery Act of 2015, Australia’s Act makes reporting mandatory within six months of a company’s fiscal year-end. Although there are no financial penalties for failing to comply with the Act, the Government can “name and shame” companies that do not comply, which stands to generate considerable reputation risk for businesses that fail to act.

Australian states such as New South Wales (NSW) also passed a Modern Slavery Act in 2018. However, the NSW Government delayed the Act’s implementation and initiated a parliamentary inquiry. On March 25, 2020, the NSW Legislative Council’s Standing Committee on Social Issues released its final review of the NSW Act and proposed several amendments. The report addressed questions regarding the necessity of the NSW Act in light of the enactment of the Federal Act, and concerns over the harmonization of the two. The Committee found that the NSW Act is overall aligned with the Federal Act and recommended that the NSW Act enter into effect on or before January 1, 2021.

If it goes into force, the NSW Act will impose a stricter set of requirements on companies than the Federal Act, including lowering the reporting threshold for companies with annual revenues exceeding A$100 million to A$50 million. The NSW Act would also establish financial penalties of up to A$1.1 million for failing to submit a modern slavery statement or for submitting false or misleading information.

If the NSW Act goes into effect, it remains to be seen how the two Acts will work in tandem, since all companies subject to the NSW Act will also be subject to the Federal Act. The NSW Government’s authority to fine companies for non-compliance means the NSW Act would be more punitive than the Federal Act, which only relies on reputational deterrents such as “naming and shaming.” An enacted NSW Act may push the Federal Act towards more stringent anti-slavery measures over time as the two Acts are harmonized. Already, the Committee recommended the NSW Government work with the Australian Government to harmonize the reporting threshold, ideally at the NSW Act’s lower threshold of A$50 million, which is also closer to the minimum levels set by the U.K. Modern Slavery Act.

An independent review of the U.K. Modern Slavery Act, conducted in 2018 and 2019 by U.K. Members of Parliament, contains important lessons on the changes required to strengthen anti-slavery legislation. After analyzing the failures and successes of the Modern Slavery Act since its inception in 2015, the review recommended making the content of company statements uniform and mandatory, and granting the government broader powers to tackle non-compliance, including through the use of warnings, fines, court summons, and director disqualification. The review also recommended requiring companies to reference their modern slavery statements in the annual regulatory filings that are currently mandated under U.K. law. The U.K. Government has thus far stated it will not make the modern slavery statements mandatory and has only agreed to a limited increase in its enforcement powers. The Government cited a belief that mandatory reporting will lead companies to take an “overly compliance-driven approach” to their modern slavery statements, “which might disincentivize disclosure of risks identified.”

However, the findings of the review indicate a growing appetite for making key aspects of corporate human rights compliance mandatory. Indeed, the Dutch Child Labour Due Diligence Act of 2019 imposes substantial requirements for corporate supply chain due diligence and sets potential fines for noncompliance at levels much greater than those allowed for under the U.K. Modern Slavery Act.

For now, policymakers still tend to prefer modern slavery reporting standards that are primarily volitional in nature. Yet as an increasing number of countries formalize their commitments to the eradication of modern slavery, international business enterprises should expect that such efforts may be supplemented with more forceful compliance requirements. Defining the parameters of the reporting and due diligence process well ahead of such additional requirements will provide companies at the leading edge of human rights best practice with myriad advantages and make the burden of forthcoming policies less overwhelming in the long term.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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