In the weeks ahead, the Senate will be turning its attention to Bill S-216. The Bill, if passed, will enact Canada's first modern slavery disclosure legislation.
The proposed Modern Slavery Act would require mandatory modern slavery disclosure by companies subject to the Act, as well as an amendment to the Customs Tariff to prohibit the importation of goods produced using forced labour (which is already prohibited) and goods made by children.
Bill S-216 is essentially an update of Bill S-211, introduced by Senator Miville-Dechêne in the previous legislative session, and which itself followed a virtually identical Private Members Bill (Bill C-423), which was introduced into the House of Commons by Liberal MP John McKay in December 2018. Bill S-211 was in Second Reading when it died on the Order Paper when Parliament was prorogued in August 2020.
The Bill lags behind legislative and regulatory developments in other jurisdictions such as France and the Netherlands that have already enacted mandatory human rights due diligence legislation, and the EU is slated to introduce mandatory human rights due diligence legislation in 2021. Furthermore, jurisdictions such as the UK and Australia already have modern slavery disclosure laws and evolving reporting by government on modern slavery issues in their procurement and supply chain activities.
That said, Canadian businesses need to read the writing on the wall. Human rights issues in supply chains have a prominent place in the "S" in ESG, and Bills such as S-216 are coalescing with increased reporting requirements among investors and asset managers to bring supply chain business practices into focus.
Which Canadian Businesses Must Comply with the Annual Reporting Regime?
If the Bill becomes law, it would apply to every corporation, trust, partnership or unincorporated organization that
(a) Is listed on a stock exchange in Canada; or
(b) Has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years:
(i) At least $20 million in assets,
(ii) At least $40 million in revenue, and
(iii) employs an average of at least 250 employees;
(c) Produces or sells goods in Canada or elsewhere;
(d) Imports into Canada goods produced outside Canada; or
(e) Controls an entity engaged in any activity described in paragraph (c) or (d).
What Would Businesses Be Required to Do?
Businesses subject to the Act would be required to provide the Minister of Public Safety and Emergency Preparedness with an annual modern slavery report, no later than 180 days after the end of each financial year of the business. The report would need to outline the steps the business has taken during its previous financial year to prevent and reduce the risk that forced labour or child labour is being used in the production of goods by the business, or in the production of goods imported into Canada by the business.
In their modern slavery reports, businesses must also include the following information:
(a) The structure of the business and the goods that it produces or that it imports into Canada;
(b) Its policies in relation to forced labour and child labour;
(c) Its activities that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;
(d) Any measures taken by the business to remediate any forced labour or child labour; and
(e) Any training provided to employees of the business on forced labour and child labour.
The report must include an attestation made by a director or officer of the business that the information in the report is true, accurate and complete.
The business is also required to make the report available to the public, and must post it in a prominent place on its website.
The Minister Must Maintain a Publicly Available Registry of Modern Slavery Reposts
Under Bill S-216, the Minister of Public Safety and Emergency Preparedness must maintain an electronic registry containing a copy of every report provided to the Minister by a business subject to the proposed Modern Slavery Act. The registry must be made available to the public on the Department of Public Safety and Emergency Preparedness website.
What are the Penalties for Non-Compliance?
Canadian businesses could be subject to the Act's broad search and seizure powers, which could be used by the federal government to verify compliance with the Act.
Also, if a business fails to file the annual modern slavery report or post the report on its website or knowingly makes any false or misleading statement, it could be found guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000.
Directors and officers could also face personal liability here. If a business commits an offence under the Act, any officer or director of the business who directed, authorized, assented to, acquiesced in or participated in committing the offence is a party to and guilty of the offence, and as such is liable on conviction to the punishment provided for the offence, whether or not the business has been prosecuted or convicted.
More in this series
For further information, please read the other parts of our Guide to addressing modern slavery in your business and supply chain for Canadian directors:
How we can help
To find out more about how Gowling WLG can help your business expertly organize and manage due diligence and other governance, risk, compliance and supply chain issues, please contact the author Stephen Pike.