The Modern Slavery Act

Following allegations and a visit by the National Crime Agency to several factories supplying fashion retailers recently, media attention has focussed once again on the Modern Slavery Act. What is the Modern Slavery Act?

The Modern Slavery Act 2015 was designed to tackle slavery and human trafficking and introduced new requirements for organisations in relation to their business and supply chains. One of the most significant sections for businesses is Section 54.

What is Section 54?

This section of the Act means that businesses in the UK have to be transparent about the things they are doing to address the issue of modern slavery in both their operations and their supply chains. These requirements are known as the ‘Transparency in supply chain provisions’.

This means that many businesses who had not previously addressed compliance issues will need to look anew at their relationships with suppliers to make sure that they comply with the new reporting requirement.

Who is covered?

Section 54 requires all companies with a turnover of £36 million or more to publish an annual statement which sets out the steps taken to ensure that slavery and human trafficking form no part of the business or its supply chain. It’s estimated that nearly 17,000 UK businesses fall within these parameters.

‘Total turnover’ is defined as the organisation’s total net turnover, i.e. total revenue from all sources less discounts, VAT and any other taxes. The turnover will be assessed as including the turnover of all an organisation’s subsidiaries.

Preparing the Statement

The Slavery and Human Trafficking statement will either give details of the steps that the organisation is taking to ensure that neither slavery nor human trafficking take place in its business or in any supply chain (Option A) or a declaration that no such steps have been taken (Option B).

Option B may well result in negative publicity and pressure from shareholders and the media, together with serious damage to the organisation’s reputation.

Publication of the statement

A prominent link to the statement needs to be included on the homepage of the organisation’s website. The statement should be approved by the board and signed off by a director to show that it has been seen and authorised at the very highest level.

In the unlikely event that the organisation does not have a website, it will have to provide a printed copy of the statement to anyone who writes and requests it. The statement must be sent within thirty days of receipt of the request.

The Act says that the statement should include the following information:

• The structure of the organisation, with details of its business and supply chains.

• The policies that have been developed by the organisation relating to slavery and human trafficking.

• The due diligence processes that the organisation operates to check for slavery and human trafficking in its business and supply chains.

• The areas that the due diligence process has identified as being at particular risk of slavery and human trafficking

• The steps that the organisation has taken to tackle those areas identified.

• The training given to staff in order to raise awareness about slavery and human trafficking and the steps that are being taken to deal with it.

• Key performance indicators that will enable readers of the report to gauge how effective the activity described in the statement actually is.

What are the consequences of non-compliance?

An organisation has the choice of Option A or Option B (outlined above) with regard to publishing a statement. What it does not have is the choice of doing nothing. The Secretary of State can apply to the High Court to obtain an injunction which will force the organisation to publish a statement that complies with Option A or B.

However, the real risk for an organisation may be to its reputation. As has been discussed above, stating that it has taken no steps to identify and tackle slavery and human trafficking in its operation and supply chains may well lead shareholders, the public and the press to focus on this to the detriment of its business successes. That could go on to cause problems if contracts that would otherwise have been placed were cancelled due to negative publicity.

What should businesses do to prepare?

Even for those businesses whose turnover is too low to qualify them for the provisions of the Act, it is a good idea to follow some or all of the following guidance, since it is good advice regardless of the size of the organisation and for those organisations which may grow to become eligible for Section 54, setting up a system of compliance will stand them in good stead later.

• Be able to provide information regarding the steps that are currently taken to ensure that human trafficking and slavery do not take place in organisations and business further down the supply chain.

• If the business has a number of suppliers, it should conduct a risk assessment with each one to identify which are most likely to be affected by slavery and human trafficking

• If the risk assessment identifies areas where action can be taken, measures can be drawn up and put into place to strengthen its existing strategy and deal with shortcomings.

• Update (or draft and publish) Corporate and Social Responsibility policies so that the issue of slavery and human trafficking is included.

• Embed provisions on slavery or human trafficking into company whistleblowing policies.

• All commercial agreement templates should be updated to include a requirement on complying with the Act (this should extend to suppliers and sub-contractors).

• Prepare a policy on slavery and trafficking, with all members of the management team signing it. This will serve as a notice to partner organisations that the company is serious and sincere about its position on modern slavery.

• Since training for staff is one of the essential elements of the statement, an assessment should be carried out regarding the need for human rights compliance training throughout the organisation, including all stages of the supply chain.

• To avoid accusations of facilitating exploitation, the business’ practices should be checked to ensure that they guarantee all employees, whether in the UK or not, the minimum wage and the right to work.

• A senior member of staff should be appointed to oversee all investigations into the business and its supply chain as well as producing and publishing the statement. A communication strategy should be developed to ensure that the results of the statement reach as wide an audience as possible.

The effect on SMEs

Despite the apparently high turnover limit, many SMEs will find that they too are affected by these requirements. This is because as part of the supply chain for companies who are covered, they are required to provide assurances that they do not make use of slave or forced labour.

The assurances are often required for tender invitations, new contracts and contract renewals. SMEs must be able to point to relevant policies and procedures if they want to continue doing business with these larger companies. They risk losing business if they are unable to do so.

Whilst it is not envisaged that SMEs who fall outside the turnover limit will have to follow the formal steps required of larger organisations, a reporting system similar to those used by companies covered by the Act would make sense inasmuch as it would provide very good evidence of compliance with the Act in the event that enquiries are made.

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Looking for more advice or guidance on this matter, or any other business-related issue?

rradarstation gives you 24/7 access to guidance, videos and on demand webinars answering frequent questions and downloadable templates to use in the day-to-day running of your business, each written and verified by our legal professionals. You will find the answers you are looking for at rradarstation.