The Modern Slavery Act consolidated previous offences of slavery and trafficking and addresses the role of businesses in preventing modern slavery from occurring in their supply chains and organisations.
Under the Act, all commercial organisations with a global turnover of £36 million or more that carry on any business in the UK are required to publish a “slavery and human trafficking statement” for each financial year. The statement must set out the actions they have taken to ensure their supply chains and all aspects of their business are free from slavery and human trafficking, increasing transparency for the public, consumers, employees and investors.
Government guidance to the Act states that, in determining the total turnover of a franchise business, only the turnover of the franchisor is considered in assessing whether the £36 million threshold has been reached. The turnover of any franchisee using the franchisor’s trademark and distributing goods or providing services is not to be used in calculating the franchisor’s turnover, although the franchisor may wish to consider the impact on their brand of activities of franchisees in relation to modern slavery. Where the turnover of a franchisee is more than £36 million, it is required to produce a slavery and human trafficking statement in its own right.
The Act has extra territorial reach as it applies to all businesses that satisfy the turnover threshold that carry on all or any part of its business in the UK regardless of where that business is actually incorporated.
Organisations are encouraged to comply with their obligation to produce a slavery and human trafficking statement annually and within six months of the organisation’s year end.
Slavery and human trafficking statement
The annual statement should set out the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains and in any part of its own business.
Contents of the statement
An organisation’s slavery and human trafficking statement may include information about:
- the organisation’s structure, its business and its supply chains;
- its policies in relation to slavery and human trafficking;
- its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
- the parts of its business and supply chains where there is a risk of slavery and human trafficking taking
- place, and the steps it has taken to assess and manage that risk;
- its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate; and
- the training about slavery and human trafficking available to its staff.
Approval and publication of the statement
The statement must be approved by the board of directors and signed by a director. It must then be published each financial year on the organisation’s website, and include a link to the slavery and human trafficking statement in a prominent place on that website’s homepage.
If foreign subsidiaries are part of the parent company’s supply chain or own business, the parent’s statement should cover any action taken in relation to that subsidiary. A non-UK subsidiary may also produce its own statement, which is highly recommended in cases where the non-UK subsidiary is in a high risk industry or location.
The Home Office has published statutory guidance under section 54(9) of the Act including specific advice on measures businesses should take to identify and tackle slavery and how to justify assertions made in the statement. These include:
- details of organisational structure and supply chains, including countries used to source goods especially high risk countries where modern forms of slavery are prevalent;
- policies, such as what minimum labour standards are expected of the business, its subsidiaries and suppliers, and how they align to industry standards;
- details of due diligence processes that the company is committed to regarding its supply chains;
- details of the company’s policy to support whistle-blowing; and
- adoption of risk assessment policies and procedures that are proportionate to the organisation’s size, structure, location of activities and supply chain(s) and nature of business(es).
The guidance recognises that businesses may already have policies (such as CSR) that go some way to addressing the issue of modern slavery, and these can be used as a foundation for the slavery and human trafficking statement. The Government states that it expects organisations to build on their statements year on year and for the statements to evolve and improve over time.
What are the risks of non-compliance?
The Act has not introduced any formal penalties for non-compliance. However, failure to comply, or a statement that an organisation has taken no steps, may damage the reputation of the business, and consumers and investors may apply pressure where they believe a business has not taken sufficient steps.
The Secretary of State (in the UK, the Home Secretary) can separately impose penalties through an injunction requiring the organisation to comply, although it is unlikely to do so without prior warnings.
What should UK businesses be doing now?
Consider the following action points:
- appoint a person responsible for anti-slavery compliance;
- consider a supply chain audit and the scope for introducing new contractual provisions within supplier agreements to require suppliers to have sufficient procedures dealing with slavery;
- consider the process for updating codes of conduct, contracts and employee handbooks (with reference to the statutory guidance);
- review and update codes of conduct and contracts of employment so as to have effective grievance and whistle-blowing mechanisms so that any concerns regarding human trafficking or slavery may be raised;
- consider training supply chain management, procurement or HR on risks of non-compliance;
- consider timing of the publication and contents of Modern Slavery Statement.
If you would like any advice on the above, please contact Nicola Broadhurst, Partner & Head of Franchising.
The information contained in this article is designed to provide a general introductory summary of the subject matters covered. It does not purport to be exhaustive or to provide legal advice, nor should it be used as a substitute for such advice.
© Stevens & Bolton LLP 2016